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Sioux County, Nebraska eyed for shale development

Stratex Oil & Gas Holdings Inc., Watertown, Conn., said it has leasehold interests in 60,000 gross (6,000 net) acres in Sioux County, northwestern Nebraska, where it said it is monitoring a possible unconventional shale play in northeastern reaches of the Denver basin.

Stratex noted that Fidelity Exploration & Production Co., a subsidiary of MDU Resources Group, Bismarck, ND, has received a permit to drill the Cattle 1-1H horizontal well in Sioux County. The well is permitted to 8,000 ft or Pennsylvanian Atoka in NE SE 26-26n-56w, Sioux County.

Earlier in 2012, Fidelity was issued a permit for the Sioux Ranch 22-11 well in 11-25n-56w, a proposed 7,895-ft vertical Atoka test within about 10 miles east of the Wyoming state line at Goshen County and 60 miles southwest of Chadron, Neb.

The Cattle 1-1H permit states that the field name of Dancing Bull has been assigned, a possible indication of a hydrocarbon discovery.

As April 29, 2013, Fidelity Exploration & Production was active on its first horizontal well Sioux County, Neb. "It is very early in the play and the company expects to review the results of this exploratory effort late in the second quarter or early in the third quarter of this year. Results of this early drilling will determine the scope of future drilling efforts in this area," said Tim Rasmussmen, a spokesman for the company.

Stratex said it acquired its acreage with the anticipation that an unconventional shale play may develop in which it could participate as a nonoperating working interest partner.

Some sources remain skeptical that Nebraska will experience an oil boom similar to neighboring Colorado and Wyoming. However, interest was piqued in 2010 when the Nebraska Bureau of Educational Lands and Funds' 2010 oil and gas lease auctions set new records. In May 2010, the sale of 48,000 acres generated $1.9 million; and in October 2010, the sale of 85,000 acres generated more than $1.3 million. The leases were primarily for Banner, Cheyenne, Kimball, Morrill, Scotts Bluff, and Sioux counties, all of which are prospective for the Niobrara shale.

Zaca farmout targeting Monterey on hold

Originally reported on January 11, 2013, AmRich LLC, private Santa Maria, Calif., operator, closed a farmout from Underground Energy Corp., Santa Barbara, Calif., under which AmRich would earn as much as a 75% working interest from Underground and its joint operating partners' interest in 1,063 gross acres of the central southern part of the Zaca field extension project in Santa Barbara County, Calif.

AmRich planned to drill three wells back to back and complete them to production and will carry 100% of Underground's interest (OGJ Online, Nov. 8, 2012). Two were reentries of wells drilled by Texaco Inc. in the mid-1980s.

Operations at the first well were to begin by Mar. 1, 2013. This farmout was intended to target the Upper Monterey, historically Zaca's main producing zone.

AmRich also had the option to secure rights to the deeper subthrust play discovered by Underground by drilling at least one of its three obligation wells to a depth sufficient to test the subthrust play or by drilling a fourth obligation well to test the subthrust play by Dec. 31, 2014.

On March 4, 2013, Los Olivos, Calif.-based Underground Energy Corp.'s wholly owned subsidiary voluntarily filed for Chapter 11 creditor protection in US Federal Court, the company said. Three creditors of the operating company had recorded liens against wells drilling on its Zaca project. The company sought Chapter 11 protection as a defensive measure to help protect its interest in its major property at Zaca.

The company announced in a statement dated March 5, 2013 that its farmout partners were waiting for the liens to be removed or subordinated and a resolution of the alleged default by the lessor prior to spudding wells at Zaca. AmRich was contacted, but had not responded with comment prior to publication.

On April 24, 2013, Underground Energy Corp. announced that it was unable to file its annual audited financial statements by April 30, 2013 due to a current lack of funds to remunerate the Corporation's auditors. The company expected that its wholly-owned subsidiary would be successful with a number of motions before the U.S. Bankruptcy Court in early May as part of its Chapter 11 protection. If successful, the company would have the financial resources to file by the end of June 2013.

Vertical Vaca Muerta shale gas-condensate discovery tested

Americas Petrogas Inc., Calgary, has reported an operated, vertical gas-condensate discovery in the Vaca Muerta shale on the Los Toldos I block in Argentina's Neuquen basin.

The Aguada Los Loros well ALL.x-1 well on the 98,300-acre block, drilled in 2012, intersected 1,844 ft of Vaca Muerta shale plus other secondary targets.

Hydraulically stimulated with four stages in the Vaca Muerta shale formation in early 2013, its initial production from the Vaca Muerta at 8,432-9,609 ft after clean-up has increased from 1.3 MMcfd to 3.2 MMcfd of gas with 9 to 18 b/d of 54-58° condensate on 4-6 mm chokes. The well is within 1 km of a gas pipeline.

Wellhead pressure declined normally during flow testing. This, in addition to core and other studies, will help the broad evaluation of the future productivity and the potential of the well and the reservoir. The well is shut-in for pressure build-up.

Interests in the Los Toldos blocks are Americas Petrogas 45%, ExxonMobil Corp. 45%, and Gas y Petroleo del Neuquen 10%.

Zodiac eyes Kreyenhagen drilling on Aera farmout

Zodiac Exploration Inc., Calgary, reported that Aera Energy LLC has spudded the first well on the northern part of the Mortgage block in the San Joaquin basin, Kings County, Calif. Drilling began on Feb. 5, and at the time of publication, the well was expected to reach its final depth by the end of April.

Under terms of the farmout from Zodiac, Aera acquired the right to earn up to 50% of Zodiac's interest in 19,600 acres of the Mortgage block by drilling two vertical and two horizontal earning wells on or adjacent to the farmout lands in two earning phases. Each phase comprises one vertical and one horizontal well.

Upon fulfillment of the drilling commitment under each phase, Aera will earn a 50% interest in 9,800 acres of each phase, respectively.

The first well, Aera Mortgage 881D-15, is to reach a final vertical depth of 15,000 ft in order to penetrate and evaluate the thick, regional Monterey and Kreyenhagen formations. Both formations have demonstrated the potential in previous nearby wells to contain large accumulations of oil in these established source rocks. Mortgage 881D-15 is an 80-day well.

After well data are evaluated, a horizontal well is planned to be drilled, either as a sidetrack out of the existing vertical wellbore or as a standalone well through the respective zone of interest. The drilling of a sidetrack is expected to take up to 45 more days, Zodiac said.

Aera will cover 100% of all costs, including all costs through to production in the event the well is successful. Zodiac will retain a carried 12.5% working interest before payout and 25% after payout in the earning wells.

The phase two earning wells are expected to spud by Dec. 1, 2013. Upon Aera's fulfillment of its earning obligations under each earning phase of the farmout, Zodiac will elect either a 50% working interest or a 3% overriding royalty in the farmout lands earned by Aera in each phase.

Peter Haverson, Zodiac president and chief executive officers, said internal detailed geologic mapping indicates the Kreyenhagen to be prospective covering an area of Zodiac's lands of around 57,000 net acres.

Zodiac management's gross unrisked best estimate for this entire Kreyenhagen formation, derived from all available petrophyiscal logs, core data, and an average gross formation thickness of 800 ft, amounts to 43 million bbl/sq mile of prospective resource or a total of 3.87 billion bbl of prospective resources for the net acreage.

The Aera-operated drilling program will go far towards establishing not only the potential of the Mortgage block but also Zodiac's adjacent 66,000 acres in the San Joaquin basin.

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