Quicksilver finds oil in well on Wolf Mountain | SteamboatToday.com

Quicksilver finds oil in well on Wolf Mountain

Quicksilver's Pirtlaw oil well on Wolf Mountain is seen Jan. 13 from the air. Of the three dark cylindrical storage tanks in the right of the frame

— The possibility that the Niobrara Shale lying more than a mile beneath Northwest Colorado will yield enough oil to be profitable seems more likely this week after top executives with Quicksilver Resources confirmed their first horizontal well on Wolf Mountain in Routt County has demonstrated it is capable of producing 500 barrels of oil per day.

"It's very early but meaningful," Quicksilver Vice President of Finance John E. Hinton said Wednesday.

The price of crude oil fell 12 cents Wednesday to $100.59 a barrel.

Quicksilver Senior Director of Governmental Affairs and Community Relations Stephen Lindsey said that during a visit to the well pad a few days ago, the pump jack on the Pirtlaw well on Wolf Mountain was not being operated, a sign it is not in full production. However, the well has given Quicksilver executives a sense of what might be to come.

Hinton confirmed the transcript of a conference call Quicksilver executives held with financial analysts tracking the oil industry earlier this month: They think the Thunderhead Project in Northwest Colorado has the potential to produce a half-billion barrels of oil.

"We've (leased) over 930 square miles. It has a thick Niobrara section with a large oil reserve target," Quicksilver Chairman of the Board Thomas F. "Toby" Darden told analysts monitoring the conference call. "From our vertical testing across the block, we have determined that the entire section is oil charged. We think there's an oil reserve target to Quicksilver's acreage of around 500 million barrels of oil if we're able to exploit it effectively."

Hinton told the Steamboat Today on Wednesday that it's premature to speculate on whether the estimated oil reserve of 500 million barrels will prove out.

"There's a lot of work to be done to prove if that entire acreage will produce" to that level, he said.

Steamboat-based energy industry consultant John C. Lamb said Wednesday that the numbers discussed by Quicksilver suggest the Niobrara Shale belt could be productive.

"It isn't necessarily an oil boom, but it's certainly very positive for the future of the Niobrara in Northwest Colorado," Lamb said.

He contrasted that the estimated reserve of 500 million barrels is substantially less than the 750 million barrels found in the vicinity of Rangely after World War II.

The Rangely field was drilled in an era when technology wasn't as sophisticated as it is today, Lamb pointed out. The conference call unveils how Quicksilver engineers have done their homework on earlier efforts to extract oil from the ground beneath Routt County by studying production from 80 vintage wells.

Quicksilver's research shows that more than 12 million barrels of oil have been recovered from older, vertical wells drilled between 1960 and 1980. Data about production in those old wells suggests to Quicksilver that they were inadequately stimulated, suggesting modern technology could produce greater yields. Five hundred barrels per day is five times what the older wells produced, Darden said.

"That's what gave us confidence in the beginning to take this acreage, and it's being borne out in our vertical tests and currently our new horizontal tests," Darden told the analysts.

Reporting on the conference call, the Web page Investopedia reported that the Pirtlaw well cost about $8.5 million but that going forward, Quicksilver expects costs to drop to $6.5 million to $7 million per well.

The conference call also suggested that the owners of the mineral rights leased by Quicksilver could profit from the Niobrara. Darden told analysts that his company got in early in the Thunderhead Project and that it has a low-cost basis in the 210,000 acres under lease "with an average net revenue interest of 81 percent."

Hinton confirmed that means in aggregate, mineral rights owners would realize 19 percent of the revenue from future wells.

Finally, Darden turned to an old expression to describe the quality of oil the Thunderhead Project is expected to yield.

"The crude is sweet," he said, which means the oil has low sulfur content, making it more valuable. And the ratio of natural gas to liquid petroleum is very low at 2,000 to one.

With oil prices high and natural gas prices low, that's the place to be for an energy exploration company.

To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com