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Energy: Texas Tops Finds From Brazil to Bakken as Best Prospect

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By Edward Klump – Mar 22, 2012 7:00 PM CT

Energy companies in search of oil riches rivaling the biggest finds from Brazil to Angola are flocking to Texas shale, where new wells have triggered a 230- fold increase in crude output in three years

More than 115 years after a gusher 55 miles (88 kilometers) south of Dallas ushered in Texas’ first oil boom, U.S. producers such as ConocoPhillips and Marathon Oil Corp. (MRO) are counting on the Eagle Ford Shale to boost crude output amid a glut-driven slump in natural-gas prices.

Drilling for oil in the brush-covered plains of south Texas is cheaper and less risky than exploration offshore Brazil, the largest oil find in the Western Hemisphere in 30 years, and more profitable than the remote, rougher terrain of the Bakken Shale in North Dakota and Montana.

“The Eagle Ford is the top basin we have in the world today,” David Roberts, chief operating officer at Marathon Oil, told analysts and investors on a conference call last month.

Surging production in shale formations has transformed the U.S. energy landscape, flooding the market with gas and boosting domestic oil production by 14 percent from three years ago after dropping by a third in the previous 17 years, according to Energy Department data. After worries of a global oil shortage drove prices to record highs above $140 a barrel in 2008, politicians and industry executives now are discussing the prospect of the U.S. weaning itself from dependence on imports.

Doubling Down

Marathon Oil and ConocoPhillips (COP) both plan to double their production in the Eagle Ford this year. EOG Resources Inc. (EOG), based in Houston, calls the Texas shale play its biggest source of growth, and last month boosted its estimated recoverable reserves there by 78 percent.

Oil production in the Eagle Ford jumped almost sevenfold in 2011 to surpass 30 million barrels, still less than Bakken production in North Dakota that exceeded 128 million barrels. This year daily oil production in the Eagle Ford is forecast to expand by 200,000 barrels, roughly the same amount as the Bakken, according to estimates by Wood Mackenzie Ltd. cited by Hill Vaden, an analyst with the industry consultant.

The South Texas oil fields are winning a larger portion of producers’ investment because it’s easier and more profitable to drill there compared to many prospects in the U.S. and in the world. Wells are faster and cheaper to develop, and the formation is located closer to refineries on the U.S. Gulf Coast, lowering transportation costs.

Higher Prices

EOG said it costs about $5.5 million per well in the Eagle Ford, compared with more than $8 million per well in the Bakken, because of different well configurations. An offshore Gulf of Mexico well can cost $100 million, said Brian Uhlmer, an analyst at Global Hunter Securities LLC in Houston.

Deep-water wells can take five months or longer to drill, compared to a couple of weeks for a well in the Eagle Ford, said Brian Cain, a spokesman for Anadarko Petroleum Corp. (APC)

Producers can get a higher price for their Eagle Ford output than they can in the Bakken. Prices for Texas and Louisiana (USCRLLSS) crude this week are as much as about $38 a barrel more than production in the Bakken (USCRLLSS), according to data compiled by Bloomberg.

“The economics there are absolutely stellar,” said Danny Brown, a general manager who helps oversee Anadarko’s Eagle Ford operations. Anadarko has said it is considering selling its exploration properties offshore Brazil.

Less Political Risk

Texas provides a more stable investment environment compared to many international projects, said Pavel Molchanov, an analyst at Raymond James & Associates in Houston.

“Clearly, there’s less political risk in Texas than in Libya, let’s say, or Kurdistan,” he said. Marathon Oil last year had output suspended in Libya during unrest in that country.

The Eagle Ford cuts across a 400-mile swath of southern Texas, according to the Railroad Commission, which regulates oil and gas production in the state. Producers have unlocked the resource using advances in horizontal drilling and hydraulic fracturing, which sends jets of water, sand and chemicals underground to break up rock.

Petrohawk Energy Corp., acquired by BHP Billiton Ltd. (BHP) last year, first drew attention to the Eagle Ford when it announced a gas find in 2008, a year when futures for the fuel in New York averaged more than $8 per million British thermal units.

Surging Production

Expanded use of fracturing, or fracking, across the U.S. caused a surge in gas output that drove prices to a 10-year low this month of $2.204 per million Btu. Meanwhile, crude in New York has climbed 15 percent since the end of 2010 and is trading for about $105 a barrel.

While drilling has slowed in U.S. shale gas fields such as the Fayetteville in Arkansas, development has accelerated in South Texas as producers focus on the formation’s oil-rich geology.

The Eagle Ford will help lead a surge in state drilling permits that’s on pace to reach 25,000 this year, the most since 1985, said Barry Smitherman, the commission’s chairman.

“It’s by far the most sought-after play anywhere — not only in this country, but anywhere around the world,” said Fadel Gheit, an analyst at Oppenheimer & Co. in New York.

A Sanford C. Bernstein report last August estimated Eagle Ford production would reach 1.2 million barrels of oil equivalent a day in 2015, with 750,000 of that being liquids.

“A long-time oil field axiom is that big fields tend to get bigger over time, and that’s certainly the case here,” EOG Chief Executive Officer Mark Papa told investors during a Feb. 17 conference call. “This continues to be the hottest and highest reinvestment rate-of-return play in North America.”

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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Grid Petroleum Corp. — Announces Joint Venture Development Agreement for New Area of Interest

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DENVER, Feb. 21, 2012 /PRNewswire/ — Grid Petroleum Corp. (OTCBB: GRPR) The Board of Directors are pleased to announce that Grid Petroleum has entered into a Joint Venture Development Agreement with a private holding company, to develop a Mutual Area of Interest in the Northwest Premont Field in Jim Wells County Texas. The Field covers 4,500 acres and is part of the Gulf Coast Trend in South Texas.

Reserves are estimated to contain over 20 million barrels of oil (bbls) and 20 billion cubic feet (bcf) of natural gas from as many as 15 potentially productive zones per well. The initial phase of the Development Agreement outlines the drilling and completion of 20 new wells and the re-entry of 8 additional previously drilled and completed shut-in wells.

The company had previously announced negotiations to purchase the private holding company, however it has been determined a Joint Venture Development Agreement will serve the company and its shareholders more beneficially in the near term.

Grid Petroleum will begin participation with the second well to be drilled under the Joint Venture Development Agreement at a level of 10% for an investment of $152,000.

Grid has the opportunity to make the Companies first investment into the Joint Venture after the results of the first well-drilled and completed are available for analysis, greatly reducing the risk of the investment by Grid Petroleum into the entire field.

The purpose of the development of the Northwest Premont Field is to create value and income by re-entering certain wells, which have been tested and have proven oil and gas producing zones, and the drilling of strategically located wells containing multiple zone production in a manner that produces high rates of stable production; proving the reserves of the underlying pay zones for further development of the field through production.

To date the fields operator has re-entered two wells, the Guerra #2 and the Garcia #2. The Guerra #2 was drilled to 4,000 feet and tested positively for oil and gas in 12 potentially productive sand zones encountering 118 net feet of pay.

AP Yang, Petroleum Engineers of Houston Texas ran 45 days of open flow tests to draw down the pressure of each of the productive zones in the well. The absolute open flow rate calculations indicated the lobe flow of the Laughlin oil sand deposit tested at 15,541,000 cubic feet gas per day. The upper lobe flow tested at 5,063,000 cubic feet peer day. The combined total of 20,604,000 cubic feet per day from 16 feet of net pay zone for this one well with multiple pay zones.

Preliminary Reserves Estimates for the Guerra #2 are 100,000 to 150,000 Barrels of oil and 1.5 Billion Cubic Feet to 2.5 Billion Cubic Feet of natural gas.

The second re entry well the Garcia #2 is co-mingling two gas zones with production averaging 1.0 million cubic feet of gas per day. An Oil zone is also producing an average of 39 barrels of oil per day. Reserve estimates for the Garcia #2 will have similar potential production levels as the Guerra #2.

The current price of gas ranges between $2.75 and $3.00 per mcf.

20 million cubic feet per day of gas production represents a potential gross of $60,000.00 per day.

Grid Petroleum Corp is a development stage company focused on the acquisition and development of low cost high reward oil and gas prospects with infield drilling for proven potential reserves in the United States and Canada.

The company anticipates the initiation of a development plan with its joint venture partners for the purpose of establishing suitable drill sites for the Kreyenhagen Trend leases.

Upon completion the company will have established a time line for the development of its significant Oil and Gas assets.

www.gridpetroleum.com

Alice, Texas – 1900 to 1990

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Alice Cotton Oil Co’s Plant, Alice, Texas

During the 1920s, as a result of the oil boom in Jim Wells County, Alice adopted the slogan “Hub City of South Texas.”

By 1900 the town had five churches, three public schools, a kindergarten, and a private Mexican school. The two weekly newspapers serving the town were the Reporter and the Echo. During that period Alice acquired the nickname the “Windmill Town” for its numerous windmills. In 1903 Eulalio Velázquez started publication of El Cosmopolita, a Spanish-language newspaper. Alice was incorporated on June 2, 1904, at which time it had a population of 887. F. B. Nayer owned the town site and donated land for early civic buildings. With the completion of the St. Louis, Brownsville and Mexico Railway to Brownsville in 1904, the Alice-to-Brownsville stagecoach was discontinued. The telephone company was sold to the Eureka Telephone Company in 1904, and the Southwestern Telephone and Telegraph Company started providing long-distance service. Trinidad Salazar was instrumental in getting Alice a new elementary school, which was named for original settler F. B. Nayer. In 1909 a fire destroyed half of the Alice business section, but it was rebuilt and the town continued to grow. Alice was chosen county seat of Jim Wells County shortly after the county’s organization in 1911. The town also became the headquarters for Texas Rangers serving in South Texas during the 1912–16 border raids. By 1914 Alice had an estimated population of 3,500, two banks, a cottonseed oil mill, a cotton gin, an ice plant, and two weeklies, the Alice Echo and the News. The introduction of irrigation helped to continue Alice’s importance as a shipping center, and a shift was made from transporting livestock to transporting fruits and vegetables. During the 1920s, as a result of the oil boom in Jim Wells County, Alice adopted the slogan “Hub City of South Texas.” The town served as the distribution point for both supplies and construction to south Texas. Its population was estimated at 4,239 in 1931. In 1935 a public library opened. The town had an oil boom in 1938, when the Alice oilfield was discovered. By 1940 the population was 7,792.

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Baptist Church, Alice, Texas

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Hotel Alice, Alice, Texas

Alice made national headlines during the 1948 primary election for state senator. Lyndon Baines Johnson and Governor Coke Stevensonqqv both ran for the Democratic party nomination. It was alleged that Johnson won the primary because he had stolen the election with the help of George B. Parrqv, political boss, who controlled both Duval and Jim Wells counties. Alice became the focal point of a federal investigation when it was alleged that Alice’s Precinct 13 ballot box had been stuffed. By 1949 violence erupted in Alice. W. H. (Bill) Mason, a local broadcaster, was shot by deputy sheriff Sam Smithwick after he had alleged on the air that Smithwick was the owner of a dime-a-dance palace.

During the 1940s and 1950s Alice had an economy based on the oil and gas industry, livestock production, and the marketing of cotton, flax, grain, and vegetables. Industries manufactured oil-well chemicals and supplies, fiberglass, products, cottonseed oil products, and foods. Census figures indicated a population of 16,414 in 1950. In September 1951 Alice was struck by a flood. In 1960 the population was 20,861. In 1963 Alice had thirteen churches and seven schools. In 1966 the town reported 429 businesses, nineteen manufacturers, twenty churches, two libraries, two newspapers, three banks, a radio station, and a hospital. Around 1966 Mexican-American youths boycotted Alice High School in protest against discrimination on the part of students, teachers, and administrators. Alice had an estimated population of 25,100 and 462 businesses in 1970. During the 1970s the city continued to be an oil and agricultural center. Agribusiness in Alice contributed nearly $34 million annually to the gross income of Jim Wells County. The Alice trade territory embraced a population of more than 150,000 in a forty-mile radius. In 1982 naphthalene and penanthene were found in Alice’s water supply and traced to an oilfield drilling company working in the area. In 1985 there were over 250 oil and mineral industry companies in the area. At the time Alice had eleven public schools and two parochial schools, twenty-nine churches, a museum, a public library, a private hospital, 557 businesses, and ninety-four major employers. In 1990 Alice had a population of 19,788. In 2000 the population dropped to 19,010.

Timeline of Texas History – Alice

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