USA
Onshore / Development
Envoi has been engaged by California-based California Petroleum Group (“CPG”), to assist in their search for a partner to join in the development of their 100% owned and operated Ten Section leases. CPG’s Ten Section leases are situated in Kern County, on the west side of the San Joaquin Basin, some 12 miles SW of Bakersfield. The area has well-established production with over 60,000 producing wells that makes Kern County one of the most productive areas in the whole of California. The state as a whole produced over 104 million bbls in 2024, making it the eighth largest producer of crude oil in the US out of its 32 oil-producing US states. CPG, owned and managed by experienced oil industry executives, and with a number of leases across Kern County, is offering a material interest in its northern Ten Section leases in return for funding the first well (estimated cost US$ 2.7 million D&C) of a 10 well infill drilling programme.
The Ten Section oil accumulation is a 34o API light oil pool in a low relief elongated anticlinal dome with subtle 7° dipping flanks, but a productive closure of approximately 2,200 acres. The field, comprised mainly of Upper Miocene-aged turbidites known as the Stevens Sand, has been produced by solution gas and a weak edge aquifer drive. Historical production has totalled 85.3 MMstb from around 225 historical wells drilled across the whole field. The northern area, where CPG operates its leases, was discovered and developed much later in 1965 by Standard Oil, with 15 wells drilled in quick succession. CPG acquired 100% its current leases in 2019 over this northwest area of the field and has since carried out a full geological and engineering analysis, supplemented with new data acquisition and workover programmes on existing wells. Currently, 2 wells are producing around 25 bopd from the existing wells in their Ten Section leases. CPG now wishes to carry out a 10 well infill development drilling programme based on a smaller 10 acre spacing infilling the space between the original wells which were drilled on a 20 acre spacing. This is designed to increase and maximise recovery from the northern part of the Ten Field closure in CPG’s leases with the first well, CPG #1, now deemed as ‘ready to drill’ with a turnkey contract. Within their acreage, the original oil in place is estimated to have been 23.3 MMstb with an 18% recovery to date and any water reinjected into a dedicated SWD well. CPG now estimates that by drilling new wells with a 10 acre spacing, the oil recovery can be increased by 9% and add an additional 2.1 MMstb to the recoverable reserves of the field in their acreage.
The threshold economics show a project EBITDA US$ 56.8 million and NPV10 of US$ 28.3 million, if just one well is funded and then reinvested in the next nine in the infill drilling programme. Oil is sold by trucking. In addition to the well cost of US$2.6 million, facilities are US$0.1 million and US$70k per well ABEX. CPG are well experienced in California and well-placed to profitably navigate the California petroleum legal and permitting processes. CPG owns and operates the wells in its leases and is in the process of applying for permits to commence infill drilling.
CPG is offering a material interest to party in return for funding the planned initial well, where the expected cash flow from the 185 bopd production each well is estimated capable of producing could then be reinvested to progressively drill up to 9 additional infill wells. The intention is for CPG to fund its own share of subsequent wells. There is also potential to acquire additional leases within the area as the development cash flow builds after the development drilling programme payback.
