Red,
PYR Energy (PYRX - OTC:BB) used existing high resolution 2-D siesmic and applied the latest methods and ideas in their interpretation... and a very good job they did too.
Here is an excerpt from their press release of Dec. 04:
December 4, 1998
PYR ENERGY CORP (PYRX)
Annual Report (SEC form 10KSB)
Significant Projects
The Company's exploration activities are primarily focused on the southern San Joaquin basin of California. The Company also has projects identified in selective Rocky Mountain basins. Advanced seismic imaging of the structural and stratigraphic complexities, common to these regions, provides the Company with enhanced ability to identify significant hydrocarbon potential. A number of these projects, especially in the San Joaquin basin, offer multiple drilling opportunities with individual wells having the potential capability of encountering multiple reservoirs.
The following provides a summary and status of the Company's exploration areas and significant projects. While actively pursuing specific exploration activities in each of the following areas, the Company is continually reviewing additional opportunities in these core areas and in other areas that meet certain exploration and exploitation criteria. There is no assurance that drilling opportunities will continue to be identified in the current project portfolio or will be successful if drilled.
Southern San Joaquin Basin, California
The San Joaquin basin of California has proven to be one of the most productive hydrocarbon producing basins in the continental United States. To date, the approximately 14,000 square mile basin has produced in excess of 12.7 billion barrels of oil equivalent, and contains 25 fields classified as giant, with cumulative production of more than 100 MMBoe.
The San Joaquin contains six of the 25 largest oil fields in the U.S. All six of these fields were discovered between 1890 and 1911, a full decade prior to the discovery of the first giant Texas oil field. The basin accounts for 34 percent of California's actively producing fields, yet produces more than 75 percent of the state's total oil and gas production. Most of the production within the basin is located along the western and southern end of Kern County. San Joaquin basin production totals for 1997 reported by the California Department of Oil and Gas for all producers in the aggregate indicate total production of 246.9 MMBoe. Of this figure, Kern County accounts for over 90 percent of the oil production from the San Joaquin Basin.
Exploration Opportunity. For the 100 plus years of its productive life, the San Joaquin Basin has been dominated by major oil companies and large fee acreage holdings. As a result of these conditions, the basin has generally been under-explored by independent exploration and production companies, groups that usually bring advanced technologies to their exploration efforts. The large fields in the basin were all discovered on surface anticlines and produce mostly heavy oil from depths of less than 5,000 feet. As a consequence, basin operators have employed only those advanced engineering technologies related to enhanced production practices including steam floods and most recently, horizontal drilling.
The basin as a whole has suffered from a lack of applied exploration technology and deep drilling. Approximately one percent of the total basin wells have been drilled to a depth greater than 12,000 feet, with none of the 2,000 wells drilled during 1996 being to a depth greater than 12,000 feet. Additional 1996 statistics indicate that the average well depth drilled during the year was just slightly more than 1,800 feet. Three-dimensional seismic has been employed only in limited quantity and in certain areas of the basin.
Tenneco and ARCO shot a limited number of 3-D surveys in the mid- to late-1980s on the Bakersfield Arch and to the south in the Yowlumne area. With the ongoing retrenchment of majors in the basin, independents such as Torch, Nuevo Energy, Vintage Petroleum, HarCor Energy and Enron Oil & Gas have moved into prominent positions within the basin and are bringing applied geoscience technologies with them. More 3-D surveys have been acquired in the last two years than in all the previous years combined. This trend is expected to accelerate in the upcoming years as a renewed emphasis is placed on 3-D seismic exploitation and exploration.
With limited exploration in the San Joaquin basin since the "boom" days of the early 1980s, the Company believes that multiple exploration opportunities are available. Deep basin targets, both structural and stratigraphic in nature, remain largely untested with modern seismic technology and the drill bit. In addition, retrenchment of the majors in the basin has caused many of them to rethink their policies regarding their large fee acreage positions. For the first time in history, many of these companies are opening up these fee acreage positions to outside exploration by aggressive independent companies. The Company has identified and negotiated exclusive access to three high-potential exploration plays in the southern San Joaquin basin.
East Lost Hills. The Company has identified and has undertaken technical analysis of a deep, large untested structure in the footwall of the Lost Hills thrust. This prospect lies directly east of and structurally below the existing Lost Hills field, which has produced in excess of 350 MMBoe from shallow pay zones in a large thrusted anticlinal feature.
This unconventional deep prospect has significant structural and reservoir risk, but the potential for large reserves makes it an attractive play. In a joint effort with Denver based Armstrong Resources LLC ("Armstrong"), the Company has analyzed and interpreted over 350 miles of high-resolution 2-D seismic data to help refine the structural mapping of the prospect. Advanced pre-stack depth migration and interpretation clearly defines a deep sub-thrust structure. Two wells drilled to the east of the prospect, in the mid-1970s, proved the productivity potential of free oil (42 degree API) and gas at depths below 17,000 feet. Ongoing source rock and maturation modeling suggests that the oil generation window exists at depths between 15,000 and 17,000 feet, and that early migration of hydrocarbons should preserve reservoir quality at East Lost Hills.
In early 1998, the Company and Armstrong entered into an exploration agreement with a number of established Canadian partners to participate in the drilling of an initial exploratory well to fully evaluate the feature. Bellevue Resources, Inc., a subsidiary of Elk Point Resources, Ltd., is operator of the well. Currently, other participants in the well are: Berkley Petroleum Corporation, Ceniarth Inc., Paramount Resources, Ltd., Richland Petroleum Corporation, Westminister Resources, Ltd, STB Energy, Inc., Kookaburra Resources, and Hilton Petroleum Company. PYR received cash consideration for its share of acreage in this play and a carried 6.475% working interest through the tanks. PYR owns an additional 4.1% working interest for a total before payout working interest of 10.575%, which reduces to 9.253% after payout.
The Bellvue Resources et al #1-17 East Lost Hills well, located in SE1/4. Sec 17, T26S, R21E, Kern County, California, commenced drilling on May 15, 1998. The well is designed to test prospective Miocene sandstone reservoirs in the Temblor Formation. During September 1998, the well was sidetracked in an attempt to gain better structural position and delineate potential uphole pay. On November 23, 1998, the well was drilling at 17,600 feet toward a total depth of 19,000 feet when it blew out and ignited. No personal injuries resulted, and an expert well control team was engaged to contain the fire. If the operator and the well control team are able to bring the well under control, a determination will then be made concerning the manner in which to proceed. The Company and its joint working interest owners control approximately 23,000 gross acres of leasehold over the prospect.
At the time that the #1-17 East Lost Hill well was sidetracked, one of the participants (the "Declining Participant") claimed that it had the right to decline to participate in the sidetracking operations and still maintain its interest in the well, subject to a "non-consent" penalty. The operator and the other participants dispute the right of the Declining Participant to maintain its interest in the well on this basis, and proceeded with the sidetracking operation while denying the Declining Participant's right to maintain its interest. Although the Company believes its position on this matter is correct, if it loses this dispute, the after-payout working interest of the Company in the well and in the other acreage subject to the related exploration agreement could be reduced to approximately 9.085%.
School Road/Southeast Maricopa. The Company has signed a lease and seismic option with Chevron Production, USA covering exclusive exploration rights on approximately 22,000 acres of fee land in the Maricopa sub-basin at the southern end of the San Joaquin valley. The Maricopa sub-basin represents a rapidly subsiding fore-arc basin containing more than 30,000 feet of post-Jurassic sediments. The Maricopa area is the location of the major depo-center for deep-water turbidite deposition in the San Joaquin. The majority of oil produced in the Maricopa sub-basin and on the Bakersfield arch to the north has come from the Upper Miocene Stevens and older (Eocene) turbidite sands.
During 1998, the Company completed acquisition of approximately 52 square miles of 3-D seismic data over its Southeast Maricopa exploration project. Western Geophysical Company acted as the Company's seismic contractor for the data acquisition. The processed data was delivered to the Company on October 29, 1998 and the Company is currently in the process of interpreting the data in order to identify drillable prospects. It is anticipated that the interpretation will take as long as three months to complete before taking this project to potential industry partners for participation. The Company intends to sell an appropriate portion of its interest in this project in order to receive a cash consideration and/or a carried interest in the drilling of one or more exploration wells. The Company intends to drill at least one exploration well on this prospect during the second quarter of calendar 1999. No drilling commitments have been made or received.
Basin wide, the Stevens sands have produced in excess of 1,350 MMBbl, with mean field size being in excess of 70 MMBbl. Stevens sand production is primarily from stratigraphic traps, and ranges in depth from 7,500 feet to over 14,000 feet. Reservoir quality is good with porosites ranging up to the mid 20 percent range. Oil gravities range from 28 to 55 degree API with the lighter oil occurring in deeper production to the south. With the superior reservoir quality and light hydrocarbons, the Stevens' reservoirs make an attractive exploration target with significant potential reserves.
Directly surrounding the Chevron acreage position, five fields produce from Stevens equivalent sands. These fields include Landslide (14.9 MMBoe), Paloma (132.9 MMBoe), Rio Viejo (7.9 MMBoe), San Emido Nose (21.1 MMBoe), and Yowlumne (117.2 MMBoe). These fields all show stratigraphic trapping mechanisms including updip sand pinch-outs, lateral facies variation, and differential compaction. These five fields produced over 1.77 MMBbls of light oil and associated natural gas in 1997 (1997 Production Statistics, California Department of Oil and Gas), and have cumulative aggregate historical production in excess of 300 MMBoe. Per well cumulative production ranges from a low of 690 MBbl to 2.1 MMBbl, with a mean value of 1.3 MMBbl.
The objective of the School Road/Southeast Maricopa exploration program is to apply advanced 3-D seismic technology and advanced interpretation methods, within a detailed sequence stratigraphic framework, to identify stratigraphic relationships and potential traps. Exploration for Stevens stratigraphic traps with 2-D seismic data has proven to be largely unsuccessful due to the lack of sufficient line density to resolve the stratigraphic complexity necessary to delineate trapping mechanisms. The discovery of the Landslide field in 1985 resulted from the application of 3-D seismic exploration. By today's standard, that data suffered from low fold, low frequency, short offset, and generally poor imaging of detailed stratigraphic relationships. Advances in field acquisition, data processing, and visualization methods since the mid-1980s should allow much more detailed seismic analysis of complex stratigraphic geometries and trapping mechanisms.
The School Road/Southeast Maricopa exploration agreement with Chevron involves a drill-to-earn option on more than 22,000 fee acres, a seismic license to an existing (1992) 42-square-mile 3-D seismic survey (School Road), more than 200 miles of proprietary 2-D seismic data, a proprietary regional sequence stratigraphic framework based on extensive, detailed palynology analysis, and all available well file data. This unique database is anticipated to allow the complete integration of geology and modern 3-D seismic data to identify potential trapping opportunities within the stratigraphically complex turbidite systems present in the sub-basin. The drill-to-earn option entitles the Company, for each well it drills, to earn a 100 percent working interest and a 75 percent net revenue interest in 1,280 acres in the vicinity of the well drilled.
On June 1, 1998, the Company executed a participation agreement with Houston based Seneca Resources for the Company's School Road acreage. The drill to earn agreement provided PYR with a prospect fee and a carried through-the-tanks working interest in an initial exploration well. PYR would ultimately retain a 40% working interest in the School Road acreage. Drilling operations on the Federal #67X-30 located in SE1/4, SEC 30, T32S, R25E were commenced on July 28, 1998. The well was drilled to a total depth of 12,508 feet and although hydrocarbons were encountered, detailed log analsysis of the well indicated that the reservoir was tight and incapable of sustaining commercial production. The well was plugged and abandoned on September 18, 1998. PYR is currently evaluating the results of the well and incorporating the new well control into the seismic model in order to determine any potential future exploration opportunities at its School Road acreage.
San Emidio. In November 1998, the Company exchanged 266,666 shares of its common stock for 39 square miles of 3-D seismic data and oil and gas leases covering approximately 5,400 acres adjacent to the Company's Southeast Maricopa exploration project. The Company intends to incorporate this 3-D seismic data with the newly acquired data at its Southeast Maricopa acreage in order to further understand the complex stratigraphic geometries and trapping mechanisms. After interpretation and evaluation, there have been two prospective areas identified within the acreage position. The Company may present this project to
potential industry partners in conjunction with its Southeast Maricopa project or may create an independent project for presentation. The Company's approach will be to obtain industry partner participation in order to receive a carried interest in the drilling of one or more exploration wells. The Company expects to drill an exploration well here in the first or second quarter of calendar year 1999. No drilling commitments have been made or received.
Geological and Geophysical Expertise
The Company's oil and gas finding capabilities are dependent upon the effective application of 3-D seismic imaging technologies. The Company has assembled a technically experienced staff of in-house geologists and geophysicists with extensive experience involving the utilization of advanced seismic data imaging and analysis, and have collectively participated in more than 100 3-D seismic projects in diverse geological trends.
The Company also has access, both in-house and through consultants, to state-of-the-art exploration hardware and software applications. The Company owns one computer aided exploration workstation running the full suite of GeoGraphix geologic mapping and analysis software. Additionally, the Company owns one geophysical workstation employing SeisX 2-D and 3-D seismic interpretation and analysis software. Through a strategic alliance with a Denver-based 3-D seismic consulting firm (Interactive Earth Sciences Corporation), the Company has full access to multiple UNIX-based seismic interpretation workstations running the complete Schlumberger/GeoQuest seismic analysis software package. Through this relationship, the Company also has full access to GMA seismic modeling software as well as Paradigm Geophysical's GeoDepth pre-stack depth migration software package.
Drilling Activities
During 1998, the Company commenced the drilling of an initial exploration well at its East Lost Hills Prospect. On November 23, 1998, a blowout occurred on this well. See " Significant Projects Southern San Joaquin Basin, California". The Company also drilled one unsuccessful exploratory well at its School Road project. The Company anticipates the drilling of at least two additional exploratory wells during 1999, depending on ongoing exploration efforts in California and Colorado.
Production
The Company currently does not own any oil or gas production. The Company has no immediate plans to acquire or purchase any production. The Company also has no booked reserves at the current time and any near-term reserve additions would result from successful exploration efforts.
Acreage
The Company currently controls, through lease, farmout, and option, the following acreage position as detailed below:
State Gross Acres Net Acres
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California 59,914 30,754
Colorado 80 80
Wyoming 2,080 2,080
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TOTAL 62,074 32,914
Competitive Advantage
The Company believes that the cumulative experience of its technical and management team, with past exposure to more than 100 3-D seismic projects covering approximately 1,500 square miles in diverse geologic trends throughout the world results in a strong competitive advantage relative to current competition in these focus areas. The Company currently has three full-time geoscientists and a landman who are specialists in a variety of technical aspects and have extensive experience and expertise in numerous geologic regions.
The Company's expertise in the application of advanced seismic interpretation methods includes many of the "cutting-edge" technologies necessary in today's competitive exploration environment. These advanced techniques include 3-D seismic visualization, attribute analysis, geostatistical modeling, pre-stack depth migration, and the integration of geological and engineering data in support of reservoir characterization. These advanced seismic interpretation methods allow the Company to leverage its 3-D seismic experience and expertise with significant exploration and exploitation opportunities.
The Company generates the majority of its exploration and exploitation projects internally, and therefore is not dependent on third parties for project flow. This results in full control of all pre-drill exploration phases including the acreage position and application of seismic technology.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceeding (nor is the Company's property subject of a pending legal proceeding) that the Company believes would have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable. |
