Rangers

The significance of the recent events associated with the Rangers DSU and the drilling of the Rangers well cannot be understated.

The intended addition of a 320 acre DSU immediately north of the original 640 acre Rangers DSU is a significant boost to the value of the DSU and  economics of the Rangers well. The fact that BRK now hold a majority position in the well whose economic value will increase is a '"double delight".

Without an announcement from either party, the implication is that the extra WI in the Rangers well  will come about almost certainly because of the lack of participation of SHE ( for whatever  reason).  The original 640 acre rangers DSU was approved  in late 2019  and has been extended to Dec 2021. The  recent 320 acre DSU is in the application stage with an approval hearing due mid August. BRK have leased a dominant position which should allow win them the operatorship which will give them pooling rights . Thus the expected eventual BRK WI in each DSU is expected to be between 80-90% and this is where it gets interesting. BRK will apply for a multiunit DSU which will have the effect of combining the two DSU's into an expanded single 960 acre.

The significant aspects of this now extended multiunit DSU  development can be summised  as:

1) The 50% increase in the DSU area will result in a ~50% increase in BRK reserves attributable to the  Rangers DSU.

2)The length of the Rangers  lateral well component will increase by ~50%

3) The cost to acquire the extra acreage  will be ~US$500 k

4) The cost to extend  and complete the extension of  well will add ~US$1.5  million to the total which will increase the total well cost from ~US$ 8.5 million to~ US$10 million

5) There may be a slight increase in well production rate but won't be anywhere near 50%, however the EUR   (Estimated Ultimate Recovery) should increase by ~50%



The map below shows the original 640 acre rangers DSU in blue, the new 320 acre DSU in orange.  The pictorial representation of the original Rangers lateral well the left green arrow, and the extended new Rangers extended lateral well the longer green arrow.


The economic benefits of this development should be pretty obvious.

As the the extension of the length of the well by ~50% only adds ~18% extra to the cost of drilling and completing the well, their is a substantial decrease in development  the development cost per barrel and subsequent break even cost. These extra reserves will possibly be the most profitable reserve additions BRK will have ( until they can repeat this exercise), both in PDP and PUD value as most , if not all future Rangers wells will be extended into the added acreage.

As BRK will have an increased WI interest of 80-90%  as opposed to a potential ~45% WI if SHE were participating, BRK will get the double benefit of a higher rate of return on a higher equity position in the well.

The reason why there may not be a higher production rate because of the length extension is due to  the friction of the oil flowing through the  extended production casing  The added friction of the oil will limit the ability of the well to produce at a faster rate . The EUR of the well will increase by~50% because the well will access more of the reservoir to drain the contained oil.

You can see  why BRK are keen to accelerate the Rangers well and DSU. The economic benefit of the multiunit DSU with a extended lateral well  ( which may be longer than the Jewell ) as compared to the original single unit DSU and short well is material to BRK in terms of production profitability and reserve value.

Despite my angst at the option freebee ( last time I whinge about that) it should be obvious why BRK needed to raise this latest capital  and this quickly . Without SHE's involvement, that added ~US$4 million to the original  BRK spend of drilling and completion, plus  ~US$ 2 million for  the additional DSU acreage acquisition  and drilling/ completing the extension of the lateral. After funding Jewell BRK were not going to have enough capital to go it alone at Rangers, let alone be able to engage the service providers, especially Latshaw drilling at the desired expedited pace.

Hopefully this helps to highlight the tremendous benefits and uplift in value of the latest  Rangers acreage acquisition and drilling  , along with the capital raise rational.

Cheers

Dan