Incremental Oil and Gas plans to drill overlooked wells in new oilfield
Incremental Oil and Gas plans to drill at least three overlooked wells in its recently acquired Borie oilfield in Wyoming — where it last week reported a 55 per cent jump in proven oil and gas reserves.
“We have identified a number of overlooked drilling opportunities within the Borie Oilfield,” Incremental chief executive John Whisler said from the company’s Denver head office.
“In 2018 we will be in a position to drill three development wells.”
The wells could potentially output more than 200 barrels of oil per day, taking Incremental’s total production to more than 700 barrels of oil equivalent per day.
“We will also optimise the wells and production systems,” Mr Whisler said.
“We will look to extract a further five to ten barrels per day by either optimising those ones that are producing at the moment or bringing some of the shut-in wells back into production.”
“We also plan to restore several gas recompletions [accessing gas reserves that are lying behind the existing well bore] within the nearby Silvertip Field in November to increase production and capture the higher winter gas prices.”
$2 million capital raising
Incremental (ASX:IOG) also this week announced a shareholder rights offer to raise up to $2 million to fund the Borie acquisition and develop further opportunities.
Incremental is buying 94 per cent of the Borie Field for about $1.125 million.
The rights issue had been priced favourably for shareholders at the inflection point of the company’s growth path, Mr Whistler said.
“With the turnaround in commodity prices and the increase in demand for US oil and gas through exports and domestic consumption, we are finally seeing light at the end of the tunnel with some stability and signs of an increase in West Texas Intermediate crude oil prices.
“The management team is working diligently and endlessly to capitalise on every opportunity.”
Shareholders will be offered one new share for every share held at 1c a piece. The offer also includes one free option for each new share with an exercise price of 2c.
“Funds from the rights issue will be used to pay for the acquisition of the Borie oil field (US$0.9M) and working capital for the company’s development initiatives”, Mr Whisler said.
Incremental follows a strategy of buying oil production cheaper than it can be drilled, then optimises for greater upside, including drilling new wells to increase cash flow and profit.
Among other projects, Incremental is evaluating “high-return exploration projects in the Williston Basin in North and South Dakota and Montana with our partner Armstrong Operating”, Mr Whisler said.
“Incremental can participate in the drilling of high impact wells with experienced operators where it is able to offset part of the risk by taking a minority working interest in a venture that has good upside potential.”
Incremental’s 2018 drilling program is expected to exceed its near-term production goal of 1,000 barrels per day.
Incremental is also on the lookout for new acquisition targets – especially those that are below market value.
“We have a long track record of creating value drilling hundreds of successful wells,” Mr Whisler said.
“We acquire undervalued producing assets where there are opportunities to enhance reserves, production and cash flow,” Mr Whisler said.
“We do this by optimising operational efficiency and identifying and developing potential wells that have been bypassed or ignored by other operators.
“Through the drilling of new wells — focusing on nearby and already producing wells as a way to mitigate execution risk — we can show that additional oil is in place which increases reserves and provides uplift in production and cash flow.
“Our ultimate goal is to increase the net revenue stream and potentially reward our investors through future dividend distributions.
“We were successful in purchasing the Silvertip Field in 2015, a no-risk producing asset, for less than the price of drilling a single unconventional well.”
“There we utilised our expertise and increased production from 350 barrels of oil equivalent per day (boepd) to over 800 boepd with low capital outlay.”
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