An Independent Evaluation of Red Fork Energy

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Red Fork Energy is an Australian-based company that holds a 75,000 net acre position that have the potential to host 900 gross drilling locations in full field development and has 10 development areas planned across five counties in Oklahoma.[1] Note: This photo is not a Red Fork well and is for illustrative purpose only. Oil well, gas tanks, and natural gas flare in Arnegard North Dakota by Tim Evanson. Flickr Creative Commons Attribution-ShareAlike 2.0 Generic

by Hugh Pickens

Red Fork Energy is an Australian-based company that holds a 75,000 net acre position that have the potential to host 900 gross drilling locations in full field development and has 10 development areas planned across five counties in Oklahoma.[2]

The purpose of this web site is to document the company's plans and policies to help make a determination of its investment potential.

Contents

Introduction

Red Fork Energy is an Australian-based company that holds a 75,000 net acre position that have the potential to host 900 gross drilling locations in full field development and has 10 development areas planned across five counties in Oklahoma.[3]

Red Fork Energy has has positioned itself as a horizontal oil resource play in Mississippi Lime oil and liquids rich gas.[4]

Corporate

Red Fork Energy was founded in 2004 and trades on the Australian Securities Exchange as RFE.AX and RDFEY.[5]

News and Views on Red Fork Energy

November 7, 2013: Red Fork Gets Secured Term Loan for $150 Million

Proactive Investors Australia reported on November 7, 2013 that Red Fork closed an agreement with Guggenheim Partners to provide a US$150 million Secured Term Loan to replace its existing US$45 million credit facility and fund its Mississippi Lime drilling program in 2013 and 2014.[6]

July 15, 2013: Red Fork Seeks Seven Exceptions with Corporation Commission for Well Locations, Horizontal Spacing, and Pooling

The Ponca City News published 7 legal notices on July 15, 2013 from Red Fork Energy seeking exceptions from the Corporation Commission of the State of Oklahoma for Well Locations, Horizontal Spacing, and Pooling. The legal notices advised that the cases would be heard by an Administrative Judge on Augusut 13, 2013 and that if person wished to protest the applications, they should advise the Attorney of record and the Court Clerk’s Office of the Oklahoma Corporation Commission five days before the hearing date.[7]

July 12, 2013: Red Fork Raises $47.7 million in New Capital

Proactive Investors Australia reported on July 12, 2013 that Red Fork Energy had raised $47.7 million from a placement at A$0.43 per share to institutional and sophisticated investors. The placement will allow increased participation in non-operated wells and fund a potential acquisition of ~2,000 acres within one of the company’s core areas and provide additional working capital.[8]

June 13, 2013: Red Fork Increases Production by 30% in May

ProActive Investors reported on June 13, 2013 that Red Fork Energy has increased gross production in Oklahoma to 2,357 barrels of oil equivalent in May, up 30% from the previous month. "Notable improvements include record well spud to rig release of 17 days and consistent delivery of well spud to sales in less than 50 days," says the company press release. "Initiatives directed toward post completion production optimization are also delivering positive results with the introduction of jet pumps in the initial phase (first 30-days) of production testing of new wells and in some cases to improve productivity on more mature wells. The use of jet pumps is allowing wells to more effectively clean up prior to the installation of the electric submersible pumps. In some cases this will impact on timing for reaching stable peak production and therefore IP 30 rates."[9]

April 12, 2013: Red Fork Delivers 2,100 barrels of oil equivalent per day

Proactive Investors Australia reported on April 12, 2013 that Red Fork Energy has delivered a record high gross production rate of about 2,100 barrels of oil equivalent per day in March from its Mississippian Development Areas in Oklahoma. Its completion planning and scheduling initiatives have delivered outstanding results with 20 wells now completed for production. The Mawson 1-03H and Hartog 1-10H wells have both achieved higher maximum rates of 4056boe/d and 396boe/d respectively while the Jardine 1-26H and State 1-13H wells have also reached higher maximum rates of 283boe/d and 124boe/d respectively in the last 30 days. Red Fork has also completed, stimulated and is now testing the Forrest 1-21H, Hammer Head 1-22H, Mako 1-27H, McMurtry 1-27H, Whitney 1-30H, Phil 1-19H and the Santana 1-30H wells.[10]

January 11. 2013: Warburton 1-23H Well is Producing 75 Barrels of Oil Per Day to Sales

Proactive Investors Australia reported on January 11, 2013 that the Warburton 1-23H Well is producing an average of 75 barrels of oil per day to sales.[11]

January 11, 2013: Red Fork Has Successfully Completed Eight Wells for Production

Proactive Investors Australia reported on January 11, 2013 that Red Fork Energy has 10 horizontal Mississippian wells in Oklahoma now successfully completed for production with eight wells producing to sales through permanent production facilities. A further two wells are currently undergoing testing while completion and reservoir stimulation is underway and/or set to commence on a further five wells.[12]

January 10, 2013: PQML-9 well Flows at Maximum Rate of 1,291 barrels of Oil Equivalent

Proactive Investors Australia reported on January 19, 2013 that the PQML-9 well operated by PetroQuest Energy flowed at a maximum rate of 1,291 barrels of oil equivalent (87% crude oil) after previously flowing at an average rate of 629boe per day over its first 27 days of production. Red Fork has a 12.5% working interest in the well, which is located within Development Area 7.[13]

January 10, 2013: Red Fork Negotiating with PetroQuest for Joint Venture

Red Fork is currently negotiating with PetroQuest on an agreement to facilitate data sharing within the play and expects to work together on further horizontal wells.[14]

August 6, 2012: Red Fork Energy to Pipeline and Truck Mississippi Lime Crude to Ponca City Refinery

The Oil and Gas Journal reported on August 6, 2012 that Red Fork Energy Ltd. has agreed to sell the Mississippi Lime Crude from its 75,000 net acres east of the Nemaha ridge in five Oklahoma counties to a subsidiary of Phillips 66. The oil will be pipelined or trucked to the Ponca City Refinery. Red Fork Energy just completed the McMurtry 1-21H well in Noble County, OK, in which it has 62.2% working interest, at a peak rate of 494 b/d of 38° gravity oil and 1.3 MMcfd of high-BTU gas. The well’s 23-day average was 470 boe/d.[15] Red Fork has drilled nine horizontal Mississippian wells with four completed for production, three awaiting completion and two currently drilling. The company's McMurtry 1-21H well in Development Area 2, Oklahoma, continues to be a winner for the company with production averaging about 470 barrels of oil equivalent per day. The well has been producing uninterrupted since testing commenced and has been transferred to the company's production monitoring team for permanent production. Further production from the Mississippi Lime play is just waiting on completion works to be carried out on the McMurtry 1-22H, Bunch 1-19H and State 1-13H wells.[16]

August 2, 2012: Phillips to Run More Mississippi Lime Shale Crude through the Ponca City Refinery

Mississippi Lime Oil Producing Formations around Ponca City are shown in brown. Mississippi Lime - porous limestone formations in northern Oklahoma and southern Kansas has been yielding reservoirs to horizontal operators such as SandRidge, Chesapeake, Devon and Tulsa-based Eagle Energy LLC during the past two years. The "new" reserves actually lie slightly below formations that were big producers 100 years ago. One advantage of the Mississippi Lime is that limestone's porosity and natural fractures can mean less expense on the drilling and hydraulic fracturing parts of the project. Expenses can total half and even a fourth of typical unconventional well efforts. Another advantage is that there is already plenty of seismic data available for the area from past exploration and drilling. Map created by Hugh Pickens and is a derivative creation from a similar map in the Tulsa World by David Housh.

Reuters reported on Phillips second-quarters earnings report on August 2, 2012 that Phillips is working to run more shale crude from the Mississippi Lime play in Oklahoma and Kansas at its 198,400 bpd refinery in Ponca City, Oklahoma by trucking crude from the company's existing gathering systems.[17] Rod Walton reported in the Tulsa World on September 24, 2011 that Mississippi Lime - porous limestone formations in northern Oklahoma and southern Kansas has been yielding reservoirs to horizontal operators such as SandRidge, Chesapeake, Devon and Tulsa-based Eagle Energy LLC during the past two years. The "new" reserves actually lie slightly below formations that were big producers 100 years ago. Phillips Petroleum Co., for instance, made its name in the nearby Burbank Field, on the eastern edge of the play that includes Osage, Pawnee, Kay, Garfield, Woods, Alfalfa and other northern Oklahoma counties. "It's sort of amazing that all of this has been sitting there and waiting for horizontal drilling," says Eagle CEO Steve Antry. "The vertical wells hardly drained any of that." The move now is toward the deposits containing mostly oil and natural gas liquids. [18]

The Mississippi Lime's ratio is often 52 to 55 percent oil, according to reports. "We're into the second tier of this renaissance," says Chip Minty, a spokesman for Oklahoma City-based Devon Energy Corp. "Now what we're doing is taking the same technology beyond the shales to the carbonates, such as limestone." One advantage of the Mississippi Lime is that limestone's porosity and natural fractures can mean less expense on the drilling and hydraulic fracturing parts of the project. Expenses can total half and even a fourth of typical unconventional well efforts. Another advantage is that there is already plenty of seismic data available for the area from past exploration and drilling. "It's a reasonably low-cost play where hydrocarbons have been found before, with a lot of wells drilled in the past," says RAM spokesman Robert Phaneuf. And that gives you good data points."[19]

External Web Sites

References

  1. Proactive Investors. "ASX oilies marching to the North American unconventional beat: Part One" by Bevis Yeo. December 7, 2012.
  2. Proactive Investors. "ASX oilies marching to the North American unconventional beat: Part One" by Bevis Yeo. December 7, 2012.
  3. Proactive Investors. "ASX oilies marching to the North American unconventional beat: Part One" by Bevis Yeo. December 7, 2012.
  4. Red Fork Energy Corporate Web Site. retrieved Janaury 13, 2013.
  5. Red Fork Energy Corporate Web Site. retrieved Janaury 13, 2013.
  6. Proactive Investors Australia "Red Fork Energy closes US$150M loan from Guggenheim Partners to fund U.S. oil and gas drilling" November 7, 2013.
  7. The Ponca City News. "Legal Notices" July 15, 2013.
  8. Proactive Investors Australia. "Red Fork Energy raises the bar with $47.7M raising for Mississippian project" July 12, 2013.
  9. ProActive Investors. "Red Fork Energy continues to ramp up Oklahoma oil and gas production" June 13, 2013.
  10. Proactive Investors. "Red Fork Energy cranks up Oklahoma oil and gas production" April 12, 2013.
  11. Proactive Investors. "Red Fork Energy expands Oklahoma oil production" January 11, 2013.
  12. Proactive Investors. "Red Fork Energy expands Oklahoma oil production" January 11, 2013.
  13. Pro Investors Australia. "Red Fork Energy adds further oil production in Oklahoma" by Bevo Yeo. January 10, 2013.
  14. Pro Investors Australia. "Red Fork Energy adds further oil production in Oklahoma" by Bevo Yeo. January 10, 2013.
  15. Oil and Gas Journal. "Oklahoma: Eastern Mississippi lime play spreads out" August 6, 2012/
  16. Middle East North Africa Financial Network. "Red Fork Energy raising A$50m to accelerate Mississippian drilling" August 11, 2012.
  17. Reuters. "Phillips 66 profit jumps 14 pct, shares up" by Kristin Hays. August 2, 2012
  18. Tulsa World. "Horizontal drilling breathes new life into Mississippi Lime oil region" by Rod Walton. September 9, 2011.
  19. Tulsa World. "Horizontal drilling breathes new life into Mississippi Lime oil region" by Rod Walton. September 9, 2011.

About the Author

Hugh Pickens

Hugh Pickens (Po-Hi '67) is a physicist who has explored for oil in the Amazon jungle, crossed the empty quarter of Saudi Arabia, and built satellite control stations for NASA all over the world. Retired in 1999, Pickens and his wife moved back to his hometown of Ponca City, Oklahoma in 2005 where he cultivates his square foot garden, mows nine acres of lawn, and photographs local events at the Poncan Theatre and Ponca Playhouse.

Since 2001 Pickens has edited and published “Peace Corps Online,” serving over one million pageviews monthly. His other writing includes contributing over 1,400 stories to “Slashdot: News for Nerds,” and articles for Wikipedia, “Ponca City, We Love You”, and Peace Corps Worldwide.

Other Articles by Hugh Pickens about Ponca City

Full Disclosure

I am an independent investor who is a stockholder in Red Fork Energy and the purpose of this web site is to follow Red Fork Energy to document and understand the company's plans and policies and to analyze the company's business strategy. I began building my position in Red Fork Energy in 2013 and am long Red Fork Energy. I will disclose publicly if I close my position on Red Fork Energy or go short. Unless stated otherwise, there is a citation for every statement in this article. Nothing in this report is to be taken as a recommendation to buy or to sell stock in Phillips 66 (PSX).

Updates to the Web Site

This web page is frequently updated so check back periodically to see the latest information or subscribe to the rss feed for this article. If you have any information or insights that you would like to see added to this report on Red Fork Energy please contact Hugh Pickens by email at hughpickens AT gmail DOT com.

Copyright

The material in this article is licensed under under the Creative Commons under an Attribution-Noncommercial-Share Alike 2.0 Generic license. Except for short, fair use excerpts, the material on this article cannot be used for commercial purposes without permission of Hugh Pickens. Attribution for use of any material from this article must be provided to Hugh Pickens and if used on the web a link must be provided to http://hughpickens.com.

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