Friday, December 19, 2014

Falcon Crest Energy (FCEN) Setting Up the Field for Success in Wyoming’s Thriving Powder River Basin

The advent of newer petroleum recovery technologies has substantially revitalized the Powder River Basin (PRB), which is a 43k square mile region primarily located in northeastern Wyoming and which has historically been a major source of coal for the U.S., as well as a minor source of oil and gas production. Just in the last handful of years, substantial production output has been made possible from a number of the underlying formations in the PRB that had hitherto gone largely untapped, with 2009 basically marking the kick off of a run of unprecedented production increases, with overall output up about 23% over the interval through early 2014 (EIA).

Major advances in output from the Niobrara-Codell, Parkman and Turner formations have led the charge with over 590 wells being drilled in the last five years, and according to the latest Baker-Hughes compiled data from RigCount, there are currently 58 rigs operating across Wyoming, with the vast majority in the PRB. The RigCount data on well starts for Wyoming is similarly bullish, with numbers climbing through early 2014 to hit an average stride of around 100 per month by mid-year, totaling out just over 1k for the full year, without even counting December. Overall the PRB did record numbers last year at around 30M barrels, a 76% jump over 2009 figures, with 2014 shaping up to be another banner year.

The PRB is so hot for oil and gas right now in fact, thanks to the proliferation of shale extraction technology, that natural gas liquids (NGL) offtake infrastructure is seeing major expansion, with Meritage Midstream announcing recently that they are now in a position to begin operations on the first leg of their Thunder Creek NGL Pipeline in early January of 2015. The new pipeline leg will pair up 22 miles of new infrastructure with Phillips 66’s (NYSE: PSX) existing 86 miles of pipe via a long-term lease and is intended to bring improved market throughput to PRB operators, basically trying to put a handle on all the production coming out of the region. The new system will support around 15k bbls/day initially, doubling to around 30k bbls/day as shipper demand increases and producers find the enhanced readiness of market access, as well as improved netback (revenue per oil unit minus the cost of bringing that unit to market), beneficial to their bottom lines and subsequently flock in ever greater numbers.

This new pipeline announcement by Meritage comes fast on the heels of having brought their new natural gas processing plant, located in Campbell County and known as the 50 Buttes facility, online just two months prior. This plant is in the heart of the PRB near Gillette and will have a projected processing capacity of around 140 MMcf/d by late next year, but also has the total upper-limit capacity to handle over twice that figure, having been designed in anticipation of growing production from the region through 2015 and beyond. This plant is already well-supported by long-term acreage commitments from some of the biggest producers in the PRB, and the 50 Buttes facility, as well as the new pipeline infrastructure, paints a very clear picture of the future of the region.

A little further east from Gillette, up Interstate 90 past Sundance, is the roughly 585-acre patch leasehold recently acquired (75%WI) from the BLM by Falcon Crest Energy (OTC: FCEN). Intended as the first of several more acquisitions by this development-stage oil and gas producer, including private leasehold rights that will be added to these federal lands, FCEN’s Rocky Ford prospect in Crook County is on the eastern edge of some sizeable late Cenozoic era alluvial and terrace deposits, according to the company’s analysis of USGS data.

This eastern portion of the PRB is largely underdeveloped despite historical wildcatting and the company is currently playing their cards close to their chest for competitive reasons, remaining tight-lipped about other acquisition targets under their reticule since having announced the Rocky Ford acreage leasehold acquisition in late August. Nevertheless, the company subsequently tapped 35-year industry veteran geologist, Michael Cvetanovic, for their advisory council the following month, looking to employ his extensive experience in play analysis, petroleum system evaluation and prospect generation across multiple continents/terrains, to help develop their growing footprint in Wyoming’s PRB.


For more on Falcon Crest Energy, visit: www.FalconCrestEnergy.com

No comments: