I don't think horizontal drilling and multi frac technology will affect oil production the way it has caused a paradigm shift in natural gas production, reserves and pricing.
I initially got interested in and started following ARN when they drilled the first horizontal at the start of this year, not knowing the outcome. They are now 8 out of 12 with 2 wells to be tied in and 2 wells to undergo a multi stage acid frac. Looks like they will be 12 for 12, suggesting very low development risk going forward, and with great economics indicated by 10-12 month pay outs per well.
An increase in booked reserves should be huge, and continue to grow as new wells are drilled. Total percentage of recoverable oil in place will dramatically increase, along with the rate of recovery, as evidenced by the quick pay out of these wells.
ARN is one of the first juniors to have built a large land position over a conventional oil field that has low overall percentage of oil in place resource recovered. They acquired when oil price was low, and just before horizontal multi frac technology came in.
Although already dated, this June 2010 presentation is worthwhile looking at:
arcanres.com
Why ARN? First, it is located in my "back yard", and second, I have a resource background so that is why I best understand natural resources and prefer to invest in this sector. All too often, when I have strayed into sectors I don't know, my head was handed back to me on a plate.
What sectors do you know and prefer to invest in? |
