Here’s another interesting article from Bloomberg.

http://www.ericwilder.com

Bloomberg.com: Energy.

Sometime back I sold a geologic prospect to a company in Amarillo.  They drilled the well, looking for a deep formation called the Arbuckle.  After setting production casing, they began testing the deeper formation.

Finding no commercial production in the lowest zone, they still managed to exhaust all their completion money.  They did have a zone up the hole that looked prospective, but they had no money left to test it.  They decided to plug the well as a dry hole even though I lobbied them to continue testing up the hole.

“If you like it so much, we’ll sell it to you,” they told me.

“How much?” I asked.

“It’ll cost us about fifteen thousand to plug it.  If you pay us that much and take the plugging liability, you can have the well.”

After taking a deep breath, I somehow managed to scrape up the fifteen thousand bucks and began thinking of a way to test the zone up the hole without bankrupting myself in doing so.  I began selling bits and pieces to my buddies and the largest share to an operator that saw things the same way as I.  I ended up with a small carried interest in the well and my money back.

The untested zone up the hole was the Mississippi Lime.  The day finally arrived to perforate the Mississippi and fracture it with fifteen thousand barrels of water.  The operation went without a hitch, the well soon making so much natural gas that it was rocking the frac tank catching the return water.

After making a rough calculation of how much the well was producing, I quickly began thinking about all the debt that I would be able to repay, the vacations that I would be able to take and the new cars I would be able to buy with my new-found wealth.  It didn’t turn out quite the way I planned.

Because of a title glitch in the ownership of the well, my override was disputed and put into suspense.  After five years, it is still in suspense.  Even though the well is producing primarily because of my efforts, I am the only one not benefiting from its production.

Well that’s the way of the oil patch!  You should never count your chickens until the zone you are testing is producing into the tanks and in my case, when and if you actually begin seeing some money flowing into your bank account.

http://www.ericwilder.com