Tri-Valley Corp: Bakersfield Californian Local News
Blood from a stone
BY ERIN WALDNER, Californian staff writer
e-mail: ewaldner@bakersfield.com
Posted: Friday September 3rd, 2004, 11:00 PM
Last Updated: Friday September 3rd, 2004, 11:00 PM
Tri-Valley Corp. is entering uncharted waters -- skeptics be damned.
Executives at the Bakersfield-based company say they intend to "frac" Tri-Valley's Ekho No. 1 well sometime this fall. They say they have the money in place -- $6 million -- needed to do the job. They're just waiting on equipment.
A "frac job" is a method of stimulating production by creating artificial pathways -- highways, if you will -- for the oil and gas to flow.
Ekho No. 1, 45 miles northwest of Bakersfield, needs a frac job because of the tight formation Tri-Valley encountered after it drilled the well in 2000.
Fracturing is not uncommon. It's frequently employed in the San Joaquin Valley. But Ekho. No. 1 is different.
"There's never been a deep well frac before in California," said Tri-Valley CEO Lynn Blystone. Several industry insiders and the state's oil and gas supervisor, Hal Bopp, backed up that claim.
Ekho has a total depth of 19,085 feet.
Tri-Valley's plans call for initially fracturing a formation that's about 18,000 feet below the surface.
"They're doing it in an environment that's not a normal frac candidate," said Jim Fox, a veteran drilling engineer whose firm will work on the Ekho frac job.
"That's what's making it a tougher puzzle for them to figure out. Operationally, they're doing things that have never been attempted before in California," Fox said.
The odds aren't in Tri-Valley's favor. Other deep wells have been drilled on the west side of the county in recent years -- Thunderball, Pyramid Hills, east Lost Hills -- and none have produced commercially.
"There hasn't been deep success in California," industry veteran Fred Holmes said.
Blystone said Tri-Valley hopes to ultimately recover about 12.5 percent of the oil and gas in place from its 230-acre producing unit. He said this equals 20 million barrels of oil equivalent.
"Now simple math says, you take $40 a barrel oil, that's $800 million," Blystone said. "So it's well worth chasing. It's well worth persisting, and all these frustrations and listening to the naysayers. You know, there's many of those."
Indeed, Tri-Valley is scoffed at by some for hyping projects that don't pan out.
"Tri-Valley is chided a lot, but so be it. We don't let that stand in our way one iota," said Joe Kandle, who heads up Tri-Valley's oil and gas subsidiary.
Blystone said he knows there's a segment of people who feel the company is overly boastful and they're entitled to their opinion, but most don't understand that when Tri-Valley issues public statements, it's with the intent of "laying it all out" so the company complies with Security and Exchange Commission regulations.
He added that Tri-Valley has done test fracs on the well, and they look promising.
Despite the company's detractors, many people are pulling for Tri-Valley, hoping for success at Ekho.
Bopp, the state's oil and gas supervisor, said he's pleased to hear Tri-Valley is going to take another crack at coaxing production from the well.
Tri-Valley is a wildcatter, meaning it looks for oil or gas in areas where no other production exists.
"Lynn represents those independents that are exploring, in this case doing the deep exploring," Bopp said. "There's not many who are doing this kind of work."
Drilling mud expert Jim Clifford, whose firm has worked on Ekho, said, "I would applaud their efforts at doing this because the future of California oil production is in finding new oil at greater depths. The oil fields in California are very, very mature."
If Tri-Valley succeeds with Ekho, it would be the first major success for the company.
A brief history
Tri-Valley originated in Bakersfield as the Salinas Valley Exploration Co. in 1963.
"It was formed by a group of geologists headed by John Beach, who was a real oil finder in his day," Blystone said.
As its name indicates, the company first explored in the Salinas Valley. Its success was marginal, as is often the case in the business, Blystone said.
Beach's company merged with another firm in 1969 and Tri-Valley -- encompassing the San Joaquin, Sacramento and Salinas valleys -- was born.
The company went public in 1981. Today its main assets are in the Sacramento and San Joaquin valleys.
Blystone came to Tri-Valley in 1969 in an unofficial capacity. He was executive director of the local YMCA.
One of Blystone's board members walked into his office and told him he had just invested in a small oil and gas company. He asked Blystone to take him to the board meetings and in return gave Blystone 500 shares in the company.
Did Blystone have a background in oil?
"Well, I grew up in Brea which is an oil town down in Southern California. I had been around the oil fields but I didn't have any clue about this business. So for the next four years or so, I sat there by the coffee pot while they sat around the table and talked about oil and gas."
He became a company director in 1974 and, to his surprise, president in 1981.
"October the 8th of 1981 I get a call from the office secretary. She says, 'Jimmy (the interim president, appointed after Beach died) left a note on my desk saying that he quit. The bylaws say you're the next in line to be president. We owe $500,000 and don't have any money. What are you going to do about it?' That's how I became the president."
Blystone said the $500,000 debt stemmed from a deal that went sour. As if that wasn't bad enough, the U.S. oil industry was starting to tank.
Tri-Valley has weathered other industry slumps and financial setbacks over the years.
Blystone said he's always had faith in the company.
"Lynn is optimistic. The glass is always half full," observed Kandle, who's been with Tri-Valley for six years.
On a more practical level, Blystone said Tri-Valley's decision to purchase a huge proprietary database in the 1990s generated hundreds of leads.
The east Lost Hills blowout of 1999 didn't hurt Tri-Valley, either.
"Turned out we had a huge play partly connected with the whole deal," Blystone said.
The play was the Ekho Project.
The blowout brought a lot of attention -- and investors -- to the Lost Hills area, and Tri-Valley raised the capital needed to drill Ekho No. 1.
Drilling 19,000 feet below the earth's surface is no easy feat, let alone in record time, as Tri-Valley did. The pressure and temperature at that depth is extreme.
Tri-Valley hoped to encounter naturally fractured formations, but that didn't happen. Hydraulic fracturing would be necessary if Ekho had any hope of producing oil at commercial rates.
Tri-Valley was struck another blow when its investors pulled out of the project.
Four years later, Blystone said Tri-Valley is in a position to get back into Ekho. To date, the company has invested $12.5 million in the well.
Success and failure
The company's goal, Blystone said, is to give its shareholders substantial payoffs.
"People that are looking for dividends should not buy our stock," he said.
Blystone acknowledged the company's stock fell to 6 cents a share in 1996. Many oil firms watched the value of their stock plummet at that time, a reaction to an industry slump.
Tri-Valley Corp., the parent company of Tri-Valley Oil & Gas Co. and the inactive Tri-Valley Power Corp., has about 5,000 shareholders in and out of Bakersfield that hold roughly 20 million shares. Since last year, the company is traded on the American Stock Exchange under the symbol TIV.
Tri-Valley's stock closed at $4.09 a share on Friday. In the past 52 weeks, it's reached as high as $6.75 and fallen as low as $3.11.
As a company, Tri-Valley has struck out on more than one occasion.
On the Sunrise-Mayel gas project near Delano, the company sustained an equipment failure with the second well it drilled. Kandle said the company is working on a way to re-enter the well.
Tri-Valley's Elk Ridge and Oil Lake wells also came up short.
Despite Tri-Valley's setbacks over the years, Kandle said, "I'm having more fun than I've ever had in my whole life. My knowledge is being used here from a creative base."
Blystone, who turned 69 on Aug. 28, said he does not plan on retiring any time soon.
"You know, finally, it's entering a period where it's little fun," he said. "For about 22 years, it hasn't been much fun."
= =
GO LYNN & JOE.... GO EKHO.... GO TRI-VALLEY!!!
dave:)) |
