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Category Archives: Oil and Gas Production

How to Read a Mud Log — Swan Energy Learning Center

Having a basic understanding of a mud log can be a valuable skill for anyone that participates in a oil and gas venture.

A mud log is a detailed report of the well bore by examining the rock cuttings and mud that is brought to the surfaces as the well is being drilled. Usually, mud logging is conducted by third party. The use of hydrocarbon gas detectors are used to record the amount of gas that is brought up in the mud. These gas levels can be seen on the mud log.

Mud logging is the observation and microscopic examination of of the drill cuttings and evaluation of the gas hydrocarbons and its constitutes, as well as collecting other information about the chemicals and drilling perimeters.

All this information is displayed in the mud log.

John Herring, Director of Exploration at Swan Energy, makes it simple to understand the basics of reading and interpreting mud logs in his three part video series found at: http://swanenergyinc.com/learn

The video below is the first video in the three video series:

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Environmental Protection Agency Signs Off On Hydraulic Fracturing By Brandon Davis

One of the most contentious issues surrounding the process of hydraulic fracturing (commonly called “fracking”) is the belief that it leads to groundwater contamination. Yet, according to Environmental Protection Agency Administrator Lisa Jackson, the process “is perfectly capable of being clean.” Moreover, she agrees with U.S. President Barack Obama in that hydraulic fracturing can benefit the economy through job creation without sacrificing the environment.

Despite these and other compelling arguments, fears surrounding the procedure continue to drive a wedge between citizens, legislators, and gas-extracting operators. Nowhere has this confrontation been clearer than in New York State. Concerns about groundwater contamination in several towns have spurred the passage of recent anti-fracking legislation. The issue has become such a lightning rod that the New York Supreme Court recently ruled that local drilling in the town of Dryden should be prohibited. The ruling essentially constitutes a ban.

Below, Brandon Davis explain how hydraulic fracturing works, and present the concerns posed by critics of the procedure. He then takes a closer look at evidence suggesting their fears are unwarranted.

Brief Overview of Fracking: How It Works

The main purpose of fracking is to extract natural gas and oil from shale formations. The procedure represents a relatively recent advancement in technology, and has made gas and oil extraction economical. Back in the 1970s, before hydraulic fracturing was widely used, reaching deposits trapped within shale formations was cost-prohibitive. Today, due in large part to fracking, gas production in the United States is much higher. Many proponents of the process argue that it will help the U.S. reduce its reliance upon foreign oil imports.

A well is drilled thousands of feet below the surface to reach the layer of shale rock. It descends vertically until it reaches the shale formation.

More than a million gallons of water, along with sand and various chemicals are sent through the well. Most fracks contain 99% water and sand. This introduces a high level of pressure into the rock layer, which causes fissures to form. The sand keeps the fissures open, allowing natural gas to escape into the well through small perforations made in the steel casing. The gas flows from the well into a special container. The pressurized water is then removed and transported to a treatment center.

Concerns Regarding Potential Water Contamination

Swan Energy knows that primary concern posed by fracking critics is that groundwater – water found below the surface – is contaminated by the gas-extraction procedure. They particularly complaint is about contamination of water wells in highly-populated areas, since the general public is exposed to such wells. Critics allege that the chemicals added to wells escape from the casing, and thus jeopardize the safety of the public’s drinking water.

Arguments That Dispel Groundwater Contamination Fears

There are few, if any, reliable studies that clearly demonstrate the contamination argued by critics of hydraulic fracturing. In fact, EPA Administrator Lisa Jackson testified in front of a House Oversight Committee in May 2011 that she was unaware of any documented cases showing such results. She stated, “I’m not aware of any proven case where the fracking process itself has affected water.”

Additionally, Mr. Brandon Davis points to a report titled “Fact-Based Regulation For Environmental Protection In Shale Gas Development” that shows many of the issues attributed to fracking actually stem from other causes. The report’s authors demonstrated that if contamination occurs, it is due to poor well construction as opposed to the fracking procedure. Such problems can be found in all gas and oil drilling projects, implying that the focus on hydraulic fracturing is misplaced.

The Path Ahead For Hydraulic Fracturing

The industry is in favor of smart regulations that will improve the construction of wells, and thus minimize the likelihood of gas and fluid seepage. To that end, many operators are working with state legislators. The danger is that unwarranted concerns lacking factual support may prompt many states to impulsively pass laws banning fracking, despite its proven benefits. While the road ahead is uncertain, Ms. Jackson’s testimony and recent comments should prove helpful toward forging a reasonable path forward, say Brandon Davis of Swan Energy.

 
 

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Swan Energy Continues Drilling the Golden Trend Uplift of Oklahoma

Over the past several years Swan Energy, Inc., through and alongside their strategic partners, has benefited from a successful drilling program that targets the Bromide formation of the McClain County.

Historical Data Highlights of currently targeted sections in McClain County, Oklahoma:

Total BOE                                                                      550,221,750

Wells Drilled                                                                   4,575

Dry Holes                                                                       33

Completion %/(Geological Success)                                 92.7%

BOE Completion                                                             129,708

Avg. IP                                                                           146 BOPD

To date Swan Energy has drilled 17 wells in the Golden Trend, out of which 17 have found oil and/or natural gas: 12 wells are producing, and 4 close to completion.

“I am excited to announce the continuation of our latest exploration efforts in the Golden Trend of Oklahoma.  It is a 3-well project that will target the Bromide formations with back up zones in the Hunton, Viola and Deese Sands,” says CEO of Swan Energy Brandon Davis.

The Three Queens Joint Venture will drill three wells in the exploration area, starting with an offset to two of the better wells Swan Energy Inc. has drilled in McClain County, Oklahoma.   The first well being offset has already made 50,000 BOE out of the 1st Bromide, and has significant reserves in the Hunton, Viola and Hart Formations to be tapped.  The second well offsets a well that has made 12,000 BOE in the last 90 days from the Hunton/Viola formations.

“The Three Queen JV is getting an opportunity offset to wells we have already drilled and had success with.  Moreover Joint Venture partners have the opportunity to come on board with Swan Energy and our operator who combined have drilled over 35 wells in the immediate area, and have over a dozen more wells to be drilled by the years end.   This is a chance to participate with the leaders of exploration in McClain County, OK,” said John S. Herring, Director of Exploration, Swan Energy Inc.

 
 

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Unexpected Top Oil Field Found in Swan Energy’s Backyard

Unexpected Top Oil Field Found in Swan Energy’s Backyard

After 39 years of developmental history, the Wattenberg oil and gas field was a close miss. Wattenberg was supposed to have already peaked as a gas field and not considered much of an oil field says Swan Energy.  Although it was expected to produce natural gas for just a few years, Wattenberg has been steadily producing gas since 1970. Wattenberg now is the 7th largest gas field in the United States.

That all changed in 2009 when the first Niobrara shale horizontal well (famously known as the Jake) was drilled and produced 50,000 barrels of oil in the first 90 days.   A year later the Jake well is still producing more then 2,500 barrels of oil per month.  In 2010 Swan Energy noted that, using the Jake well as a model, several other companies drilled comparably performing wells in the Niobrara shale using horizontal drilling and fracking techniques.

Two years ago the oil rush began in Colorado.  The Wattenberg is not considered the largest oil field in terms of acreage but it is what we at Swan Energy call “oil dense”.  It is two to four times more “oil dense” than the Bakken field (based on 25 -40 OOIP MMBEO/Section for the Wattenburg).

It is estimated that the Wattenberg field can produce 55 Million Barrels of Oil Equivalent per year in the Niobrara shale formation.

The Wattenberg oil and gas field is 20 miles north of the Swan Energy Inc corporate headquarters in Colorado.

The Niobrara shale formation is about 6,800 – 7,200 feet deep with an average thickness of 400 feet. However, the northwest portion of the Wattenberg field can be as much as 1,400 feet thick.  With recent advances in horizontal drilling and hydraulic fracturing the Niobrara shale found in the Wattenberg field is quickly becoming one of the hot oil plays of the west.

Public companies like Anadarko, Chesapeake, Noble Energy, Devon and ConocoPhillips are grabbing as many mineral and land leases as possible.   These companies are going after the estimated 55 million barrels of oil equivalent per year sitting untapped in the Wattenberg field found in the Niobrara formation.  The Barrels of Oil Equivalent (BOE) per year expectation and the increased ability to extract the oil quickly through horizontal drilling and fracturing has created an oil race that Colorado has never seen before.

High oil prices have created even more urgency.  Horizontal fracturing wells make sense to drill while oil prices are high.  The cost of one well is between 4 to 5 million dollars.  Oil companies are willing to take this risk because they know, based on the results from the development testing wells they drilled in 2010 and 2011, that they will hit oil and will see a 30% increase in both initial production (IP) and one year cumulatives over vertical wells.

Anadarko is projecting a payout in 10 months on a typical horizontal well drilled in the Wattenberg field.  These factors explain why public oil companies are racing to get as many land and mineral leases as possible. They have an aggressive drilling schedule of 10 to 12 wells per month because they are projecting a much larger production in a shorter time span when compared to typical vertical well projects.

Any investor looking to invest in the oil and gas sector should keep an eye on the Wattenberg oil and gas field.   Most of the companies that are drilling here are seeing well averages triple their Expected Ultimate Recovery (EUR) revenue production levels in the last several months.

In 2009, when horizontal drilling and fracturing started in this field, the Wattenberg saw at least a 20% year-on-year growth rate in Barrels of Oil Equivalent (BOE) since the wells have come online.

Brandon Davis of Swan Energy Inc thinks there are several factors that make Wattenberg a very advantageous and conservative oil play:

  • High-quality, liquids-rich reservoir
  • Strong proven well performance
  • High hydrocarbon saturations per acre (2 to 4x over the Bakken)
  • Large continuous reservoirs
  • Horizontal drilling and fracturing ability to tap into reservoirs that are 12 times larger then the vertical wells in the same area.
  • High Barrels of Oil Equivalent per Day (BOED) production numbers
  • Short 10 day drilling schedules.
  • Quick payout points based on EUR range of 300,000 – 600,000 BOE per well.
  • With only a few dozen horizontal wells starting to produce in the 3rd Quarter of 2011, the Wattenberg field still was able to set a new record for quarterly sales volume for horizontal wells of 72,400 BOEPD – that’s a 22% increase over 3rd quarter 2010.

With the modern horizontal drilling and fracturing techniques and short Expected Ultimate Recovery curves, Wattenberg has been proven to be a very conservative oil move for investors and companies that are drilling here.

Considering high oil prices, the pressure cooker that is heating up in Iran and the Middle East, the discovery of this oil field could not have come at a better time for the United States.  In 2012, the Wattenberg oil and gas field will play an important role in decreasing our dependence on foreign oil while increasing domestic jobs.   With the Wattenberg field in Swan Energy’s backyard you can rest assured that we will be looking at this tremendous opportunity.

 
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Posted by on March 12, 2012 in Oil and Gas Production

 

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Swan Energy Explains Modern Horizontal Drilling Techniques

At Swan Energy we often talk about pools of oil, but in fact oil exists between the grains of porous rock broken up by faults. With the advancement of horizontal drilling combined with hydraulic fracturing the industry is able to be much more effective at extracting the oil from targeted rock formation.

Horizontal drilling starts off with a vertical well bore. When the bore gets near the target formation the drilling string then makes a 90-degree turn so that the well bore runs parallel to the target formation. Because of the flexibility in the drilling pipe at these lengths the drill string can be snaked through the target formation.

To learn more about horizontal drilling and fracturing go to: http://www.swanenergymedia.com/HZ

In the Wattenberg field the average horizontal well is 7,000 feet deep and then runs 4,000 feet horizontally according to Swan Energy.

These horizontal wells have a significant advantage over vertical wells. In some cases a 4,000 foot horizontal well bore can have as many as 16 perforations  resulting in extracting more oil in a shorter timespan throughout the target formation.

The modern technique of combining fracturing with horizontal drilling has opened up new discoveries throughout the continental United States — Eagleford, Bakken, and the recent discovery of the Wattenberg field. As with the Wattenberg, most of these hot new oil plays that we hear so much about have been known for decades.   It is only now with high oil prices and this new technology of horizontal drilling and hydraulic fracking that makes these fields significant oil plays.

This kind of drilling not only opens up new oil and gas fields, but it also gives the ability to have several wells drilled from one drilling pad site location. For example, Swan Energy estimates that on 1288-acre parcel of land it may be possible to drill 32 vertical wells. One horizontal multi-well pad site with horizontal wells could effectively extract as much oil and gas from the 1288 acre of land as the 32 vertical wells. For Brandon Davis and Swan Energy this significantly reduces cost, and has much less environmental impact on the surface.

To learn more about horizontal drilling and fracturing go to: http://www.swanenergymedia.com/HZ

To learn more about horizontal drilling and fracturing go to: http://www.swanenergymedia.com/HZ

 
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Posted by on March 12, 2012 in Oil and Gas Production

 

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Is an Oil Pipeline Planned in Oklahoma? By Brandon Davis

Is there an oil pipeline that is being planned for construction in Oklahoma, asks Brandon Davis of Swan Energy. According to KOCO in Oklahoma, three oil companies are planning a large scale pipeline that will provide the capacity of over 130,000 barrels daily transportation from multiple locations within the state. The pipeline is expected to connect to Cushing, OK, where there is a 1 million barrel oil storage terminal. Cushing is the largest US oil storage facility with an operational capacity of over 66 million barrels as indicated by the US Energy Dept.

The pipeline will provide jobs to the region and add to the ability to transfer larger volumes of crude oil from the Oklahoma oil fields to market. Production is expected to begin in this summer. For more information on this new pipeline development and construction, please read it here and here as well.

 
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Posted by on February 22, 2012 in Oil and Gas Production

 

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Swan Energy explains the difference between WTI and Brent oil

Swan Energy explains the difference between WTI and Brent oil

Many people do not realize that the oil Swan Energy pulls out of the ground in Oklahoma has different characteristics than the oil that comes from the Middle East or Canada.  There are two factors that generally define the characteristics of oil that create these differences.

The first factor is called API gravity.  API stands for American Petroleum Institute.  This is a statics that is used to measure how heavy or light petroleum liquid is   compared to water. If the API gravity is less then 10, it is heavier than water and sinks; if the API gravity is greater the 10 then its lighter than water and floats above water.  API is measured in “degrees”.  Most petroleum values fall between 10 and 70 API gravity degrees.

Generally oil with an API gravity between 40 and 45 commands the highest prices.   Oil that has an API above 45 degrees is less valuable to refine because of the changes to the molecular structure.

The API gravity from the oil that Swan Energy (http://swanenergyinc.com) is currently pulling out of its wells in Oklahoma is about 38.00 to 42.00 degrees.

There are three main classifications of oil based on API Gravity:

  • Light crude oil: API gravity greater then 31.1 degrees
  • Medium crude oil: API gravity between 22.3 and 31.1
  • Heavy crude oil: API gravity less then 22.3
  • Extra heavy crude oil: API gravity below 10.00

There may be some differences in grading from party to party, but this will give you a good baseline to conceptualize the grades of oil.

The second factor is how sweet or sour oil may be.   This is based on the sulfur content of the petroleum.  Petroleum is considered “sweet” if it contains less then 0.5% sulfur.  “Sour” oil refers to petroleum contains more then 0.5% sulfur.

The term “sweet” comes from the nineteenth century prospectors that would taste small amounts of the oil to determine its quality – the low level of sulfur provides the oil with a mildly sweet taste and pleasant smell.

Sour oil is much more widespread than sweet oil.  Sour oil is found in Canada, the Gulf of Mexico, parts of South America as well as most of the Middle East.  Sweet crude is more commonly produced in the Central United States, most of Africa, the Asia Pacific and the North Sea.

Sweet crude is preferred because it takes less processing in order to remove impurities.  Light sweet crude has the highest demand while heavy sour crude is traded at a discount.  The oil that Swan Energy is currently getting out of Oklahoma is considered Light Sweet Crude.

Using these two factors, oil is then priced on the world market using the different types of oil.   There are two major benchmarks for world oil prices:  WTI crude oil and Brent crude oil.  While both are light sweet crude oils, historically WTI trades at a premium (by just a few dollars a barrel) because it is generally lighter and sweeter. Swan Energy sells the oil produced by the Joint Venture wells using the WTI index not the Brent index.

In 2010, for the first time, this changed and now WTI is trading below Brent by as much as 20%.

The variance between WTI and Brent began at the end of 2010 and was accentuated in February of 2011.  There are two main factors contributing to this.  First are the Libyan crisis and the Arab Spring, which decreased supply of light sweet crude to Europe.  The second, which may be more long term then the Libyan crisis, is the oversupply at the main storage facility in Cushing, Oklahoma.

As the new pipelines from Canada came online along with oil production increases in North Dakota and Colorado combined with  the two pipelines sending oil up from the Gulf resulted in the Midwest refiners being oversupplied with oil.   What also may be a factor is the oil coming from these areas may not comparable in quality to the light sweet crude oil from the Midwest.  These factors are all playing a part in creating a large delta between Brent and WTI.

There are some analysts that believe that market manipulation may be playing a factor as well.   The bottom line is that we will have to wait and see what happens as the crisis in Libya settles down and as more and more oil coming form Canada and North Dakota is being transported by truck and train to the Gulf.

Ultimately, demand remains high and while we may see short term increase in supply, oil supply is still diminishing world wide and this will continue to keep oil prices high – as evident by the increasing WTI prices as it closes the gap between Brent and WTI at the end of October and beginning of November.

 
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Posted by on November 18, 2011 in Oil and Gas Production

 

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