Innocent has honed
their strategy remarkably in recent years and is now focused squarely on
opportunities where low initial funding requirements and tight controls over
the project economics can be implemented. The company is targeting direct
offsets to former production or to wells with demonstrably favorable oil and
gas shows in the energy-rich Wyoming/South Dakota region. The current primary
focus for INCT is their Powder River Basin exploration JV in northeast Wyoming
alongside oil and gas veterans, Evergreen Petroleum out of Dallas.
With an impressive
track record stretching back over a century and a half, Evergreen makes an
eminently competent GM for the project and they will deliver the full force of
this considerable development experience to the task of lease selection,
drilling, and eventual production. With formation targets as shallow as 2.5k
feet in the Powder River Basin, geological analysis by Evergreen should quickly
turn up quality lease acquisition targets and the JV has tapped Pacer Energy
out of centrally-located Gillette to handle initial mineral title reviews and
conduct acquisitive operations.
Also out of Gillette
is the project’s operator, L & J Operating Inc., which will oversee all the
remaining substantial requirements, ranging from bond acquisition, to Joint
Operating Agreement preparation and the payment of contractors or suppliers, as
well as sale of the final production and subsequent payments to the JV. L &
J Operating will be under close scrutiny by the JV via daily reporting and
other periodic analysis, with INCT tagging requisite engineering and geology
hired guns as the need arises. A lean and mean strategy by INCT in this
incredibly rich basin, which is home to the top 10 producing coal mines in the
country; and INCT is also eyeballing broader prospects throughout Wyoming and
in South Dakota which exhibit similarly optimal development characteristics and
which are aligned with INCT’s business model.
The JV is
anticipating lower API oil in the Powder River Basin and has devised a strategy
involving a mix of enhanced oil recovery solutions like gas, water, steam, and
even fire flooding (or injection well flame fronting to drive the oil to
production wells). Also in the mix will be low-cost and environmentally
friendly radial horizontal drilling technology that allows for a series of
small diameter laterals to be created, a technique which has shown incredible
production results in even low-permeability, thin net pays. The combination of
drilling in areas that have a substantial history and Evergreen’s vast
experience in the region/industry should really give INCT a leg up when it
comes to hammering out lease production in the Powder River Basin. The company
also has access to a trove of analytical and technical IP for Oklahoma and
Texas that grants them access to overlooked and undervalued opportunities in
these areas, with formation maps and the associated testing/production data, as
well as historic well log data on developed/shut-in fields, remaining reserves
and potential cash flow estimates. They even have well completion, injection
well, and tank battery engineering data appropriate to Oklahoma and Texas, a
vital IP asset which places the company in a prime position to acquire
overlooked yet valuable reserves for pennies on the dollar.
U.S. oil and gas
wells are on-track to exceed near-record 2013 production as crude inventories
climb to their highest levels since 1931, even as roughly 35% of the EU’s crude
oil and 30% of its gas needs are threatened by the evolving situation in
Ukraine and the associated sanctions on Russia. The U.S. will continue to play
a major role on the global oil and gas scene for years to come according to the
EIA, which has slated 2016 as a future high-water mark, with output expected to
climb to 46-year highs on the strength of shale production. Wyoming producers
in particular have recently been shifting more into oil due to falling natural
gas prices and ample supply, leading to a situation where, barring some kind of
massive LNG architectural build up, this logistical background noise will be
really good for INCT’s own oil development bottom line. The efficiency of that
bottom line also plays heavily off of Evergreen’s vast experience in the region
of course, as well as their numerous industry connections and this Wyoming JV
looks like the start of a beautiful friendship for the two companies.
To INCT this is an
exciting time, developing oil and gas in North America via a laser-focused
business model that emphasizes predictable, sustainable value and partnerings
with proven oil and gas industry operators. The strict line-item detail level
at which funding will be approached, combined with clearly defined,
conservative assumptions, should drive home real bang for the shareholders buck
and investors will want to keep an eye on INCT as their Wyoming JV progresses.
More information on
Innocent, Inc. available at www.innocentinc.com
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