Friday - October 14, 2011

We doan need no steenkin Alternate Energy

Royale Energy Discovers Natural Gas in Sacramento Basin

Royale Energy (ROYL) revealed on Friday a new natural gas discovery in the Sacramento Basin that has increased the company’s optimism over its growth potential. The discovery and the additional drilling capabilities are expected to increase its production.

“With a strong balance sheet and an aggressive pace of exploration in Royale’s core area, the company is confident in its outlook for growth,” the company’s co-CEO Donald Hosmer said in a statement.

While the company was drilling to a depth of 7,150 feet, the well intersected natural gas filled sands in each of the targeted upper, middle and lower Mokulumne sands. [also spelled Mokelumne in other places]

The lower zone has been completed and is flowing over one-million cubic feet a day on a restricted choke. The company said it will reserve the middle and upper zones to be completed following the production of the lower sands.

The Pacific 1-3 was drilled to a total depth of 7,150 ft. and wireline logs have been run. The well intersected natural gas filled sands in each of the targeted upper, middle, and lower Mokulumne sands. The lower Mokulumne has been completed, flowing over 1,000,000 cubic ft. per day on a restricted 10/64’s choke. With the strong results of the lower sand, the company will reserve the middle and upper Mokulumne zones to be completed following the production of current zone.

The company has also added new production with the recompletion of new zones in several of its existing wells.

Andrus Island well is now producing 250,000 cubic ft. per day from a shallower formation in the well. Andrus East was recompleted with a high pressure of 1100 psi and will be placed into production this month.

The title of the first article is a tiny bit misleading. Natural gas extraction has been going on in the Sacramento Basin since 1936. Trillions and trillions of cubic feet have been harvested. The Basin is the area between the coastal mountains and the Sierra Nevadas; it is the Sacramento Valley and the San Joaquin Valley and the backwaters of the San Francisco Bay. The Rio Vista gas field lies a few miles southwest of Sacramento and a few miles northwest of Stockton; the Thornton field is just to the east, due south of Sacramento. This is the heart of the gas producing region. Andrus Island is just southeast of the Rio Vista field, on the edge of the backbay where the Mokelumne River meanders in from Lodi a few miles to the east.

The thing about the Basin is that the sediments there are very deep; in between the two mountain ranges silt piled up for millions and millions of years, reaching 7.5 miles in depth at some points. And it’s all gas bearing sand and shale, layer after layer, with only a couple of oil producing areas. This find might revitalize the whole zone, which I gather has been depleted to such an extent that the land is sinking and people have even considered using the old wells as CO2 hiding areas. Injecting all that naughty CO2 - the depleted fields could hold many gigatons would not only support the upper soils, it would also help push out the rest of the gas. Like frakking, only without water or dynamite. But now that Royale has shown that at least one whole new layer of gas exists further down (and that hole still isn’t even halfway through the sediment layers) this could revive the whole area. Nice.

I like that the test well is flowing a million cubic feet a day, even through a restrictor; the implication is that it could flow even more, perhaps half a billion cubic feet per day, without one. That’s what a good well can produce. And there are two other proven gas layers above it, left in reserve. Sweet.

Playing the market? Royale Energy (NasDaq: ROYL) stock was down .3 to only $3.23 per share even after making this announcement yesterday, having recovered from a low of about $1.80 in late September. They’re at < href="http://thestockmarketwatch.com/stock.aspx?stock=ROYL">$3.52 right now and have been tagged as a “big mover” stock to watch once again. The company increased revenue by 34.5% last year, reduced expenses 11%, and paid 12¢ per share even though their net profit was only a bit over $1 million. It’s not a giant company. With this strike they could be set to take off, as their proven reserves were already nearly 4 years worth of production, and large investments (and low wellhead prices) from 2009 begin to pay off.

Crude oil and natural gas prices are on the rise again, although gas’ wellhead price is around $4.27/MCF, just about the lowest price in a decade if you ignore 2009’s midyear slump. That means that this new well, even with it’s choke in place, is earning $4270 a day and could have an unchoked revenue of $2.14 million per day.

PS - Can somebody explain this one to me? Looks to me like wellhead price is up $0.04 since February, import price is down $0.11 in the same time frame, yet residential price is up a WHOPPING 55%! And this is after a whole year full of new gas finds, the shale frakking thing, etc - we have lots and lots and lots of natural gas. There are no new national pipelines that need paying for, are there? The nation has more than 3.5 TRILLION cubic feet of the stuff in tanks, which is pretty much how much stock on hand we always have this time of year. So what gives?? We’re getting ripped! Corporate Greed!!!11! Occupy Natural Gas Street!!!!!!!1111!!!

Posted by Drew458     on 10/14/2011 at 11:55 AM   
Filed Under: • Oil, Alternative Energy, and Gas Prices •  
• Comments (3) • Trackbacks(0)  Permalink •  

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