Point of View - Cano targets EOR potential in US mature fields

March 28, 2005
Mature fields in Texas and Oklahoma still contain significant production potential, according to Jeff Johnson, chairman and chief executive officer of Cano Petroleum Inc., a Fort Worth independent producer that became a public company in June 2004.

Mature fields in Texas and Oklahoma still contain significant production potential, according to Jeff Johnson, chairman and chief executive officer of Cano Petroleum Inc., a Fort Worth independent producer that became a public company in June 2004.

To exploit this potential, Cano has acquired three properties in Oklahoma and recently signed a letter of intent to acquire 11,000 acres of mature oil fields in central Texas. Johnson said two of the fields in Oklahoma, as well as the one in Texas, are prime candidates for enhanced oil recovery (EOR) through alkaline-surfactant-polymer (ASP) flooding.

Johnson added that Cano's "focus on mature fields with proven reserves significantly reduces the risk of drilling dry holes and the high degree of speculation in making new oil discoveries." These fields are in areas with an active oil field infrastructure and a regulatory environment that is conducive to further development.

"We work closely with regulatory agencies on enhanced recovery, and in Texas and Oklahoma these agencies understand the objectives very well."

He said Cano is looking to acquire fields with established oil reserves and low rates of decline, indicating a significant remaining drilling and development potential. He expects that by implementing modern drilling and completion techniques as well as enhanced recovery methods, these fields will offer exceptional oil and gas recovery opportunities.

Cano's current net production is 360 boe/d.

Operated properties

Cano's three fields in Oklahoma are the Davenport unit in Lincoln County, Rich Valley field in Grant County, and Nowata field in Nowata County. Cano purchased all three fields in 2004.

In Texas, Cano entered into a letter of agreement to purchase Square One Energy, which is set to close by Apr. 1. Square One Energy's assets include a 100% working interest in 11,000 acres of mature oil fields in central Texas that currently produce 70 b/d of oil, condensate, and natural gas liquids from 34 wells. Cano estimates that this field contained 100 million bbl of original oil in place and, to date, has produced only 17 million bbl, thus providing a sizable EOR target as well as a potential for waterflooding for the first time.

With regard to Cano's Oklahoma fields, the 2,178-acre Davenport unit began producing in 1924 and has recovered about 22 million bbl of oil from the 58 million bbl estimated to be in place, according to Cano. Primary recovery was about 12 million bbl and waterflooding added another 10 million bbl. Third-party engineering estimates indicate that a successful EOR program could recover an additional 8-10 million bbl of oil.

The Davenport Unit produces 38° gravity oil from the Prue Sandstone at about a 3,300-ft depth.

The Rich Valley field includes 51 wells and covers 4,500 acres. Current net production is about 110 boe/d and Cano estimates that the field contains 622,000 boe of reserves, 37% oil and 63% gas.

Cano expects to increase production from Rich Valley's existing wells through recompletions and remedial work. The company also sees the potential to drill up to 30 additional wells.

The Nowata field is the other property in Oklahoma with ASP flooding potential. The field has about 228 producing wells on 4,500 acres that produce from the Bartlesville sandstone. The wells are on 21/2 acre spacing and produce from a reservoir at about a 600-ft depth. Current production is about 250 bo/d (230 bo/d net) and estimates show that the field has about 1 million bbl of proved reserves remaining.


The injection of alkaline-surfactant-polymer into a reservoir "washes out" the oil from the pore space, allowing oil to flow more readily from the formation into the wellbore.

The two common alkalines used in the process are: sodium hydroxide (NaOH), and sodium carbonate (Na2CO3).

Specifically, the alkalines reduce surfactant absorption, allowing the chemicals to react accordingly. The surfactants help facilitate oil flow by reducing interfacial tension between the oil and water, causing spontaneous emulsification, and changing the wettability characteristics of the rock.

The polymer in the process improves the reservoir sweep efficiency by increasing the formation water viscosity.

Cano has contracted Surtek of Golden, Colo. to perform screening and core studies to determine the applicability of ASP flooding for its Davenport unit and Nowata field. Johnson said that Surtek has extensive experience in optimizing the process and has worked on several large, successful projects. ASP EOR requires a customized injection fluid for each field because no two reservoirs are exactly alike. These types of chemicals can be injected to a field at any time during a waterflood or at the end of a tertiary program.

According to Surtek, the ASP process typically recovers 20-30% of the original oil in place at an incremental cost of $2-4/bbl.

Johnson said a successful ASP project in the Davenport Unit could increase production to 7,000 bo/d by 2008 from the current 38 bo/d. Cano estimates that the total cost including all capital and operating expenses for the Davenport EOR project will be about $25/bbl ($17/bbl for drilling, facilities, and chemicals and $8/bbl for operating costs).

Johnson estimates that Surtek will require about 6 months for its screening analysis and he expects chemical injection to start in the Davenport Unit in the fourth quarter of 2005.

Johnson said Nowata currently produces 250 bo/d and 77,000 bw/d but may peak at more than 3,000 bo/d in 18-24 months after ASP flood starts, with no additional drilling necessary.

In addition, Cano expects a peak production of about 4,300 bo/d by yearend 2006 from the EOR project. Cano estimates a $12-13/bbl total cost for the EOR project, including capital and operating expenses.

Although the ASP recovery efforts at Nowata look promising, Cano has been conducting lab tests from the site using a surfactant only recovery method. The first three of these surfactant only tests have yielded 19%, 21%, and 28% recovery rates respectively. As a result, the company is moving forward with plans to conduct a field level pilot using the surfactant only method to complement the ASP recovery program already in place.


To maintain low internal costs, Cano uses both in-house expertise and employs independent engineers and geologists for aiding in the evaluation of drilling plans and potential acquisitions.

One of its in-house experts is Tom Cochrane, executive vice-president of oil and gas operations. Cochrane spent more than 15 years as an engineer and field supervisor with ExxonMobil Corp. and his expertise includes CO2 and waterflooding, coordination of injection and production logging, volumetric calculations, and identification or drilling candidates.

Cochrane likens Cano's strategy to the success that Mitchell Energy & Development Corp. had in the Barnett shale in the Fort Worth basin. In the Barnett shale play, Mitchell acquired these gas properties at a time when the technology to produce this tight gas was still under development. But as the industry developed the required production techniques, such as new fracturing methods and horizontal drilling, this play has became one of the most prolific gas producing areas in the US.

Cochrane said that operating problems caused by the ASP chemicals can usually be overcome with proper chemical treatments, and problems specifically caused by alkali injection can be addressed with reasonable operational changes.

In addition to Cochrane, Cano employs another engineer and a production coordinator with more than 30 years of experience in waterflooding, enhanced oil recovery, and environmental processes.

Johnson said engineers with EOR experience are a rare commodity in the US because most of the working petroleum engineers have concentrated their work on gas plays such as coalbed methane, tight gas sands, and the Gulf of Mexico.

Career highlights

Jeff Johnson is chairman and CEO of Cano Petroleum Inc., an independent energy producer headquartered in Fort Worth.


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Johnson has more than 15 years of experience in the oil and gas business. He started his career in corporate finance during which he raised funds for oil and gas partnerships for Chesapeake Energy Corp.'s South Texas projects.

In 1993, Johnson initiated his first independent oil and gas exploration venture that later led to his purchase of Scope Operating Inc. in 1997. While there, he assembled a diversified team of management personnel and oil and gas consultants, to eventually sell all of Scope's producing properties and assets.

Johnson started Cano in 2004 to capitalize on oil and gas recovery opportunities that exist in proven fields throughout the US midcontinent region.