Oil & Gas Investments
J. E. Richey Lease:
The re-completion of the Concho Richey well conducted almost four years ago is still producing commercial quantities of oil and gas from the Gray formation at approximately 3,900 feet. Plans are to rework J. E. Richey #3 on the same lease to further enhance the oil and gas revenue stream from this lease. NMEX owns 24% of the working interest in the Richey Lease. Plans are being put into motion to drill a new 4,500 foot well on the Richey Lease which will encounter five known productive formations in the area with the primary targets being the Gray and Morris. The Gray is known to produce for more than 30 years of commercial quantities of oil and gas with cumulative production numbers of more than 100,000 barrels of oil and 200 million cubic feet of natural gas.
J. E. Richey 2A
Our drilling location for the J. E. Richey 2A has multiple potential payable productive formations which will each be carefully evaluated during the drilling and logging process. The Company negotiated with a third party for the drilling and completion of the Richey 2A costs and to be assumed the working interest partners already paid in this well. The following is a drilling report on the J. E. Richey 2A well.
Drilling commenced on July 17, 2020 at 1:35PM. Surface pipe (8 5/8ths) was set to 119 feet to protect underground freshwater sources as Texas Waterboard recommends for that area to protect down to 100 feet. Drilling resumed after allowing time for the cement to cure at 2:00 pm on Saturday, July 18th.
First encounter of hydrocarbons was at 3,430 feet when drilling through the Morris formation. The gas analyzer measured 50 units of gas and continued to measure gas each time a new connection was made (connection = when an additional drill pipe was added to the drilling).
Morris production was established on the lease in the J. E. Richey Well # 3, which has made approximately 215 million cubic feet of gas and approximately 3,600 barrels of oil. The Morris Sand is of a Channel nature running east-west in a meander trend through the lease area.
The second encounter of hydrocarbons was at 3,866 feet when drilling into the Gray formation. The gas analyzer measured 25 to 50 units of gas and continued to measure gas each time a new connection was made.
The Gray Sand is trending Northwest to Southeast across the north half of the acreage. The Gray Sand is a significant oil and as producer in this area. Gray production was established in both the Richey wells #1 & 2 and Concho Richey #1. The Concho Richey #1 well is a direct offset to the Olympia Hale #1 well that has produced approximately 100,000 barrels and 225 million cubic feet of gas over a 33 year period averaging over 6 barrels per day with approximately 30 MCF of gas per day. Another notable Gray field is the Templeton Field located about 3 miles east of the acreage that has produced in excess of 1.5 million barrels and 4.1 BCF of gas.
It is important to note that the J. E. Richey #1 drilled by ARCO in 1981 well came in with an initial rate of 167 barrels of oil and 118 MCF of natural gas per day on a 100 sack sand frac.
The J. E. Richey #2 also drilled by ARCO came in with an initial rate of 45 barrels of oil per day on a light 750 gallon acid stimulation, no sand frac was conducted on this well.
The Concho Richey #1 (well name changed to Richey #4) well drilled in 2005 was re-completed in 2015 in the Gray formation and came in with an initial rate of 65 barrels of oil and 100 MCF of natural gas per day. This well is still producing today approximately 2.75 barrels of oil and 19 MCF of natural gas per day after producing five years. This well had a 50 sack sand frac conducted on this well.
The third encounter of hydrocarbons was at 4,422 feet when drilling into the Ellenburger formation. The gas analyzer measured 25 to 35 units of gas and continued to measure gas each time a new connection was made. The horizontal fractures in this interval are likely to be connected to significant oil and gas that is known to have produced from the Ellenburger in the J. E. Richey #2 well.
The Ellenburger Dolomite was formed during the Ordovician age, which was later eroded resulting in several highly structured trapping mechanisms, which were highly fractured resulting in very good secondary porosity. These wells are known for their high rate of production and quick payout. The best known Ellenburger Field in this area is the Hrubetz which has produced over 1.4 million barrels of oil and 1.4 billion cubic feet of gas.
The J. E. Richey #2 produced first from the Ellenburger with an initial rate of 2,535 MCF of natural gas and 19 barrels of oil.
The drilling of the Richey 2A well was completed at 11:30 AM on Friday, July 24 reaching a total depth of 4,497 feet. A two stage cement program was conducted on the well to insure covering the Coleman Junction with cement as the Coleman Junction is a very corrosive formation. The first stage of the cement job was completed at 6 PM and the second stage was completed at 11:45PM on the 24th of July.
The drilling rig was released at 1 AM on Saturday morning on July 25, 2020.
Plans are to commence the process of completing the well and plans are to have it into production by October 1, 2020. Placing the production tanks and laying flow lines for both the gas and oil, setting a meter run for the gas, outlining the stimulation process and setting up the work program.
Calihoma Partners
Northern Minerals and Exploration has acquired 4.25% interest in Calihoma Partners, LLC and the West Lenapah Project managed by Foster S. Zeiders. Initial revenues are expected in Q4 2020. Future development of the West Lenapah Project should deliver to the Joint Venture reserves estimated between 11.0 bcf and 25bfc.
The West Lenapah Project, located in Nowata County, Ok, is a joint venture between Calihoma Partners, LLC and EnergyVest Inc., to operate, produce and develop a natural gas asset covering approximately 40,000 acres of largely contiguous acreage and 1200 miles of associated gathering lines. Future operations include the startup of 45 wells, and the development of over 40 identified Mississippian and Coalbed Methane gas wells currently located within the West Lenapah Project.
Field operations for the West Lenapah Project commenced in July 2020 and is on schedule for first revenues in Q4 2020.
Tax Advantages of Oil and Gas Investing
When it comes to tax-advantaged investments for wealthy or sophisticated investors, one commodity continues to stand alone above all others: oil. With the government’s backing, domestic energy production has created a litany of tax incentives for both investors and small producers. Several major tax benefits are available for oil and gas investors that are found nowhere else in the tax code.
An investment in oil and gas drilling/exploration is now tax deductible up to 100% (95 % in the 1st year & 5% over a 5 year period) because of a combination of Section 179 and bonus depreciation*.
The intangible drilling costs (IDC) deduction has been allowed in the US since 1913 in order to attract investment capital to oil and gas exploration. However, President Reagan’s tax reform along with President Trump’s January 2018 changes have made oil and gas one of the most unique and attractive investments for high income, high net-worth individuals looking for tax write offs and current income. For small independent drillers, the IRS allows 15% of that income to be received by investors income-tax free at the federal level.Quotes by TradingView
Disclaimer:
*All information provided herein is not to be used as tax advice. Investors should and are encouraged to consult a tax attorney and/or an accountant to determine their own tax benefits and tax advantages through investing in oil and gas drilling programs.
REGULATION D 506(C) MANDATED LEGEND
Any historical performance data represents past performance. Past performance does not guarantee future results; Current performance may be different than the performance data presented; The Company is not required by law to follow any standard methodology when calculating and representing performance data; The performance of the Company may not be directly comparable to the performance of other private or registered funds or companies; The securities are being offered in reliance on an exemption from the registration requirements, and therefore are not required to comply with certain specific disclosure requirements; The Securities and Exchange Commission has not passed upon the merits of or approved the securities, the terms of the offering, or the accuracy of the materials.
Forward Looking Statements: Statements which are not historical facts contained in this release are forward looking statements that involve risks and uncertainties, including but not limited to, the effect of economic conditions, the impact of competition, the results of financing efforts, changes in consumers’ preferences and trends. The words “estimate,” “possible,” “seeking,” and similar expressions identify forward-looking statements, which speak only to the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, because of new information, future events, or otherwise. Future events and actual results may differ materially from those set forth herein, contemplated by, or underlying the forward-looking statements. The information herein is subject to change without notice. Northern Minerals & Exploration Ltd. shall not be liable for technical or editorial errors or omissions contained.