Replies to This Discussion

Permalink Reply by jeff boler on September 23, 2011 at 11:08

MNLU has stated that $8 million dollars are required before MNLU/AEXP can move forward with completing & Producing the Burkley-Phillips#1. The unusually high cost to complete the well can be attributed to a number of factors:

1) As a previous post mentions, the christmas tree on this well will be very costly. There are less than 10 known well-heads in the world rated for this well's pressure, and it is likely that MNLU has had to have these & other production materials fabricated. These could be a large part of the $8 million.

2) This will not be just another run-of-the-mill completion. This day & age, a typical frac-job will run anywhere between $500K & $1MM (U$D), but can be much higher. The cost of a frac-job is highly dependent on the geology, specifically the Fracture-Gradient which is a function of both pore-pressure & overburden-stress.

When drilling Horizontal Wells, many operators will spend extra time & money while drilling to ensure that the well stays within a specific layer of the shale that is known to have a lower fracture pressure. They know that the extra money spent while drilling will be returned ten-fold in cheaper completions cost (please note: this strategy is not an option in all shales).

Due to the high pore-pressure & overburdern-stress of the Burkley-Phillips#1, the pressures required to initiate fractures in the formation will be extremely high for ordinary completions equipment - & possibly over the equipment's safety threshold. While drilling, a 22,000 ft column of 19+ lb/gal mud was required just to balance the pore-pressure (21,700 psi). While fracking, there will be a 22,000ft column of 8.34 lb/gal water in place of that mud, delivering only 9,540 psi to the formation. The rest of the pressure (12,160 psi) will have to be supplied by pumps from the completions contractors. This is only enough pressure to balance the well, significantly more pressure will be required to break down the formation.

Typical Drilling Rigs are rated for 4,000 or 5,000 psi, I would assume that completions equipment is rated for more, but 12,160+ psi? Another alternative would be to use saltwater weighing around 10.0 lb/gal as a frac-fluid. this would reduce the pressure requirements to 10,260 psi (to balance the well), but again, more would be required to initiate fractures.

I'm sure that these technicalities have contributed to the $8MM required by MNLU

3) MNLU's current pipeline can only handle 5MMCF/Day, only 1/4 of what the well has been designed to produce over the first months. Part of the $8MM could be to rectify this issue.

4) The Burkley-Phillips#1 has 3 liens against it & I would image that these figures have been included in their cost.

Permalink Reply by Joe Aldridge on September 24, 2011 at 2:06

Well it looks like we've beat this well to death - so to speak. It will be interesting to see what happens next as for as completing it. I guess that is the next chapter.

Permalink Reply by Mudbugs20 on September 25, 2011 at 4:02

Jeff, the 19+ ppg Oil base mud will most probably be displaced to a heavy completion fluid like zinc bromide, before any perforating is done. Zinc Bromide is not cheap.

Permalink Reply by Kitt Burkley on September 25, 2011 at 12:15

Rome wasn't built in a day and I like to see that some of you have a positive attitude. I believe that this is a bump in the road and that MNLU will get the funding or partnership they need to complete a fruitful well. It is also my opinion that negative speculation very possibly could drive stock prices down the same that positive speculation and news drives it up. For 30 years now there has been tests revealing something significant in the Burkley-Phillips #1 well. Why stop now? Mainland is diligent with attempts to acquire funding in this difficult economy and with dry gas
Prices down. I suggest that we keep the faith and those of us that have an interest do what we can to get the word out for investment. Thanks for allowing me to express my thoughts about this.

Permalink Reply by jeff boler on September 25, 2011 at 19:46

I believe that the C.P. Long et al & Burkley-Phillips#1 wells have left little doubt that your mineral acreage stores significant natural gas reserves. In the event that Mainland's efforts fail, someone will at some point pick up the torch. In 10-15 years, perhaps natural gas will sell for over $10/MCF. Operators will be drawn to your proven reserves like a magnet.

I know that you hope that MNLU is successful, but it would almost be better for you if this play is developed during a time of higher natural gas prices when your royalties will yield 2 or 3 times the revenue that you would develop today. Should MNLU fail & the lease/leases to your minerals expire, you will have a chance to team up with your family members & perhaps the Phillips Family members to demand a higher royalty percentage in the next lease. 

Whenever this field is developed, it should make you & your family very wealthy.

Permalink Reply by dbob on October 21, 2011 at 12:49

Today's press release:

http://www.prnewswire.com/news-releases/mainland-appoints-world-ren...

 

HOUSTON, Oct. 21, 2011 /PRNewswire/ -- Mainland Resources, Inc., (the  "Company") (MNLU-OTCBB, 5MN-Frankfurt) has appointed Dr. George Chilingar to its Advisory Board in order to assist the company with a strategic partnership alliance and the supporting financing.

Dr. Chilingar is an expert with extensive knowledge, experience and recognition in the oil and gas industry, as well as the environmental sector. He is one of the most well-known petroleum geologists in the world and the founder of several prestigious journals in the oil and gas industry.

Dr. Chilingar states, "I am excited by the potential of Mainland's Buena Vista shale gas project in Mississippi. It is a significant prospect where I feel I can assist the Company both with strategic partnership affiliation, financing and a greater understanding of the long term development of this play."

George V. Chilingar, Ph.D., is a distinguished Emeritus Professor of civil and petroleum engineering at the University of Southern California, member of American Association of Petroleum Geologists, Certified Petroleum Geologist, Certified Professional Chemist and Certified Geologist, State of California. He received a B.S. and M.S. degrees in petroleum engineering and a Ph.D. degree in geology with minor in petroleum engineering from the University of Southern California. He has been the Honorary Consul for the Republic of Honduras since 1983. Dr. Chilingar was the first American petroleum geologist elected to the Russian Academy of Sciences. He is also a member of the Armenian Academy of Sciences, the International Academy of Engineering and the President of the US Branch of the Armenian Academy of Engineering.

 

Permalink Reply by dbob on October 21, 2011 at 12:51

I think this suggests Mainland may have turned the corner - I suspect this appointment was a prerequisite for a funding/strategic partnership. 

 

Anyone got comments?

Permalink Reply by CRAIG TAYLOR on October 21, 2011 at 14:34

you are so correct sir!

Permalink Reply by Skip Peel - Mineral Consultant on October 21, 2011 at 14:52

Some had the same opinion when Atencio was hired.  How long has he been gone now.

Permalink Reply by dbob on October 21, 2011 at 14:57

Surely this guy had to do his DD?  It is curious they announced it on a Friday afternoon - not the best time to make a splash.  Maybe they paid him 10k upfront to come onboard?

Permalink Reply by Skip Peel - Mineral Consultant on October 21, 2011 at 14:59

I recall many kind words and expressions of confidence that Mr. Atencio was just the guy to put things back on the right track at MNLU.  He did have an impressive background.  The whole merry-go-round of CEOs and other officers seems never ending.

Permalink Reply by dbob on October 21, 2011 at 15:32

as always, thanks.  color me an optimist, but maybe Charlie Brown (with Lucy and the football).

 

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