trinidad site vist report from a shareholder.

Kev Yorks has gone to Trinidad to see for himself what is going on in the Trinidad operation. His report is below.

http://www.worldstocks.co.uk/forum/download/file.php?id=190


Range Resources
Trinidad Site Visit 2012
?????Notes taken during my Trinidad site visit. Please note whilst every endeavour has been taken to ensure accuracy and the contents have been crosschecked, I cannot vouch unreservedly for the content within as certain aspects are forward looking and subject to operational change.
?Corporate.
?Trinidad bid round end of this year early next it’s a pure exploration play and they will be looking to enter the bid round.
They have atm drill rights to 13,000ft in the northern half of Morne Diablo and South Quarry, 10,500ft in the southern half of these blocks and 5,000ft on the Beach block. This is hoped to be enough depth to hit the Upper Cretaceous in some areas, however Petrotrin terms should be changing and the company are actively pursuing this to give unlimited drilling depth.
They will definitely add additional Rigs as and when required probably looking at a min of 2 shallow rigs once the first 6 are operational
They are also looking at plans to run their own drill school to feed drillers through the ranks on the shallow drills.
?Backroom Staff
They now have support staff in place for 24-7 operations currently 256 employees (128 added by Range) 25 are graduates some in field others backroom staff.
Now fully manned Environmental, HSE, reservoir simulation, risk assessment offices to speed up regulatory processing (guys from Trinity have done the same it was the only way to get around Petrotrin delays) sending in multiple plans so they have a number of drills pre approved. (Anywhere from 2-6 weeks per application)
Seismic's, drilling perforating etc etc all require their own approval by both Petrotrin and the ministry on a well by well basis.
The company bar additional drillers are fully staffed up for 1-2 yrs of projected activity of 200 wells currently planned.
In the process of getting a new Petrotrin requirement “Safe to Work Permit" similar to a ISO in the UK.
They have acquired new reservoir simulation software and are currently building a database of all seeps, well logs, Seismic's 2d and 3d and combining into the res models, for this reason they are sampling every 30ft to delineate all the sites and have accurate data for the onset of horizontal drilling.
Trinidad background
The company manage over 600 wells currently of which approx 100 are producing across three blocks South Quarry, Morne Diablo and Beach Marcelle.
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?Morne Diablo covers over 9,300 acres with 10m barrel Primary production thus far but that’s on a very small percentage of the asset.
South Quarry over 3,700 acres 2m barrel Primary production likewise but on even less development with only 20-30 producing wells on south quarry.
Beach covers 3,500 acres with a total of 236 wells and 30m barrel primary production started by Texaco then continued by Petrotrin
Texaco started a water flood program in the 1960's and flooded two of eight targets before leaving, the first wells date back to 1902.
The current rig inventory is 6 drill rigs (Rig 8 11,000ft + 2 medium 6,000ft rigs)
They own a resistive imaging tool (man portable) which has just returned from the states
?where it has been serviced calibrated and had the software upgraded, also down hole logging tools etc all owned and on site in Trinidad.
In addition to the drill rigs there are 3 production Rigs & 3 Swab Rigs.
Historically in 2008 there were 16 rigs half offshore at the peak of the drilling by 2012 only 12 rigs half offshore where operating in Trinidad so It'll be the first time since the 1950's a single company Range will have 6 operational rigs (last 2 on for this year Rig 2 second week of Nov back into operation)
Over the Island the average production per well approximately 40bopd, whilst the current average for Range drills is approximately 50bopd.
They have a full 3d dataset for Morne Diablo and South Quarry plus additional 2d lines on both. Importantly they've also gone back through all the historical data and plotted every seep and well found or drilled on these blocks.
Traditionally all wells were drilled on seeps without Seismic's Range with this in mind have enough targets to keep them busy for 20yrs on the current acreage.
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?Reserves etc
?Sub 1000ft wells typically produce 40k barrels Primary @40bopd with decline rates of 30- 15% for the first 1-2 year then 15-10% thereafter.
Mid Cruse (4000ft) historically produce 200-400bopd with an Island wide average of 120bopd taking into account the full spectrum of wells, dry holes to good producers and approximately 50-100k barrels recoverable via primary means. Bearing in mind Morne Diablo is not a virgin reservoir it’s probably better to expect in the region of 75-100 bopd from the mid Cruse which is in line with the current best producing Morne Diablo mid Cruse well at 110bopd. For the lower Cruse targets it’s again probably better to work on the same numbers with any higher daily production figures as a bonus.
?The current 200 targeted drill sites should give 5,500 bopd and 15m recoverable plus water flood. The Morne Diablo shallow water flood is increasing from 8 acres to 80 acres targeting 700bopd and 1.8million barrels extra production.
The Beach block water flood is targeting 4k bopd with 12.8 recoverable.......Texaco flooded two blocks in the 60's so they have a proven model and all data is available. The company rate it as zero risk due to it being a proven recovery method on this site and just a case of continuing where Texaco left off.
Once all currently planned projects are on-stream target is 8-10,000 bopd
?Hererra the current target block has a prospective 27m recoverable of which it would be expected to recover 500,000 barrels per traditional vertical well. With 500ft well spacing the current drill site can facilitate multiple wells utilising directional drilling techniques from the single pad so no demob mob delays .......Upper Cretaceous is also on the agenda and within reach of Rig 8 in certain areas see beach site later though additional drill depth which is being sought will be required.
Assuming the Lower/mid Cruse is proven with Rig 8 its going to take 2 rigs 2-3yrs just to cover this additional drilling and it’s not in current plans so it’s all extra provisional reserves, as this drill is proving up a new extension. If as seems probable they drill horizontally less wells will be required, more on this later!
Currently only 2 drills have intersected the upper cruse pay.
The current Morne Diablo trend runs way to the East where they have a similar area to which they are drilling at present, again with seeps and a few historical wells so proven oil again but not in current plans at present.
?There’s another Hererra anticline on South Quarry in addition to mid and lower cruse with a 10m barrel prospective recoverable target @10,000ft.
Again further targets to the west of current Morne Diablo drilling but yet again not in the current drill plans, so yet more prospective reserves not accounted at the minute.
Rig 6 is currently looking to extend the trend on its current drill, this then will require infill drilling.
From Mark Patterson the whole system is hyper saturated with crude and what can't be trapped seeps to the top even at sub 1000ft depths there using 8-10lb mud weights due to overpressures in the reservoirs.
From Neil the resident geologist, recommended reading http://www.energy.gov.tt/content/Centenery_Pub_Krishna_Persad.pdf
source rock is Upper Cretaceous also known as the La Luna in Venezuela and its very high in organic carbons...........NOT Abiotic!
Traditionally wells in the area were hitting 26-30api however they have been encountering a very light 43api oil, to the west its however traditionally heavier also Hererra is anticipated to be a slightly lower api oil.
Importantly though they have NO heavy oil!
They are hoping to produce from at least 10 more ultra shallow blocks similar to the current MD block with estimated reserves of 1.8m barrel per target area at a cost of approximately $15,000 per well. As a indication of how productive these shallow target are 300ft wells have sands of 200ft out of the 300ft TD with initial oil shows as shallow as 10ft.
Hererra rocks are of a "salt and pepper" structure some drills have found 800ft of res sands and with new completion methods give phenomenal upside. 500ft well spacing targeting 500bopd on a simple vertical well but with new completion methods Horizontal drilling plus a frack they would want 3,000-5,000 bopd per well.
The first Hererra wells they are only banking on 150ft of pay and 27m recoverable using
??simple vertical drills prior to any possible horizontal drilling...... vertical wells $2.5m per drill On the first target area it'll require 20-30 vertical wells or less horizontal to produce the field, but there are more structures down dip for later exploration again not in reserves or plans at present...........spud Dec.
This is important for drill timelines there is no need to move the rig, just sidetracking from the currently prepared location is a viable option.
The Company also own a Surface resistivity kit (man portable) which is just back from the manufacturers having been recalibrated with updated software and it's to be deployed into the field checking out seep areas for more ultra shallow targets. They are hoping for a minimum of a further 10 shallow targets 1.8m barrels recoverable each to drill with the small shallow rigs Walter is keen to purchase.........this will also work well with the drill school they are possibly looking into setting up using graduates to do the work.
?New completion tech what it means.
?Historical lower cruse pays produce at 2-400bopd in a vertical well but with only 75-100 being targeted with new completion tech res simulation suggests 1,200 bopd is possible once the field is delineated and they drill horizontally. Further a Hererra 500bopd vertical drill would equate to a 3-5,000 bopd horizontally drilled well when combined with a frack.
Walter is convinced there would be no issues with this, fracking’s already been done on a small scale in Trinidad and due to the depths and remote location he foresees no major regulatory issues. The amount of fracking required if any would be optimised after core samples had been analysed along with well logs. However given the anticipated additional recovery and flows it’s a effort well worth taking and something they seemed very keen on doing as soon as the reservoirs are delineated sufficiently, hence why samples are currently
?being taken at 30ft intervals.
Water flood
Range have done trials and proven disused wells are as effective a injector as purpose drilled wells and Petrotrin are OK with this so it’s a massive reduction in costs here, approval has been given to reuse old wells for this purpose. Further they have had discussions with Petrotrin regards taking their waste water in addition to our own for re-injection purposes, the response being speak to us again when you’re ready to inject. Due to the clays within the fields they cannot use fresh water it requires either sea water or saline waste water from production........fresh would swell the clays and reduce production.
The Morne Diablo 8 acre test flood has proven the tech and Petrotrin are happy to expand it across a 80 acre MD block they're expecting 700bopd peak flow over a 10 yrs lifespan this should net 1.8m barrels for a cost of $2.5m.......with zero geological risk as they are using a proven model. Again the minimum 10 similar shallow blocks they are going out for with
the resistivity kit will get the same treatment so add additionally circa 1.8m x number of blocks found extra recoverable there over 10 yrs or so.
The MD targets are inclined at approximately 30 degrees and the plan is to inject at the lower edge of the target locating producers above, once this line is watered out they will produce from further up the incline as the pressures build further through the formation........ Plan is to start building pressures in the New Year with production late 2013 early 2014
Beach water flood 230+ wells Petrotrin are still operating a handful of wells for now prior to likely handover of the full site in the near future. The Initial plan is 55 infill drills and 6 well
??bores to deepen, whilst they phase in the water flood......on Beach the first wells were drilled in 1903 in that time 30m barrels have been produced thus far and Texaco added a extra 69% to primary production on the 2 water floods they completed. With all the data there it’s a no geologic risk continuation of a working model total cost $20m Environmental permits should be in place by Dec (applied for end of 2011) and they’ll be using a seawater pipe plus production waste for injection.
The Cretaceous formation is much shallower in beach it’s a domal fault and the same source rock as the big offshore producers in the East approx 8000ft deep so well within rig 8 capability.....................quote from Walter was "do not discount the possibility of seeing some UC drilling next year". He wants primarily more shallow rigs first though using what they have already to maximum effect prior to bringing in new bigger rigs, however leasing some more big stuff was not discounted short/medium term.
?I wasn't going to add this section but in light of the fact most will not in this instance have site access to the degree I've been fortunate enough to, will add my own personal thoughts and conclusions now I've had time to reflect on the visit.
First and foremost the sheer scale of the site I never really understood and equally how little of the asset is currently under development by Range. For the initial outlay to be already recouped at least on paper by reserves upgrades in the first year of operation is a testament to the work done on site, Something myself and I suspect most have not given credit for! The picture from Rig 6 in the centre of the current development block, out to Rig 1 on the Eastern edge of current development shows the true scale of clearance and site preparation already carried out as a precursor to what will then be rapid low risk infill drilling by Range.
?The new fiscal terms something I've not touched on in here will make a huge material difference not just the reduction in the headline figure but the reduction in daily volumes required to trigger the lower 15% Tax tier threshold and its quite obvious given infrastructure improvements that Petrotrin are gearing up for large production increases from the site.
Water Flood it’s tried and tested onsite already so just a continuation of a working model, so really is high return for minimal risk and outlay.
3d reservoir simulation software and its intended uses not just in the water flood which is in itself a extremely low risk license to print money, but its use
in delineating and mapping the reservoirs which will assist in the drilling of horizontal wells. The numbers there speak for themselves, yes we all baulked at the high one off admin costs incurred with the purchase of the software and setting up of the data centre but on reflection I feel it’s money well spent that will be recouped many times over. Further this software and data centre does not have to be Trinidad only, run the Colombia data through the same process and what sort of increases would we see there with horizontal drilling techniques?
The passion and commitment of Walter the Trinidad CEO don’t underestimate his intent to prove up his “baby” I sincerely got the impression he’ll do whatever it takes to make this asset work and regardless of obstacles that's exactly what he intends to do now he now has the means to carry out the work. This may not be a fast as some may want because he has a mindset of maximising value and minimising costs wherever possible and this is admittedly not always the quick way, but given the site
?topography Petrotrin issues etc it’s certainly the sensible route to high returns and a sustainable future for the assets out there.
Finally a thanks has to go the BOD for allowing me access to the site out there, which means I've been able to relay in my own manner without the constraints of Nomad approvals my own interpretation and views of the Trinidad asset. Incidentally some of the numbers forecast may be on the conservative side but better that and have some pleasant upside surprises.
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?Light Oil seeps in the South Western corner of the South Quarry block.
Rig 6 drilling (foreground), far distance (East) Rig 1 drilling, Right center background prepared Site for the Hererra drill.
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?Rig 1 drilling whilst capable of 1000ft its rigs such as this that will be used to drill the Ultra shallow exploration plays.
?Rig 5 drill site taken from above the Rig 6 site.
?Rig 8 pictures.
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?A well head on the Beach Site
?Beach Site Storage and Treatment Tanks.