Source: Maurice Jackson for Streetwise Reports 04/24/2018
Molori Energy CEO Joel Dumaresq, in conversation with Maurice Jackson of Proven and Probable, discusses his company’s newest exploration focus.
Maurice Jackson: Today we will discuss a company that presents a unique value proposition in oil and gas. I’m speaking of Molori Energy Inc. (MOL:TSX.V; MOLOF:OTCQB), which trades on the TSX-V under MOL and on the OTCQB under MOLOF. Joining us for a conversation is Joel Dumaresq, the CEO of Molori Energy.
Joel, we had quite a bit of delay in getting news out of Molori on this first Red Cave Appraisal well—can you talk a bit about these delays?
Joel Dumaresq: Admittedly it did take us longer than we anticipated to get a handle on the well. As I recall, we completed and logged the 23-1R well in mid-January. However, shortly after that, we got hit with historically low temperatures up in the Texas Panhandle, which ended up delaying our efforts to frac the well.
You’ll recall Maurice, that the frac is really the silver bullet when it comes to getting a Red Cave well to flow oil, or for that matter gas. Credit goes to our neighbors in Moore County—”Adams Affiliates”—who were first to demonstrate that by employing fracs the size of which you see in the Permian Basin, they could get their Red Cave wells to flow at 40–50 barrels of oil a day.
So, getting back to our well, when we came to frac, the air temperature was simply too low and the ground too hard for the almost 300,000 gallons of water we were to inject. As a matter of fact, our workaround ended up being that we heated the water before injecting it into the formation. By the time we completed the frac, we were well into February.
Once the well went into production, it was evident we had oil along with some gas. However, what we didn’t expect was the volume of water that flowed back from the frac. These Red Cave wells typically have a low water to oil ratio, so we weren’t expecting to have watering issues. However, when you pump that much water downhole, you are going to get a lot of it back, and that’s exactly what happened.
The next challenge we encountered was with the amount of sand in the well. We pumped approximately 300,000 lb of sand into the well during the frac. What we’ve found is that the sand is falling back into the well and being picked up by the oil, which has presented a challenge for the pump. We’ve been experimenting with different pumps to get around the sanding issue, and we believe we will get that challenge licked as well.
So that’s all a long way of telling you that indeed it did take longer than what we expected. However, this was our first well of this type into this zone of the Red Cave and just like Adams, we are learning as we go. With what we’ve learned on this first well, we will surely streamline and refine our completion strategy going forward.
Maurice: Let’s talk about the production we are seeing from this first well. From Molori’s announcement on Wednesday, that number looks to be 28 boepd? Are you happy with that number, Joel? More specifically, in previous interviews, you stated production numbers that Adams Affiliates were getting out of their Red Cave program. Is Thompson 23-1R behaving like a ”typical Adams Affiliates” well?
Joel: Maurice, what’s most important from our perspective is that we found oil, and, yes, some gas. When we talk of proof of concept, that’s what we were after.
If you’ll recall from our prior discussions, the Red Cave is a complex formation and Adams Affiliates were the first to demonstrate that they could economically build production from the Red Cave.
For Molori’s part, no one has spent more time or money studying the Red Cave to get a sense of where the ribbon of oil sits. But that said, we are learning about the characteristics of producing oil from the Red Cave, and just as Adams has, our results will get better and better with the more wells we drill.
Adams has drilled over 50 wells into the Red Cave. At the outset, they also had issues with sand collapsing into the well and they learned to overcome them. As they improved upon their completion techniques, their IPs consistently improved to where the average Adams well into the Red Cave now initially produces about 40–50 barrels of oil.
Let’s also not forget that the oil is there in the 23-1R well. All we are talking about is how fast we initially recover that oil. It may impact the short-term economics of the well, however, the long-term economics remain unchanged. These are very inexpensive wells to drill in comparison to the wells in the Permian: only about $250k–$300k per well, so the payback, even at 25 boepd, is still only a little over a year.
With the land position we’ve assembled and are continuing to assemble, we
expect to have access to several hundred well locations. More importantly, the first 50–100 locations we are focused upon are simply “offset” locations relative to Adam’s best wells—that’s about the lowest hanging fruit you can get in the oil development business.
We can all do the math on what even just 100 locations look like with 25 barrels a location, and when you think we are almost at $70 a barrel oil, the economics really begin to shine.
At the end of the day, we have to remember why we are in the Red Cave in the first place: This is ‘virgin’ pressure and the formation has not been depleted the way the brown dolomite formation has in North Texas. You just don’t find opportunities like this “onshore” in your own backyard with land acquisition costs of 1/100th of what it would cost you to get into the Permian. This play …read more