Published in the July-August 2015 edition of RESOURCESTOCKS

The major trends in US oil and gas over recent years have overlain growth in export expectations with a globally stirring proliferation in unconventional production plays.

A number of Pacific coast LNG export terminals are beginning to look ready to graduate from the blackboard to hard ground, while Panama Canal expansions and European efforts to wean off Russian oil continue to portent increased traffic from the Gulf of Mexico. Potential offtake deals with major Asian customers have become routine chatter in the local industry.

All the while, the number of drill rigs in operation is falling sharply, and the wave of shale hopefuls continues to squeeze US source rocks via hydraulic fracturing, or fraccing, a resource industry buzzword that has become almost as politically toxic as "coal".

Many of these unconventional extraction schemes - which got into business on the back of a Saudi-coaxed $US100-per-barrel oil prices - are now being forced back into innovation mode to survive.

Shale is a numbers game in the sense that companies can drill, produce and make money on a per-well basis, but they'll need to get lucky with sweet spots in continuous fields for long-term profitability.

Production typically declines to 10% after the first year. It can clearly work for well-positioned oilers, but the payback on these things is extending into multiple years these days.

Some US producers have been burned in the shale space because they're in fringe areas or lack access to sweet spots. But even in the centre of the action, the piping infrastructure simply doesn't exist.

This is perhaps most dramatically evidenced by the flaring in North Dakota's booming Bakken Basin, where a normally dark prairie is now lit up in satellite photography more brightly than regional metro areas like Minneapolis.

The US' bounty in energy resources has never been in question. In fact, after less than 10 years of concerted development, the Marcellus basin in the country's northeast has achieved a production rate of 16 billion cubic feet of gas per day, exceeding the national output of Qatar and representing four times what Australia producers.

The Marcellus' most northerly state of New York, however, has joined a growing list of US jurisdictions, which have decided that the risks of fraccing outweigh the rewards. The Empire State called for a ban late last year.

Nearby Maryland became the most recent state to ban fraccing last month when Governor Larry Hogan decided not to veto the prohibiting legislation.

For Australians venturing into the US, the core debate seems to be whether the unconventional revolution of recent years is the next big thing or a bubble about to bust.

"It's already started busting in our view, but we're very happy about seeing that because it keeps all the sheep running the other way, all chasing the same pasture while we're in another pasture just hitting some things out of the park," Titan Energy CEO Brad Simmons told Energy News' sister publication RESOURCESTOCKS from his office in Houston.

"There are a lot of people that may have been enamoured with the shale before, and the bloom is off the rose. We wish all those companies the best of luck because that's a tough road to hoe in the unconventionals. You will never see Titan involved in any unconventionals as long as I'm involved - that's not our game."

Titan's game is combining Australian marketing and financial expertise with some third-generation Texan oil savvy, courtesy of Simmons. In bringing Simmons out of retirement to build an oil company during a global lull, the ASX-listed company quadrupled in value during the 12 months to May.

Titan says it's now drilling wells for less than half the cost of a year ago, claiming oil projects are economic down to a price of $30/bbl and recent milestones including a $75 million funding deal with New Orleans-based Gulf South. This commitment equates to more than three times Titan's market capitalisation.

Simmons found the recipe for this success not only in a focus on long-term conventional plays, but in avoiding the common pitfall of considering the US a familiar, English-speaking destination where smooth integrations will be easy.

"Australian companies coming to the States have not always had a pleasant adventure over here, and I think there's been a stigma. If I'm going over from Texas to go mining in Perth for gold, you guys are going to go, ‘he's heading for disaster, he's on our turf, he's the out-of-town mullet.'

"There're a lot of unscrupulous oil companies over here whose sole intent, especially with foreigners, is to convert your money and their experience into their money and your experience.

"One of the best things to do is to be involved in strategic relationships with rock-solid companies. There's a lot of cutting corners that we've seen with Australian investment into here, but mine you, when I was breaking into the business 40 years ago, there was a strange-named company that I would run into on the salt dome and in the oil field called Broken Hill Proprietary. So there's some solid growth that's happened here for Australia."

Australian Oil Company chairman Andrew Childs emphasised the importance of regionally specific local contacts, considering the vast jurisdictional variability inherent in the sprawling US oil and gas scene.

"We're lucky that we have one of the best operators on the ground who is also a 20% working-interest partner in everything we do. He's drilled over 300 wells in the Sacramento Basin," Childs said.

"He's the key to success for us, and I think it's fair to say, if we didn't have that contact, I don't think we'd be in California because there are plenty of examples of other companies that have gone to California that have essentially been fleeced by the operator."

AOC is chasing giant conventional gas reservoirs in the northern part of the state, where its currently producing Dempsey project has capacity to handle 10 million cubic feet of gas per day a mere 200 feet from two 36-inch pipelines that run from Vancouver to San Diego.

The company describes California as the world's seventh largest economy with an enormous energy appetite and a drought-plagued debutant in the power-intensive sector of desalination technology. An enormous amount of investment has already been earmarked for Californian seawater desalination, with a massive $1 billion plant on track to be realised near the resort city of Carlsbad.

Childs sees blue sky for Dempsey in some encouraging seismic work, California's 90% dependence on imported energy and a steady rise for gas prices due to evaporating unconventional gas supplies from shuttered shale oil plays.

"There hasn't been a lot of exploration in California going back to the 1970s, but that's why we like it," Childs said.

"Unlike in Texas, where you're paying potentially tens if not hundreds of thousands of dollars an acre per annum to hold [leases] before you drill, our holding costs are anywhere from $20-$30 an acre.

"The problem that we have is trying to explain to people both in Australia and in the US how do we think we found something literally underneath the US oil industry's feet."

Finding hydrocarbons under the US oil industry's feet, however, isn't such an impossible task. US oil and gas history is a patchwork of regionally diverse booms that fizzled for reasons beyond living memory. What's left is a continent's worth of sleeper regions, where a little (or a lot) of modern detective work can rekindle some old flames.

This is the plan at Strata-X Energy, an ASX-listed junior with properties in Texas, North Dakota and California, but a laser focus on dormant historic resources in the less celebrated Illinois Basin.

The company spent more than a year digitising dusty courthouse land records to establish a huge oil-identifying dataset for a modern workstation in southeast Illinois.

The basin produces today at a rate of about 9 million barrels of oil a day, but has historically generated more than 4 billion barrels, including 1.5BBL in Strata-X's immediate area alone.

The region became mostly uneconomic at an oil price of less than $2/bbl when Middle Eastern crude began flowing into the US, but Strata-X sees new life in the use of updated extraction techniques and a more lucrative global marketplace.

"When the early Illinois Basin explorers originally drilled and produced decades ago, the wells declined in production fairly quickly because there was no big water drive," Strata-X chairman and director Ron Prefontaine said.

"At our Blue Spruce project we estimate only 10% to 20% of the oil in the reservoir has been recovered, leaving about 1.2MMbbl net to Strata-X that we can recover using proven water flood technology and potentially the same again using the latest tertiary recover methods.

"We are not wildcatting - we already know the oil is there and some has been produced. It really is applying good engineering and geology to recover more of the oil left behind."

Prefontaine was a director for both Arrow Energy and Bow Energy, which were sold over 2011-12 for almost $4 billion combined. He says much of the success of those companies was in exploiting unfashionable jurisdictions such as Strata-X's Illinois holdings.

"The market doesn't get it yet as there is nothing like this in Australia," he said.

"I have lived through a sceptical market before at my last two companies, and both proved successful, and shareholders were well rewarded. I see similar growth potential in Strata-X's Illinois Basin projects."

Doggedness and tech-savvy detective work are universal ingredients to oil and gas success. But in a way, the willingness of ASX explorers to embrace these tools in the US despite a pessimistic chorus of nonbelievers evokes the spirit of the local scene going all the way back to the Pennsylvania oil rush of the 1860s.

It was entrepreneurial stubbornness that allowed the Pennsylvanians to pioneer that primeval industry as it was technological experimentation that allowed the North Dakotans to revolutionise the shale business on inflated oil prices. So it's in this same tradition that a methodical and innovative jurisdictional reimagining will reanimate some of the country's forgotten hotspots in the years to come.

Sometimes you've got to be a little unconventional to get the conventional goods.

A version of this article was first published in the July-August 2015 edition of RESOURCESTOCKS magazine.