Low-Cost Oil & Gas Player in High-Rent Permian Basin
Source: Streetwise Reports
November 29, 2017 (Investorideas.com Newswire) An oil E&P company has acquired rights at low cost in the prolific Permian Basin that it is now exploring and producing.
The price of oil has been rising in recent weeks, with West Texas Intermediate Crude now fetching $57 per barrel.
The Permian Basin, a prolific oil and gas producing area spanning West Texas and southeastern New Mexico that some people have called "America's Saudi Arabia," has attracted the attention of majors such as Exxon (XOM:NYSE) and Chevron (CVX:NYSE). Earlier this year, Exxon acquired acquired about 275,000 acres of leasehold in the Permian Basin from companies owned by the Bass family, with an estimated 3.4 billion barrels of oil equivalent.
Chevron has been active in the Permian Basin since the 1920s and holds about 2 million net acres of resources. The company has produced over 5 billion barrels from the area.
Another company active in the Permian Basin is Amazing Energy Oil & Gas Co. (AMAZ:OTCQX). Amazing Energy has rights in a contiguous 70,000-acre block in the Permian that is adjacent to the prolific Yates Oilfield, which has produced over 1.6 billion barrels of oil. The company's neighbors include Kinder Morgan (KMI:NYSE), Oxy Petroleum (OXY:NYSE), Pioneer Natural Resources (PXD:NYSE), ConocoPhillips (COP:NYSE), Jagged Peak Energy (JAG:NYSE), Diamondback Energy (FANG:NASDAQ) and Apache (APA:NYSE). "Amazing Energy is in the unique position in this 70,000-acre contiguous block with special long term right that we believe will keep up secure for many years in the future," Amazing's CEO Willard G. McAndrew III told Streetwise Reports.
"The cofounder and chairman of Amazing Energy, Jed Miesner, purchased this lease back in 2008. The acreage has plenty of oil plus gas in the many stack zones starting from the Yates, Seven Rivers, Queens, San Andres, Clear Fork, Strawn, Wolfcamp, Devonian and Ellenburger that will help in building our company (potentially thousands of wells could be drilled)," McAndrew stated. "Baker Hughes informed us in March 2017 of $15.3 billion of probables within this block."
McAndrew also stressed that Amazing got in at very low cost. "There is Permian fever here, and acreage is going for as high as $60,000 per acre, while we paid and continue to pay $200 to $300 per acre through a court-ordered settlement. Companies that pay those high prices have tens of millions of dollars tied up into leases that have to be drilled to maintain the lease. This is before they even start to drill and produce a well. We get to develop in the shallow zones that are from 2,000 feet and up at a low operational cost now, plus the big upside of our deeper horizons the Wolfcamp, Devonian and Ellenburger that are proving producers in the area. The continuing new technical discoveries that are now available put us in a good position," McAndrew shared.
"Our situation is different," McAndrew stated. "The way it was put together with drilling and being able to bank time to meet our drilling commitment, it should be ours forever. We only go out and lease part of the 70,000 acres that we need when we are ready to do something on it. We don't have the financial burden that many companies have. This is like owning the minerals. AMAZ should never lose the rights to this acreage."
Amazing's land is stacked pay, which means that there are multiple zones that could produce oil.
Amazing is moving ahead on drilling. The company recently announced the "successful drilling, logging and cementing of casing in the WWJD #23 well in Pecos County." According to the company, the well was drilled to 1,997 feet and encountered the Queen Formation.
McAndrew stated that "with increased resolution of the oil reservoirs at our target depths, we gained significant knowledge during the drilling of the No. 23 well. The well encountered the Queen Formation at a higher depth than any previously drilled well in this section."
McAndrew also commented that "all of the productive zones correlate to the other wells in the area, further confirming the lateral continuity of the resource. The company's land position provides us with miles of continuous drilling locations."
Amazing is currently trading on the OTCQX market, and would like to uplist to the NASDAQ or Amex in the next year, McAndrew told Streetwise Reports. The company has 5.6 million shares out in the float and 67 million shares issued and outstanding. "It has no debt except $4.1 million to the founder and largest shareholder, who helped fund the company himself over the last eight or nine years. There are about 700 shareholders," McAndrew stated. The company's market cap is approximately $24 million; the stock is trading at around $0.35.
Bob Moriarty noted in 321 Energy on Oct. 17 that a "recent study concluded that the Permian Basin located in West Texas and extending into New Mexico still contains 60 to 70 billion barrels of oil ready to pump."
"Amazing Energy has the rights to 70,000 acres in the Permian. A recent sale of land to Occidental Petroleum just west of Amazing's land valued acreage at $1512. With about 66 million shares outstanding, if Amazing got the same price for their land, the stock would be worth $1.59. If Amazing only received $1,000 an acre for their land, the shares would still be worth $1.06 apiece," Moriarty wrote. "The company is currently producing about 100 BOEPD and has an aggressive drill program scheduled that calls for production of 1500 BOEPD in less than a year and 3000 BOEPD in two years."
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