The company announced this morning it had entered into a conditional agreement with US-based interests to re-work mature oil fields in Oklahoma and Texas.
Longreach chairman Boris Ganke told EnergyReview.net the company had looked to Amadeus Energy, Elk Petroleum and Louisiana Petroleum, which owe their successes in part to adopting a similar strategy.
“All of these companies have had interesting rises in their share price, since they started producing from known oil fields,” Ganke said.
“We’ve been looking at going overseas for sometime and have been in discussions with companies in West Africa, Russia, Iran and the Ukraine. What we’re after is a low-risk project to build our company and this opportunity fits that criteria.”
Longreach, which has a market capitalisation of $2.8 million, currently holds a 100% stake in the onshore Carnarvon Basin permits EP-369, EP-405 and EP-410, but it is trying to attract farm-in partners to these permits. Longreach also has a 23.38% stake in another Carnarvon Basin lease, EP-439.
It also has a 22% stake in Brisbane Petroleum NL, which in turn holds a 50% stake in Surat Basin Petroleum Leases 18 and 40. In addition, the company holds a hot rocks play in New South Wales with its partner Hot Rock Energy.
But Ganke said 2005 saw “very little performance” across Longreach’s Australian petroleum tenements.
Following satisfactory due diligence, Longreach will establish a 50/50 joint venture company to start an immediate work-over program on 25 wells in Oklahoma.
Ganke did not name the US firms in the agreement, instead describing them as “experienced entrepreneurs.” He also declined to pinpoint the exact whereabouts of the leases.
To fund the initial investment of about $1 million, the company has granted 6 million short-term options exerciseable at 2.5c each.
Ganke said he hoped the reworked wells would produce between two and 20 barrels of oil per day. The recompletion work could begin in March, he said.
Longreach could be on to a good thing if the performance of other Australian companies are any indication.
Last month, the Bulletin magazine ranked Amadeus Energy number one in its 50 Hot companies list for 2005.
Today, Amadeus has a market capitalisation of just under A$200m but it took a decade of hard work and persistence to reach this point.
The company started out buying old Texan wells then reworking them to boost production.
It was a simple plan that has since been followed by several other Aussie juniors. But where companies such as Elk Petroleum and Louisiana Petroleum enjoy instant success, closing their IPOs oversubscribed and listing at premiums, Amadeus limped along for years at 10 cents per share until oil prices took off again in 2003.
But its business plan meant that production was steadily growing, the bills were being paid and the company was well positioned to take off when oil prices shot up.
Today, Amadeus also has blocks in Oklahoma, Kansas and Louisiana and is drilling more new wells than reworking old ones. The company expects to more than double production this financial year, from 280,000 barrels to 600,000.
In September last year, Elk Petroleum announced it had underestimated the production potential of its historic Grieve Oil Field in Wyoming. The company said swabbing of four recently completed wells indicated the field would exceed the target 100 barrels of oil per day.
Elk owns 100% of the field, which was first drilled in 1954, and was never worked with secondary recovery techniques, such as waterflood or natural gas re-injection. In August, Elk said an independent estimate showed a potential 12 million barrels of reserves still to be recovered from Grieve.
Today, Elk Petroleum has a market capitalisation of $11.4 million.
Meanwhile, Louisiana Petroleum has recently started producing and selling gas from its 100%-owned Caddo Pine Island Field project in northern Louisiana, USA. Here, the company is using modern technology to remediate old oil wells.
Production in the September quarter 2005 was up 59 barrels of oil and revenue increased US$2778 from the previous month, the company said. Last month it generated 367 barrels for a net revenue of US$16,762, while August saw 308 barrels for US$13,984 revenue.
Another company, Marion Energy – formerly Carpenter Pacific Resources – is also benefitting from this strategy. A few months ago, the company expanded its Texan prospect inventory following the discovery of oil and gas at the recompleted Huntington-3 well.
