Yes We Can Become Energy Independent
Huge Oil Find In Central Utah Rocks Industry Insiders
The Covenant Field in Central Utah
We are pleased to report the latest in a long series of oil and gas lease sales to oil companies by some of our Utah clients. Our most recent announcement is the sale of over 6700 Acres of Oil and Gas lands in Emery County UT, to Westar Minerals.
How it all started
We
became involved in Utah lands when Wolverine Gas and Oil Company made
that huge oil discovery in Central Utah near the small town of Sigurd.
Said to be one of the largest on shore discoveries of recent times the
Kings Meadow Ranch 17-1 discovery well at Covenant Field, came in –
after being successfully drilled - with the production of very sizable
amounts of oil in May 2004, but was not publically announced until 2005.
You would expect Wolverine to be “shouting from the rooftops” the news to the general public about their huge discovery. However, in their wisdom and as long as they could keep the secret, they were systematically trying to lease up every piece of viable drilling prospect before land prices shot through the roof. But you can’t keep a good thing secret for long. In addition to certain public reporting, requirements, just the beaming faces of workers and management can be the biggest give away. So in early 2005 the word was out.
Lease Prices Began to Skyrocket
As you can imagine, it wasn’t long before lease prices were skyrocketing to over $500.00 per acre in the area. We got wind of this and for us, and other companies that perform similar services, the land rush was on.
At that time the likelihood of acquiring lottery leases in non competitive phase of the government’s two tiered program anywhere near the vicinity of the newly discovered Covenant Field was, of course, non existent. Any leases offered at or near Covenant would be snatched up immediately at the public auction (competitive phase) where some leases, we are told, received bids of well over $600.00 per acre.
But after a review of other Utah lands we noticed quite a few opportunities
that still had great potential for exploration and drilling. Our rush,
indeed a more quiet rush, was on for lands believed to hold great potential.
Over the next several months, hundreds of our clients were successful
in obtaining parcels in other areas of Utah through the non-competitive
(lottery) phase of the program.
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A Wonderful Story Begins To Unfold
Meanwhile a truly wonderful story was unfolding for Wolverine, a tiny oil company barely noticed prior to this remarkable discovery. A second well was drilled at the Covenant Field, and within several months of their first discovery and it too was successful. The name Wolverine Gas and Oil was seen or heard on nearly every financial news publication, radio and television program, worldwide. How could the major oil companies overlooked this incredible prospect and let it slip through their hands? And worse yet, to a virtually unknown independent located in - of all places - Grand Rapids, Michigan?
It was thought to be a huge blunder on the part of big oil. But in the Rockies, and especially in the states we are active in of Colorado, Utah, Montana and Wyoming you will see this happen over and over again. It is not unusual for smaller independents doing what the majors can’t or are unwilling to try and finally accomplish. The independents have long been a major driving force behind so many of these government oil and gas leases. This is what creates such great opportunities for both smaller drillers and individual land speculators alike.
“The Covenant wells produce good-quality, 40-degree gravity crude and show a very low gas-to-oil ratio”, claims Doug Strickland, Wolverine’s Exploration Manager. He went on to say that “Production from each of the field's first wells averages 850 barrels per day” in an interview in 2005 and it is said by many that the Wolverine discover could be “the most promising new onshore play in the United States in recent memory” according to an article published in the American Association of Petroleum Geologists’ newsletter.
The Uinta Basin and Overthrust - Hotbeds of Activity
“The nearest significant production is from fields at the edge of the Uinta Basin, about 120 miles to the northeast and unrelated to thrust belt geology”, explains Doug Strickland. Interestingly it is the Uinta Basin, in Wyoming, is where several of our other clients have recently acquired, then shortly thereafter, re-sold to oil companies for purpose of future oil and gas exploration. The Uinta is located at the near southwest tip of Wyoming, which extends from the northwest portion of Utah and is in close proximity to the famous “Overthrust Belt” of the western side of Wyoming.
As is sometimes the case with independent wildcat wells, such as the Kings Meadows discovery well 17-1 (the first exploration well drilled by Wolverine), money or venture capital for drilling is not easy to come by. Prior to 2005 Wolverine was virtually unknown and they were miles away – in Grand Rapids, MI - from the Denver downtown hub of the Rockies, where many of the dealmakers (and dealbreakers) of the oil business have their offices.
It was nearly two years after commencing technical work, including the acquisition of some 2-D seismic data when Wolverine began to “shop” their Utah prospect to several major players. Legend has it that they attended at least two NAPE (North American Prospect Expo – a form of trade show where oil deals and money for drilling come together) and were shot down both times. Imagine the remorse of those folks who turned Wolverine down.
Finally, Wolverine broke their package into smaller portions, something
that is quite common, and began selling off shares to industry insiders
and non industry people, in smaller amounts in order to raise the needed
capital for their project. The investors would receive a portion of
the first well along with being able to stake an interest in the Federal
unit (a unit is a consolidation of oil and gas parcels held for future
development).
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The Great News of Winning a Lease
Suffice to say the initial risk takers in Wolverine’s deal we’re overjoyed at their foresight in the Covenant Field Prospect when they learned the good news about their Meadows Ranch well. And while certainly on a much smaller scale, imagine the thrill of our winners when they hear the great news of winning a lease or once they sell to an oil company for exploration and drilling along with those who have experienced the joy of successful oil or gas development—and corresponding royalty payments - on their leasehold.
Most all of our clients’ sales of their leases to oil companies, including those that just sold in Utah, involve the customary cash bonus drilling fee that they receive upon the sale of their lease but also the component of an overriding royalty interest as well.
This simply means that in addition to the up-front cash paid for their leases they also have a pre-determined percentage that they will automatically receive at the time their leases begin producing commercial quantities of oil or gas. The Cash Bonus drilling fee is guaranteed at the time of sale, and is theirs to keep no matter what happens relative to a discovery of oil or gas. Another words, there is no way they are obligated to pay back the cash drilling fee, nor will they incur any other liability associated with their sale. It is all upside - for these lucky oil lottery winners - from here.
Our Utah winners’ lease parcels are all located in Emery County, UT, which is just one county east of Sevier County. Sevier County is the Covenant Field is located and where Wolverine made their huge discovery recently. At the time our clients acquired their Emery County leases everyone was excited and we could all immediately see, even then, the potential of parcels located in such relative close proximity to Wolverine, given the massive size of the State of Utah.
Earlier this year we also had the delight of seeing many of our client’s Converse County sell to oil companies as well. Converse County is in the northern part of Wyoming. Over the years we’ve watched as thousand of acres were made available through the Government’s leasing program in Converse County and have been successful in obtaining a fair amount of acreage there.
So imagine the thrill and excitement for ourselves and for our clients when there began to be multiple offers presented on several of the Converse County properties. To date several of our clients’ Converse leases have sold and, of course, while all this is taking place we are busy assisting our customers in the endeavor of trying to acquire even more acreage the energy hot spots of the Rockies. Scores of other leases in various parts of Colorado and Montana have also recently sold to oil companies also.
We’ll keep you up-to-date as developments continue to unfold. Remember to check our website regularly for additional news and updates.