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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Douglas V. Fant who wrote (70853)	8/14/2000 12:21:51 AM
From: isopatch	Respond to of 95453

"I picked up Fred's full set of slides/handout. It's at work so remind me tomorrow to post it and I'll detail the discoveries, technology, and drilling techniques." Please do Doug. I'd also be very interested in this information. Maybe there are some ideas we can use in the prospects we've been piecing together from small adjacent lease tracts since early Feb. In Illinois, even when you are drilling into a virgin pool, you tend to encounter naturally low pressure reservoirs. This is true of both sandstones and carbonates. Geoscientists have a variety of explanations for the low pressures in our reservoirs as well as those in some in other basins in the lower 48. Low permiability only accounts for part of it. One geologist told me earlier this year he believes characteristics of the formation water are the principal source of these relatively low pressures. Personally I don't know why. But we have to design our drilling and completion programs with this and other important factors clearly in mind. For example, many good producers during the past 60 years DST in the geologically quirky Aux Vases at pressures of 400 to 650 psi. Oolitic limestone pays in the O'Hara, Rosiclare test only marginally higher. Above 750-800 psi, even in those limes, and you almost always into water - big time! A friend who's an offshore coordinator for Chevron on the La. Gulf is accustomed to GOM hi perm pays with a loosely consolidated rock matrix. So pressures and IP rates are tremendous. But in 3-4 years, he tells me, they are pumping 97% salt water! Talk about depletion? Geez! Anyhow, showed him some representative Illinois DSTs and completions when he was here in Feb, and he found it hard to believe I wasn't showing him readings from depleted reservoirs. So, considering the challenges we are dealing with, there is a good deal of interest in underbalanced drilling and completions. "Dry perfing" the pay has been used with a good deal of success because without fluid in the hole there is a more immediate and stronger flow back from the formation to clean out the perfs. In zones known for clay swelling in the presence of fresh muds, some operators rotary drill to just above the top of the pay, then finish with a spudder. Such inexpensive new ways of applying old tools and techniques are practical and popular. Look forward to your post. Hope there are some things I can look into. Whether it's the market or planning a project am always looking for an edge. TIA. Isopatch

To: Douglas V. Fant who wrote (70853)	8/14/2000 7:39:20 AM
From: Big Dog	Read Replies (2) \| Respond to of 95453

From Frost this morning: E&P spending on oilfield services should increase significantly through 2001. Year-end 1999 surveys of E&P companies suggested that E&P spending in 2000 would be up 10% to 12% in 2000. At that time we strongly believed those estimates to be conservative. More recent surveys of E&P capital budgets suggest overall exploration and development spending for 2000 may be in the range of 18 to 20 percent. Now, just past the mid-point of the year, numerous E&P companies have announced plans to revise their original capital spending budgets for 2000 upward. Many of the announcements from the U.S. independents suggest increases in the range of 25 to 30% over original budgets. Additionally, since spending during the first half of the year was based on the original budgets, second half spending is likely to be aggressive in order to reach end of year targets. More importantly, we expect E&P spending in 2001 to be higher still. The major and super-major integrated oil companies and international state oil companies have been hesitant to increase their capital spending during the first half of 2000. We expect these larger oil companies will accelerate their spending levels in 2001. Many of these companies were focused on mergers and internal cost reductions throughout the period from 1998 through 2000 in an effort to generate return on capital and earnings growth. Clearly, there is a limited extent to which a company can generate earnings through cost cutting. The managements of these major oil companies have a responsibility to their shareholders just like any other public company. These companies are now essentially backed against a wall. After several years of reserve depletion, we believe each of the majors have little choice but to re-invest capital into growing their reserves and production as a means of generating shareholder value, albeit assuming a reasonable return on capital. Our point is, these companies essentially MUST spend money on oilfield services, and we believe at higher levels than that of the past few years. In short, even considering the expected moderate decline in oil prices, we believe E&P capital spending on oilfield services worldwide will be up substantially in 2001. In fact, next year could easily see oilfield activity levels higher than any time over the past decade.