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“Vitruvian too”- In Hart Energy’s January 2015 Oil and Gas Investor Emerging Plays 2015

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By Nissa Darbonne, Hart Energy, January 2015
This article originally appeared on Hart’s Oil and Gas Investor website (http://www.oilandgasinvestor.com/emerging-plays-777911)
 
The Springer’s Goddard Shale has fascinated Richard Lane. Lane, a geologist, was president, E&P, for Southwestern Energy Co. during its discovery and development of the Fayetteville Shale in the 2000s. “It seems to be a very robust source rock,” he said of the Goddard.
 
Retiring from Southwestern, Lane went on to form Vitruvian Exploration LLC and focused on Oklahoma’s Mississippian Lime play. He sold that in 2012 and formed Vitruvian Exploration II LLC. Following formations south of the limestone play, Vitruvian II bought 350 old vertical wells in the condensate window of what Continental soon named Scoop.
 
Vitruvian Exploration II LLC’s Scoop position is HBP by legacy wells it bought when looking south of the Mississippian Lime for a new play, said Richard Lane, president and CEO.
 
Dry gas flows easily from shale using modern completion techniques. Condensate does as well, as it leaves the shale as a gas and becomes a liquid as it approaches surface pressure and temperature. But oil is a big molecule; past understanding was that it would flow from a super-tight rock only if that rock was “shaley” rather than shale like the Barnett. “But we’re seeing some areas where that’s just not the case,” Lane said. “That’s why you see something brand new like this.”
 
What’s different? “I don’t think we’re fully appreciating the impact the kerogen has—the type of kerogen, how the kerogen is dispersed in the rock—and some other factors that influence the oil-in-place numbers and the producibility of the rock. I don’t think it is fully appreciated yet,” he said.
 
“This shale is producing true oil—not just condensate.”
 
Goddard Shale porosity is about 6%, he said, which is about the same as Woodford porosity in the Scoop area.
 
Vitruvian II holds 40,000 net, contiguous acres for the Woodford in Scoop in the old Chitwood-Knox Field area in Grady, Garvin and Stephens counties that has produced from formations all along the stratigraphic column. In Vitruvian II’s block, its position is mostly operated and the Springer is thicker—about 100 feet—than east, where it has small, nonop interests in many of Continental’s wells and wells operated by Newfield and Marathon.
 
“We’re excited about that [thickness] because the wells that have already been made are pretty darn good,” Lane said. The nonop interest is low—1%, 2%, 3%—“but it’s given us a lot of data for a little over a year now. It’s a lot of wells, but it’s a small amount of capital for all the learning we’ve had.”
 
Held by old wells, about 95% of Vitruvian II’s position is HBP. Of its 40,000 net acres for the Woodford in Scoop, some 25,000 include rights to the Springer that is producing 80% to 90% liquids adjacent to Vitruvian II’s position. Of this, about 65% is oil.
 
“We wanted an asset that had diversity in its revenue stream. We are selling gas, NGL and condensate and that acts as a hedge against individual commodity cycles like we are experiencing now,” Lane said.
 
As for Vitruvian’s timing for exit, Lane says, “We have a great team in place, an HBP asset and more formations to explore. During 2016, it starts to cash-flow itself. But, as a private-equity-backed firm, we are always for sale at the right price.”
 
That’s for both its Woodford and Springer potential. It had five rigs drilling the Woodford in the fourth quarter; this year, it plans to assign one of these to drill its first operated Springers. Overall, its portfolio is producing 55% gas and 45% liquids. A large portion of its liquids production is hedged for 2015.
 
"But we don’t make our capital investments based on one year of revenue when we have 30-year-plus reserves,” Lane said. “And we’re in one of the lowest breakeven plays in the U.S. Scoop-Woodford is one of the last to go and the Springer is even better. And it’s HBP, so we can always taper back what we’re doing and not worry about leases expiring.”
 
 
By Nissa Darbonne, Hart Energy, January 2015
 
This article originally appeared on Hart’s Oil and Gas Investor website (http://www.oilandgasinvestor.com/emerging-plays-777911)
 
The Springer’s Goddard Shale has fascinated Richard Lane. Lane, a geologist, was president, E&P, for Southwestern Energy Co. during its discovery and development of the Fayetteville Shale in the 2000s. “It seems to be a very robust source rock,” he said of the Goddard.
 
Retiring from Southwestern, Lane went on to form Vitruvian Exploration LLC and focused on Oklahoma’s Mississippian Lime play. He sold that in 2012 and formed Vitruvian Exploration II LLC. Following formations south of the limestone play, Vitruvian II bought 350 old vertical wells in the condensate window of what Continental soon named Scoop.
 
Vitruvian Exploration II LLC’s Scoop position is HBP by legacy wells it bought when looking south of the Mississippian Lime for a new play, said Richard Lane, president and CEO.
 
Dry gas flows easily from shale using modern completion techniques. Condensate does as well, as it leaves the shale as a gas and becomes a liquid as it approaches surface pressure and temperature. But oil is a big molecule; past understanding was that it would flow from a super-tight rock only if that rock was “shaley” rather than shale like the Barnett. “But we’re seeing some areas where that’s just not the case,” Lane said. “That’s why you see something brand new like this.”
 
What’s different? “I don’t think we’re fully appreciating the impact the kerogen has—the type of kerogen, how the kerogen is dispersed in the rock—and some other factors that influence the oil-in-place numbers and the producibility of the rock. I don’t think it is fully appreciated yet,” he said.
 
“This shale is producing true oil—not just condensate.”
 
Goddard Shale porosity is about 6%, he said, which is about the same as Woodford porosity in the Scoop area.
 
Vitruvian II holds 40,000 net, contiguous acres for the Woodford in Scoop in the old Chitwood-Knox Field area in Grady, Garvin and Stephens counties that has produced from formations all along the stratigraphic column. In Vitruvian II’s block, its position is mostly operated and the Springer is thicker—about 100 feet—than east, where it has small, nonop interests in many of Continental’s wells and wells operated by Newfield and Marathon.
 
“We’re excited about that [thickness] because the wells that have already been made are pretty darn good,” Lane said. The nonop interest is low—1%, 2%, 3%—“but it’s given us a lot of data for a little over a year now. It’s a lot of wells, but it’s a small amount of capital for all the learning we’ve had.”
 
Held by old wells, about 95% of Vitruvian II’s position is HBP. Of its 40,000 net acres for the Woodford in Scoop, some 25,000 include rights to the Springer that is producing 80% to 90% liquids adjacent to Vitruvian II’s position. Of this, about 65% is oil.
 
“We wanted an asset that had diversity in its revenue stream. We are selling gas, NGL and condensate and that acts as a hedge against individual commodity cycles like we are experiencing now,” Lane said.
 
As for Vitruvian’s timing for exit, Lane says, “We have a great team in place, an HBP asset and more formations to explore. During 2016, it starts to cash-flow itself. But, as a private-equity-backed firm, we are always for sale at the right price.”
 
That’s for both its Woodford and Springer potential. It had five rigs drilling the Woodford in the fourth quarter; this year, it plans to assign one of these to drill its first operated Springers. Overall, its portfolio is producing 55% gas and 45% liquids. A large portion of its liquids production is hedged for 2015.
 
But we don’t make our capital investments based on one year of revenue when we have 30-year-plus reserves,” Lane said. “And we’re in one of the lowest breakeven plays in the U.S. Scoop-Woodford is one of the last to go and the Springer is even better. And it’s HBP, so we can always taper back what we’re doing and not worry about leases expiring.”
 
 
 

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