Schlumberger Oilfield Services Inc. completed two log reports to ensure accuracy of data and have provided estimates for the potential of oil and gas in each of the five zones encountered in the drilling process. All five zones demonstrate potential commercial grade and significant quantity of hydrocarbons (oil and gas), which is further corroborated by similarities to other neighboring offset wells, both within 400' (122 metres) of the Bolero 1-23 well. An independent geological report prepared in accordance with National Policy 51-101, will be commissioned immediately to support the data from the log reports.
Given the significance of United Bolero's recent find, the partners have instructed the onsite team to install wellhead equipment as soon as possible and Schlumberger will return to the site to perforate the deepest oil bearing zone according to their initial log data.
In order to recover hydrocarbons in a systematic manner, the Operator, will commence recovery of oil from the deepest interval, the Tyler C Sand. The Tyler C Sand has an approximate 20-foot (6.1 metre) hydrocarbon zone from 2,836' - 2,856' (864 - 871m).
In addition to finding oil in the Tyler C Sands, the Operator encountered a 14-foot (4.26m) hydrocarbon zone of oil in the Stensvad horizon at interval 2,660' - 2,674' (811 - 815m).
A third zone at a more shallow depth of 2,240' - 2,328' (683 - 710m) encountered oil in the Amsden zone. There does not seem to be a possibility of secondary recovery production due to the porosity of this particular horizon, but the lithology of fractured carbonate does suggest that additional horizons could be found with horizontal drilling.
Of particular surprise to both joint venture partners was the discovery of significant gas in a sandstone interval between 1,680' - 1,770'(512 - 539m). The operator encountered a 25-foot (7.6 m) zone of gas in the 3rd Cat Creek zone.
At interval 1,602 - 1,618' (494 - 488m), the operator again encountered gas in the 2nd Cat Creek zone. The zone was approximately 16 feet (4.88m) in depth.
The Wagonbox Field was discovered in 1973 with the successful drilling and completion of True Oil's, Beckman No. 11-24 well. This well was completed in the Tyler "C" interval from perforations 2,902' - 2,912' (885 - 888 m). The Beckman No. 11-24 well had an initial oil rate reported at 53 barrels a day. This well produced approximately 30,000 barrels of oil prior to abandonment. Nearby oilfields currently producing from the Tyler sand have produced in excess of 69 million barrels of oil to date as reported in the Montana 2002 Review.
The Wagonbox Field lies within the Devil's Basin Anticline located in central Montana. Structurally, the Devil's Basin features an uplift which defines the northwest boundary of the Powder River Basin that extends northward from Wyoming. The Wagonbox feature is a strong structural nose with east, south and west dip. There appears to be some faulting to the west creating steeper dips in the horizons. The Wagonbox field is situated at or near the crest of the aniticlinal feature, which enhances the trapping of hydrocarbons in a structural position. The Tyler sand reservoirs were deposited in Mississippian time as fluvial streams and sand accumulations in a delta front environment. The Amsden formation is primarily a depositional limestone bank development situated in a deeper marine water environment. The structural position of this reservoir on the anticline has allowed the limestone formation to be reworked and diagenetically altered to improve the porosity and permeability of the rock. It appears from the log data that the upper portion of the Amsden has experienced this process and has accumulated hydrocarbons in significant volumes. The Cat Creek sandstone reservoir is of Cretaceous age and is developed in a delta front depositional environment. Hydrocarbons appear to have been migrated and trapped in this reservoir due to its structural high position.
Under the Wagonbox agreement, United Bolero shares a 50% undivided interest in the working interest which translates into an undivided 40% net revenue working interest (after landowner royalties, overriding royalties & taxes equaling 50% of an 80% net revenue lease), in wells drilled in Musselshell County, Montana. This first well, the Bolero 1-23, is located in Section 23, Township 10N, Range 25E. United Bolero advanced $100,000US to Big Snowy Resources for its 40% net revenue interest (after overriding royalties) in this well within a 40-acre spacing unit to a depth of 2,930'(893 m).
The initial production from the Bolero No. 1-23 is anticipated to be oil, which will be transported by truck to market. If the well is completed in the future, to a natural gas bearing zone, the anticipated marketing channel would be via gas pipeline. The pipeline would have to be constructed in this case and a market established at that time.
The oil production from this well is expected to be high gravity crude oil with a projected price slightly discounted ($5 per barrel) from the current spot price of West Texas Intermediate (WTI). Natural gas prices in the area are expected to be approximately $4 per 1,000 cubic feet ($4 per 28 cubic meters).
Risks inherent in withdrawing hydrocarbons are minimal. The primary risks in hydrocarbon extraction from development to production, are mechanical in nature. These risks are handled in daily operations and are minimized.
Oil and gas pricing is a risk in oil and gas production. The risk of major downward adjustments in the current price of hydrocarbons seems minimal at this time.
The probability of success in drilling is dependant on the nature of the reservoirs encountered in this area. There is sufficient well control in the area to aid in reducing the risks in well development. However, there still exists the possibility of major structural and geologic changes within well spacing to warrant concern for risk.
The historical probability of success for Tyler sand exploration is in the range of 1 well for every 20 wells drilled. In the case where you have better well control, as in the Wagonbox field, the probability of success is expected to be greater, and is anticipated to be in the range of 1 producing well for every 2 wells drilled. The possibility of multiple hydrocarbon zones in the area also lends strength to a higher estimated probability of success.
United Bolero's President, William Rascan states, "After much anticipation, it is with great excitement that we are able to forward this news to our shareholders. United Bolero is eager to commence work on our 2nd well option."
United Bolero's director, Eric Olsen, who is strongly familiar with the Wagonbox field adds, "I have reviewed the drilling and log data on the Bolero No. 1 well. It looks very encouraging from the data that I have reviewed that a successful completion can be made in the Tyler C sand formation. It is also encouraging to see additional hydrocarbon potential in the upper Tyler section, Amsden formation and 3rd Cat Creek sandstone. This multi-hydrocarbon potential gives greater strength to this prospect in developing significant oil and gas reserves."
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