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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (130707)	4/27/2010 8:45:37 AM
From: Ed Ajootian	Read Replies (1) \| Respond to of 206151

eplay, NiMin Energy (NNN.TO) -- I believe the answer, for booking proved reserves (vs. just probable) is mostly going to be yes. Even for established technologies this is usually the case. Denbury (DNR) doesn't usually book proved reserves at any of its CO2 floods until they see first oil. The only exceptions are when they have a field that is a look-alike to another one that is nearby. I thought the new SEC rules might have changed this but at least according to Denbury they didn't. But we are getting way ahead of ourselves at this point, we don't even know if this technique of NiMin's will work yet, or even if it works, whether it will work well enough to be economic. So far, net of some cash flows from conventional recovery, they are $30M in the hole on their California EOR experiment. They have yet to see a single dollar of net cash flows yet, and its been about 2 years since they started the experiment (and 10 months since starting injections). I would be stunned if this first shot at this process worked perfectly; the odds are high that there will be need for some more tweaking, or even significant changes, for this to really work, if it works at all. Reading the above you might question whether its all worthwhile. Why would a small company be spending such a large portion of its precious capital on this single science project? The reason is that the upside is so massive. (The following comes mostly from slide 18 of the company presentation.) The field that the California EOR project is on has about 35 mm original barrels of oil in place ("OOIP"). The petroleum engineers (Huddleston, a well-respected PE firm) have assumed that 12% of that oil (2.3M bbls.) will be producible by conventional primary recovery. They have further assumed that this EOR process should be able to recover another 24% of the OOIP, or 9.7 mmbo, and have allowed NiMin to show those reserves as Probable. If these assumptions prove accurate, this would work out to F&D costs of an astounding $3.10/bbl. This Pleito Creek field is only one small field in the Sacramento basin --- there is literally billions of barrels of oil sitting in that basin that are similar to Pleito Creek.