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

To: Aggie who wrote (42118)	4/13/1999 1:15:00 AM
From: Heretic	Read Replies (1) \| Respond to of 95453

Oil Service Slump to Linger Through Year, Halliburton's Cheney Says bloomberg.com

To: Aggie who wrote (42118)	4/15/1999 1:36:00 PM
From: JungleInvestor	Read Replies (2) \| Respond to of 95453

Aggie, you really have an impressive knowledge of this stuff (so that's what they teach y'all in Aggieland)!! Many thanks for your detailed and very helpful post in answering my questions on SEV. Sorry for the delay in getting back to you, I was sidetracked on other things (mainly house building) and couldn't do the research needed to find answers to your questions. Following is text from your post in < >, followed by my response. It will take several posts to answer your questions. <What are these ARCO guys doing there? Is that just their heritage, or is ARCO a partner?> On 9/21/98 SEV announced the following new management and staff personnel. Posters on Yahoo thread refer to them as the “ARCO team”, but only one of the four worked for ARCO. I've included some of the background info because their credentials are impressive. That people with this background joined a small development stage company is for me both a vote of confidence in SEV's potential and a good indication that future wells will be done correctly. “1) Mr. William W. Daily, 55, has joined the Company as an Executive Vice President and Director of Seven Seas and President of its operating subsidiary, GHK Company Colombia. Mr. Daily, based in Bogota, is principally responsible for the development of the Emerald Mountain field and its production infrastructure and pipeline. Over a 20 year period Mr. Daily has held various positions with ARCO, including Operations-Engineering Manager for the north slope and offshore Alaska during the early 1980's, Coordinator of the China Gas Project and Vice President of the China, Middle East and Africa Region. In 1989, Mr. Daily joined the former Chairman of ARCO at Hondo Oil & Gas Company as Vice President of International Operations where he managed the initial exploration and drilling operations for the Opon Project in Colombia prior to turning over operations to Amoco. In 1993 he founded an international energy consulting practice with clients that included Occidental Oil and Gas Corporation, Epic Energy Inc. and theStandard University Petroleum Investment Fund. 2) Mr. Charles P. O'Brien, 38, has joined Seven Seas as Manager of Reservoir Engineering and is based in Houston. He held positions at Landmark Graphics (a Halliburton subsidiary), Conoco, Bechtel Petroleum. 3) Mr. Wayne Lewis, 53, has joined the Company as Project Manager for the installation of infrastructure and crude oil transportation systems for the Emerald Mountain field. Mr. Lewis is based in Bogota. Since 1985, has been the CEO of the Lewis Group International, Inc. an international project management firm that has managed very large and complex infrastructure projects for an extensive number of clients including the national oil companies of Colombia, Malaysia and Thailand. Other assignments have included ARCO production projects on the north slope and offshore Alaska, British Petroleum's support planning and staffing in Colombia, Shell Oil and Caltex for refinery logistical operations in Thailand and Enron India for planning and scheduling the construction of offshore production platforms and pipelines. 4) Mr. Raymond Parsons, 42, has joined Seven Seas' Houston staff as Geophysical Manager. Prior to joining Seven Seas, he held the position of Chief Geophysical Manager with Rutherford Moran Oil Company where he managed the geophysical analysis that led to the discovery and development of a large oil and gas field in the Gulf of Thailand. <1. 5 billion barrels? Super giant field? If only 38 million barrels have been proven, are the 5 billion the possible? Sounds farfetched. 38 million is on the low side to justify development for a remote field.> One Yahoo poster wrote the following: “Please be aware that the Dec 3, 1998 Strain report on Seven Seas (available by FAX from SEV shareholder relations at 713-622-8218) is on the liberal, not conservative side of one billion barrels. Strain stated on page 2 in his initial report: "We estimate the adjusted break-up value currently at more than $29 per share based on an assumption of 2 billion barrels of gross recoverable reserves in the Emerald Mountain Field. Our estimate of 3 billion barrels of ultimate reserves provides a possible break-up value of more than $37 per share. We assume a present value of $4 per barrel for the oil in these calculations which is based on our assumption that the oil will be sold for $17 per barrel when it starts being produced after the end of 1999." Strain amended his initial report's Exhibit 1 a few days after his initial report came out with probable reserves listed at 1600 MMBO (1.6 billion barrels) gross, 14% net revenue interest, 224 MMBO net, PV = $4/bbl, 90% probability, for an adjusted break-up value of $32.10 a share. (The adjusted break-up value per share reflects all finds to date since the last annual report.) Why hasn't this stock been bought out? Why is it not a mover? The top, controlling shareholders are probably not interested in relinquishing significant control until (a) SEV proves up the extent of its field, which Strain has suggested could be, along with the Harken tract, the largest oil field in the Western Hemisphere and (b) the price of oil recovers to at least the high teens. This is not to say that there are not nibblers, such as State Street Research out of Boston which has recently acquired 7.6% of Seven Seas's stock, or Soros Management, which has 3.13% (cf. the SEC Schedule 13G filings).” Evidently four “botched” wells caused Ryder Scott to reduce SEV's reserves significantly. Results from horizontal drilling of well TP1W should be out within 3 weeks and one poster believes this will give SEV their P's back.

To: Aggie who wrote (42118)	4/15/1999 2:46:00 PM
From: JungleInvestor	Read Replies (1) \| Respond to of 95453

Aggie, following is the second half of my answers to your questions: <3. You haven't mentioned the depths involved, or whether there have been any problems with wellbore stability. Typically with fractured carbonates (limestones and dolomites), if this has been any kind of problem while drilling vertically, then it stands a good chance of becoming a serious problem if drilling directionally or horizontally. Columbia is a region which is known to manifest problems with wellbore stability due to tectonic stress. I wonder if that is a factor here.> <I would doubt that they would choose to try to produce simultaneously from a horizontal drainhole and a vertical well - I might be misreading your comment about 11 producers, did they already have 6 wells before the 5 dry holes?. Typically a casing window is milled (if necessary), then the hole is plugged back with a sidetrack plug. The well is then sidetracked to horizontal. It has become a fairly common practice to drill dual horizontal drainholes and complete them separately. The fractures I spoke of usually have a regional context, so the idea would be to have 2 drainholes 180 degrees apart (one headed north, one south, for example), again, to intersect the maximum number of fractures.> The depths range from about 6,000 feet (most are in th 6,000 foot range) to 8,700 feet. Sorry about the confusion my note caused on how many wells. They have drilled a total of 10 wells – but the last 5 wells were “botched.” A Yahoo poster defined “botched” as “SEV introduced cement to an underbalanced reservoir. “ Neither SEV or the Yahoo posters ever mentioned a problem with wellbore stability. I'll ask in a Yahoo post and let you know. <5. Why are ARCO acidizing - Is it an acid-frac? Acid jobs are typically done in carbonates to remove near-wellbore damage resulting from drilling operations. Acid-frac's are designed to extend the existing natural fractures.> I'm not a technical person and cannot answer why the acidization. There is mention in SEV news releases and Yahoo posts of stimulation, perforation and fracturing. Following is what one poster and SEV said which may help explain the reason. “RESULTS NOT BAD IMHO <test on TP 1W lateral was to test pressure communication from this well to the other well ie ES 6E was shut in to observe pressure response from the test well, and of course to get a production rate, however the rate was limited by the pump size ie 1500 b/d approximately, after the well is acidized to remove skin damage a bigger pump capable of much higher rates will be installed ie 10000 to 15000 b/d, however the ability to store and truck the oil will limit the higher rate tests to short periods, maybe a day or so, the ES 6E was apparently damaged too much to repair ie the water from a shallower formation was not shut off due to a bad cement job that couldn't be repaired, the geologic results still appear to be favorable with the high probability of good oil production if redrilled, the TP 3E will be tested later in the Villeta by fracturing and then the shallower Cimmarona, this may require a redrill however via a lateral well, imho lateral drilling with slotted liner or open hole completions may solve well problems of the last four wells. “ SEV news release said: “Seven Seas also announced that although the Tres Pasos 4-E well encountered 303 feet of Cimarrona formation with oil and gas shows and no water contact, the well bore did not appear to intersect the larger fracture system due to a rotation in fracture system orientation at the Tres Pasos 4-E location. Consequently, the well may not be commercially productive without a successful fracture treatment or the drilling of a lateral extension. The Company is continuing evaluation and analysis to determine whether to fracture treat the reservoir in this well bore.” Thank you very much, Aggie, for your help on this!!! I've actually backed up the truck and SEV is now a major portion of my portfolio. It appears to be way undervalued based on the reserve estimates and a new, capable management team.

To: Aggie who wrote (42118)	4/15/1999 7:24:00 PM
From: JungleInvestor	Read Replies (1) \| Respond to of 95453

Aggie, following is info gleaned from the Yahoo SEV board on wellbore stability: One poster commented on wellbore stability in the Colombian Andes based on Cusiana / Cupiagua wells (Cus/Cup wells). Fractured shales in the Andes caused high dollar problems on many early BP wells (cost overruns of 3 x budget, time overruns of 4 x program), the problem is impossible to fix but can be managed (most of the time). Another poster said: SEV wells NOTHING like Cup/Cus Wells. The issues that you mentioned which BP face in their drilling do not exist in the Emerald Mountain block. The big problem they face is underpressured formations and how to drill and not damage their formations. Before the reservoir, they also have low bottom-hole pressures that force them to drill with foam, etc., etc. Ultimately the SEV wells will be drilled in 2-3 weeks compared to the 4-6 months and more spent drilling in the area to which you refer.

To: Aggie who wrote (42118)	4/16/1999 12:24:00 PM
From: JungleInvestor	Respond to of 95453

Hi, Aggie. One more Yahoo post on SEV's Emerald Mountain property. The biggest plus for me is that SEV's reserves are estimated to be huge, these reserves are accessible and relatively easy to drill, however, inept past management botched drilling the wells. They now have a new management team with impressive credentials (perhaps shareholders such as George Soros and State Street brought pressure to make these management changes). Emerald Mt Compared to Cusiana/Cupiagu by: IVANOILSKI 2946 of 2946 The reservoirs are totally dissimilar other than being in Colombia.One is shallow, underpressured and on west side of Andes practically in a suburb of Bogota and in the Mag Valley, the main civilized area of Colombia. The other is across the Andes, fully pressured and very deep and expensive to drill.Furthermore the resevoir rocks are different in that an extensive fracturing system is in the Cimarrona (Emerald Mountain) whereas the Mirador is a very fine grained well sorted sandstone. Both have high perms but for different reasons. The oil is also very different as E is 20 gravity(about like 20W lube oil) with little gas and C/C is high gravity with a lot of gas. Emerald Mountain is low cost low drilling time in favorable terrain. The common factor is bad management initially in both areas. BP finally solved most of their problems in drilling but it was very slow and costly. Seven Seas has so far not solved it's many problems of drilling/completion, financing(after wasting $45mm)needs and running a public co rather than a private small partnership operation.