Using the Wyoming Oil and Gas Conservation Commission’s extensive data base and the expertise and local knowledge of its own Casper, Wyoming-based team, Elk has identified historical oil fields that it believes can be redeveloped using new technology or enhanced oil recovery techniques.

Elk intends to optimise oil production at its Grieve and Sand Draw South oil fields through progressive multi-staged developments. Each field contains substantial infrastructure, including compressors, pumps, tanks, separators and more importantly, numerous temporarily abandoned wells that can be re-entered and placed on production.

“Many Wyoming oil fields were abandoned at times of very low oil prices,” Elk chief executive Rick Wood said.

“We own and operate the crude production at Sand Draw South, which is an area that we focused on in the last half of 2006 [but] Grieve is the company-maker.”

Grieve is close to a carbon dioxide pipeline, which offers enhanced oil recovery options. An independent assessment estimates there are up to 12.5 million barrels (MMbbl) of oil remaining in Grieve, with proven reserves of 185,000 barrels and probable reserves of 2.015MMbbl.

Discovered in 1954, Grieve has produced about 30MMbbl of premium light, sweet crude from the Muddy Formation between 1954 and 1988. Original oil-in-place was independently assessed at 85MMbbl.

The field has only one producing, flowing at about 20bopd.

“Thirty million barrels have already been produced and our conservative estimated ultimate recovery factor, under enhanced oil recovery, specifically a CO2 flood, will be at least 50%,” Wood said.

The company has engaged two leading consulting groups to confirm the impact on production and oil reserves that would result from an EOR program using CO2 injection. Another group has been approached to offer advice on the development and production facilities required to start the EOR program.

The use of CO2 in enhanced oil recovery is a well-established tertiary recovery technique. Inspection of other CO2 injection projects, often in less suitable reservoir structures and older and more mature fields than Grieve, shows a dramatic increase in production can be achieved in a relatively short response time after starting CO2 injection.

“We have a big advantage at Grieve,” Wood said.

“It is a textbook case for a CO2 flood, as it is quite steeply dipping, so gravity is working to our advantage. It is basically a simple tilted slab.”

The immediate focus for Elk at Grieve is to put in place an EOR project for the Muddy Formation. The first stage requires the company securing a supply of CO2.

“We’re in confidential negotiations with a supplier of CO2 and are hopeful that soon we’ll be able to announce securing a supply,” Wood said.

“To run CO2 from that pipeline to the active part of the field would be a very inexpensive job.”

The second stage in Elk’s equation will be forming a joint venture with a party with experience at managing CO2 projects.

“That’s not to say we can’t do it ourselves,” Wood said.

“But we feel it would be much more expedient and efficient if we can form a joint venture with an oil company which is already operating a CO2 EOR project in the area.

“A farm-out would represent an indirect way of financing the development.”

This year is shaping as quite a busy year for Elk Petroleum, as it plans to investigate the oil potential of some of the sands above the Muddy reservoir in the Grieve oil field that are believed to host, previously untapped, oil reserves. Evidence of this potential has been observed in several temporarily abandoned Grieve wells. The company plans to drill a shallow well as part of the Grieve 2007 work program.

The deeper Phosphoria and Tensleep formations at Grieve also remain targets for future investigation and will be scheduled after the Muddy and Upper Sand projects have been completed.

Elk has acquired a 50% working interest in the Ash Creek field, which has potential for shallow oil in a rock sequence similar to that at Grieve. A shallow well at Ash Creek is scheduled for 2007. The company’s Wyoming staff are pursuing other exploration opportunities in the region while being alert to the possibilities of acquiring producing assets.

It will also continue working on its Sand Draw field.

“Sand Draw South produces a heavier crude with total production of 3.1 million barrels since its discovery in 1946.

“We implemented a workover program there in 2006 aiming to generate cash and to cover operating and administration expenses, which allowed us to preserve our cash for our capital program such as re-entries and new wells.”

Crude was being produced from the Tensleep Formation from two wells at the Sand Draw South oil field when it was acquired in 2005. Historically, crude production has come from both the Phosphoria and Tensleep formations while gas has been produced from the Frontier Formations (five in total) and the Muddy Formation.

Elk now has five oil producing wells and has significantly increased its daily production by completing five workovers including the addition of three producing wells as well as enhancing production from the two original wells.

Four of the wells are producing from a combination of the Tensleep and Phosphoria formations. One other well is producing solely from the Lower Phosphoria Formation and will be available for Tensleep production after an appraisal period.

A week after the workover program was completed, test production at the field reached 340 barrels of oil per day.

“We had a very successful program there and we increased production substantially,” Wood said.

“From the start of the northern summer we were producing about 50bopd at Sand Draw South and we finished at tested rates up to 340bopd.

“There is remaining potential yet to be tapped there in the form of a couple more abandoned wells that can be re-entered and worked over.”

Elk already has a spring workover program scheduled. The aim of this program will be to increase production from the Tensleep and Lower Phosphoria formations as well as test the potential of the Upper Phosphoria Formation in existing wells high on the structure.

“We have identified new reserves in the Phosphoria Formation,” Wood continued,

“And we have also identified infill locations that can be drilled subject to the availability of capital.”

The company purchased Sand Draw South 3D seismic data and believes that re-processing using the latest technology could reveal further opportunities at Sand Draw South and could provide an exploration play for the future, according to Wood.

First published in a different form in the April issue of ResourceStocks