IN THE NEWS / Hope Runs Deep For Huge Reserve - Lost Hills Update
Filed: December 5, 1998
By BOB CHRISTIE
Californian staff writer
Many believe the heyday of wildcat wells coming in big is long gone, but
every once in a while something happens that proves that theory wrong.
Such is the case at Lost Hills, where an exploratory well being drilled by
a group of small Canadian and U.S. oil and gas companies appears to
have hit the jackpot. There's no hiding the evidence of a big strike.
The well, dubbed Bellevue No. 1, blew out and exploded on Nov. 23,
spewing flames hundreds of feet into the air and destroying the
multimillion-dollar rig drilling the 17,000-foot-plus well. It's been on fire
ever since.
Estimates of the amount of natural gas and condensate, or natural gas
liquids, venting from a reservoir more than three miles down are
enormous.
According to qualified oil-field sources who have seen the blaze, as
much as 100 million cubic feet of natural gas and 1,000 barrels of
condensate is burning each day.
That's the equivalent of 18,000 barrels of oil. At recent gas prices, as
much as $200,000 per day is being burned.
More importantly, the flow hasn't diminished in the nearly two weeks
since the blaze broke out.
Longtime Californian oil-field columnist Bill Rintoul was cautious early
on about the size of the discovery, but has become more confident that
the initial flow isn't a fluke.
"The thing has kept up so well that it does appear they have a significant
find," Rintoul said.
Several Bakersfield-area petroleum engineers surveyed about their
impression of the new field's potential all gave rosy predictions.
"It's a significant discovery to be sustained for this amount of time," said
Lee Cecil of Cecil Engineering, who has worked in the industry for more
than four decades. "That's a substantial flow — the highest rate of
delivery of any well in California ever."
A two-mile wide, 14-mile long geologic structure has been identified as
the target for the wildcatters, according to one of the companies
involved. Others involved viewed that estimate as overly aggressive.
The deep, 17,000-to-18,000-foot reservoir averages 400 feet in
thickness, analysts said.
"If that's the size of the reservoir, you're talking about trillions of cubic
feet," of gas, said Claude Fiddler, a Bakersfield oil consultant who is a
former high-ranking Chevron executive.
The group of Canadian oil and gas firms who put up the money to drill
the well won't talk about the potential of the newly discovered field.
But securities analysts in Canada who have done independent reviews of
the data estimate the field could hold at least 500 million barrels of oil
equivalent. Stocks in some of the the Canadian companies with interests
in the well have soared in recent days.
"You're starting to see it in the stock market and have for the last week
or so," said Tim Bowes, vice president for corporate finance at Yorkton
Securities Inc., a large independent Canadian brokerage house with
offices in Vancouver, Calgary, Montreal, New York, London and Paris,
on Friday. "The well has now been blowing out of control for the last 11
or 12 days, and it hasn't abated in any way. That's encouraging."
Bowes' analysts used a theoretical formula to estimate 4.2 trillion cubic
feet of natural gas and liquids may be recovered from the field. Those
estimates are only possible reserves, and hold only a 20 percent chance
of being accurate, Bowes said. But they're also less than other analysts'
estimates, which are double Bowes' figures, he said.
"This is not something that will be determined with certainty overnight,"
Bowes said of the field's potential.
For investors based around Calgary, the center of Canada's oil
exploration industry, the potential for a huge success here has created
incredible excitement. The Californian has been deluged with e-mail
messages and phone calls from interested parties seeking up-to-date
information on the well, some from as far away as the Persian Gulf.
According to Aiden Walsh, president of Elk Point Resources Inc. and its
subsidiary, Bellevue Resources Inc., operators of the well, no official
estimate of gas flow from the well has been done and any outside
estimate should be viewed as very speculative.
The proposal for the wildcat well was brought to the Canadian firms by
Bill Armstrong of Denver-based private company Armstrong Resources
LLC, which bought the lease for the land from Chevron last year.
"Bill Armstrong from Armstrong and PYR Energy from Denver put this
prospect together and brought it to a group of Canadian companies,"
Walsh said. "We reviewed it technically and decided that we liked the
chances."
For his part, Armstrong said he was impressed with the tenacity of the
Canadian firms, although still uncertain about the field's potential.
"These guys in Canada, they are just fantastic wildcatters," he said.
View the fire here: bakersfield.com
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