Financial Petroleum Holdings

EXECUTIVE SUMMARY

The prospects that have been evaluated all represent either un-tapped proven reserves or re-entry or rejuvenation projects of formerly producing wells in the South Eastern United States. As technology US Petroleum Holdings has continued to improve, old wells and old fields that were once too dangerous, too unproductive or “empty” can be reopened and produce economically. These wells are preferred because they are already along the gas and oil pipeline routes that crisscross the United States (i.e. infrastructure costs to monetize new finds in these old wells are minimal).

These investments represent late-stage investment which mitigates the riskUS Petroleum Holdings  to investors and the time to production on these wells is shorter than if investments were made in the early stages.

Houston Farm Project

History

The Houston Farms #1 well was drilled by Midwest Oil Company US Petroleum Holdings in 1960 to a total depth of 16,085 ft. The Lower Frio, the main objective at 16,000 ft. was wet and non-productive, so the well was considered a dry hole. While drilling the well, core sample of various Upper Frio sands between 10,000 – 12,000 ft. were taken and indicated condensate (gas) pay. Prior to plugging and abandonment, several of these Upper Frio sands were tested and they showed to be productive. The well was never completed, most likely due to nominal gas prices and/or the lack of a gas market. With Natural Gas prices at the time only a few pennies per MCF of gas, it was not economical to set several miles of pipeline to transport for just one well. Consequently, the well was plugged and abandoned. US Petroleum Holdings

The Frio Deep-Seated Salt Dome Fields lie south and southeast of Houston in Brazoria, Ford Bend, Harris, Galveston and Chambers counties along the Texas coast, US Petroleum Holdings.

Collectively, the Frio Deep-seated Salt Dome Fields are significant because their cumulative yields exceed those of any other producing formation in Southeast Texas. From the early 1930’s through 1982, the fields reported a combined cumulative production in excess of 2.3 billion barrels of oil, and at the end of 1993, the figure surpassed 2.4 billion barrels.

Although the most prolific fields were found in the 1930’s (15 major discoveries), development of the play continued into the 1940’s and 1950’s, and centered in Chambers and Brazoria counties, US Petroleum Holdings,  because of the proximity to the Danbury Dome, Hoskins Mound and the apparent deeper seated salt diaper over the Chocolate Bayou field.

By 1982, engineers set recoverable reserves for Frio reservoirs of the deep-domes play at nearly 4 billion barrels of oil. By the end of 1993 the fields had yielded more than 2.4 billion barrels.

In the 1950’s three new areas became productive and were called Chocolate Bayou Upper Frio (Brazoria County, 1950), Trinity Bay Frio 12 (Chambers County, 1951), and Chocolate Bayou Alibel (Brazoria County, 1952).

During the last half of the 20th century, the Chocolate Bayou Field has increased in aerial extent and multiple sand packages stacked all the way down to the 15,000 ft. Lower Frio Marker. Several major oil companies and numerous independent exploration companies have discovered over 55 different horizons (pay zones) within the Chocolate Bayou Field. The cumulative production of both gas and oil within this field is ENORMOUS!

Multiple Oligocene Frio Gas Sands have been identified in the well by log and core analysis. Sands are located within the existing casing between 10,000 and 12,200 ft. The primary objective is to complete the 12,000 ft. series of sands. A future plugback would complete the 10,000 ft. series of sands.

A second well on the property will be drilled to the Miocene Gas Sands between 5,100 and 7,000 ft. These sands show as productive as in the Houston Farms #1 well. The well will “twin” the Houston Farms #1 location for the shallower objectives.

Geological estimation of total reserves: 350,000 barrels of oil and 15 Billion cubic feet of Natural Gas.

Estimated Payout: somewhere between 100 – 120 barrels of crude oil per day.

Bissonet Humble Petroleum

Bissonet Lease at Humble Salt Dome Field

History

Humble Salt Dome Field was discovered in the early 1900’s. Bubbles of oil were first observed seeping from the ground near the San Jacinto river in 1887. Humble became an oil boomtown in the early 1900’s when oil was first produced here. The first oil was produced a couple years earlier after the famous Spindletop discovery in Beaumont Texas.

In the fall of 1902, George Hart spudded a well in the field on evidence of escaping gas in the area. His operation was halted by a blowout, an unexpected volume of gas under pressure, that forced the drilling equipment out of the hole. Blowouts were encountered in several wells in the part of the field later called “the hill” and drilled in the summer of 1904 by C.E. Barrett of Houston. Despite the menace of blowouts, some success was found in the early field when Higgins Oil and Fuel Company brought in a large-volume gas well half a mile Southeast of Barrett wells in October 1904. By the end of the year, Humble field reported two sporadically-producing oil wells that had yielded 2,000 barrels of oil. Since none of the crude had been sold, it was stored in earthen tanks for use in the field. Even though blowouts hampered field development, their threat was minimized by the invention of a blowout preventer in 1905. D.R. Beatty used the blowout preventer on the #2 Fee Well which gave up the first gusher with a potential of 8,500 barrels of oil a day from a depth of 1,012 feet.

From 1905 through 1913, development of the field concentrated on the caprock of the salt dome, producing at depths of 1,100 – 1,200 ft. When deep production was found on the dome flanks at Sour Lake Field, operators in Humble field drilled into zones below 2,500 ft., hoping to emulate the success at Sour Lake. In November 1913 the effort was rewarded when Producers Oil #11 Carroll cam in with a potential 10,000 barrels of oil per day at a total depth of 2,700 ft. Forty-six wells were completed before the end of the year, and production reached nearly 2.8 million barrels of oil. In 1935 the Wilson Oil House Well #1 came in at 1500 bopd from the 2,500 ft. sand on the north flank of the field.

Geological estimation of total reserves: 50,000,000 barrels of oil.

Estimated Payout: somewhere between 100 – 300 barrels of crude oil per day.

Financial Petroleum Holdings

EXECUTIVE SUMMARY

The prospects that have been evaluated all represent either un-tapped proven reserves or re-entry or rejuvenation projects of formerly producing wells in the South Eastern United States. As technology has continued to improve, old wells and old fields that were once too dangerous, too unproductive or “empty” can be reopened and produce economically. These wells are preferred because they are already along the gas and oil pipeline routes that crisscross the United States (i.e. infrastructure costs to monetize new finds in these old wells are minimal).

These investments represent late-stage investment which mitigates the risk to investors and the time to production on these wells is shorter than if investments were made in the early stages.

Houston Farm Project

History

The Houston Farms #1 well was drilled by Midwest Oil Company in 1960 to a total depth of 16,085 ft. The Lower Frio, the main objective at 16,000 ft. was wet and non-productive, so the well was considered a dry hole. While drilling the well, core sample of various Upper Frio sands between 10,000 – 12,000 ft. were taken and indicated condensate (gas) pay. Prior to plugging and abandonment, several of these Upper Frio sands were tested and they showed to be productive. The well was never completed, most likely due to nominal gas prices and/or the lack of a gas market. With Natural Gas prices at the time only a few pennies per MCF of gas, it was not economical to set several miles of pipeline to transport for just one well. Consequently, the well was plugged and abandoned.

The Frio Deep-Seated Salt Dome Fields lie south and southeast of Houston in Brazoria, Ford Bend, Harris, Galveston and Chambers counties along the Texas coast.

Collectively, the Frio Deep-seated Salt Dome Fields are significant because their cumulative yields exceed those of any other producing formation in Southeast Texas. From the early 1930’s through 1982, the fields reported a combined cumulative production in excess of 2.3 billion barrels of oil, and at the end of 1993, the figure surpassed 2.4 billion barrels.

Although the most prolific fields were found in the 1930’s (15 major discoveries), development of the play continued into the 1940’s and 1950’s, and centered in Chambers and Brazoria counties because of the proximity to the Danbury Dome, Hoskins Mound and the apparent deeper seated salt diaper over the Chocolate Bayou field.

By 1982, engineers set recoverable reserves for Frio reservoirs of the deep-domes play at nearly 4 billion barrels of oil. By the end of 1993 the fields had yielded more than 2.4 billion barrels.

In the 1950’s three new areas became productive and were called Chocolate Bayou Upper Frio (Brazoria County, 1950), Trinity Bay Frio 12 (Chambers County, 1951), and Chocolate Bayou Alibel (Brazoria County, 1952).

During the last half of the 20th century, the Chocolate Bayou Field has increased in aerial extent and multiple sand packages stacked all the way down to the 15,000 ft. Lower Frio Marker. Several major oil companies and numerous independent exploration companies have discovered over 55 different horizons (pay zones) within the Chocolate Bayou Field. The cumulative production of both gas and oil within this field is ENORMOUS!

Multiple Oligocene Frio Gas Sands have been identified in the well by log and core analysis. Sands are located within the existing casing between 10,000 and 12,200 ft. The primary objective is to complete the 12,000 ft. series of sands. A future plugback would complete the 10,000 ft. series of sands.

A second well on the property will be drilled to the Miocene Gas Sands between 5,100 and 7,000 ft. These sands show as productive as in the Houston Farms #1 well. The well will “twin” the Houston Farms #1 location for the shallower objectives.

Geological estimation of total reserves: 350,000 barrels of oil and 15 Billion cubic feet of Natural Gas.

Estimated Payout: somewhere between 100 – 120 barrels of crude oil per day.

Bissonet Humble Petroleum

Bissonet Lease at Humble Salt Dome Field

History

Humble Salt Dome Field was discovered in the early 1900’s. Bubbles of oil were first observed seeping from the ground near the San Jacinto river in 1887. Humble became an oil boomtown in the early 1900’s when oil was first produced here. The first oil was produced a couple years earlier after the famous Spindletop discovery in Beaumont Texas.

In the fall of 1902, George Hart spudded a well in the field on evidence of escaping gas in the area. His operation was halted by a blowout, an unexpected volume of gas under pressure, that forced the drilling equipment out of the hole. Blowouts were encountered in several wells in the part of the field later called “the hill” and drilled in the summer of 1904 by C.E. Barrett of Houston. Despite the menace of blowouts, some success was found in the early field when Higgins Oil and Fuel Company brought in a large-volume gas well half a mile Southeast of Barrett wells in October 1904. By the end of the year, Humble field reported two sporadically-producing oil wells that had yielded 2,000 barrels of oil. Since none of the crude had been sold, it was stored in earthen tanks for use in the field. Even though blowouts hampered field development, their threat was minimized by the invention of a blowout preventer in 1905. D.R. Beatty used the blowout preventer on the #2 Fee Well which gave up the first gusher with a potential of 8,500 barrels of oil a day from a depth of 1,012 feet.

From 1905 through 1913, development of the field concentrated on the caprock of the salt dome, producing at depths of 1,100 – 1,200 ft. When deep production was found on the dome flanks at Sour Lake Field, operators in Humble field drilled into zones below 2,500 ft., hoping to emulate the success at Sour Lake. In November 1913 the effort was rewarded when Producers Oil #11 Carroll cam in with a potential 10,000 barrels of oil per day at a total depth of 2,700 ft. Forty-six wells were completed before the end of the year, and production reached nearly 2.8 million barrels of oil. In 1935 the Wilson Oil House Well #1 came in at 1500 bopd from the 2,500 ft. sand on the north flank of the field.

Geological estimation of total reserves: 50,000,000 barrels of oil.

Estimated Payout: somewhere between 100 – 300 barrels of crude oil per day.

Drilling an Oil Well in US Petroleum Holdings

DRILLING AN OIL WELL

The earliest oil wells were drilled percussively (cable-tool drilling), that is, holes were drilled simply by hammering at the earth. Very soon, the limited depths which this method could attain meant that rotary drilling was introduced. Modern wells drilled using rotary drills can achieve lengths of over 12,000 meters / 38,000 feet.

Until the 1970s, most oil wells were vertical (or, more specifically, were supposed to be vertical – deviations introduced by different lithology and mechanical imperfections meant that most wells were at least slightly deviated). However, modern technologies (directional drilling) allow strongly deviated wells which can, given sufficient depth, actually become horizontal. This is of great value as the reservoir rocks which contain hydrocarbons are usually horizontal, or sub-horizontal. A well, therefore, which passes along a reservoir (rather than through it, as a vertical well must) can tap a larger volume with a much larger surface area (and thus a correspondingly higher production rate). Using deviated and horizontal drilling, it has also become possible to reach reservoirs several kilometers away from the drilling place (Extended Reach Drilling), allowing to produce hydrocarbons from underneath e.g. environmentally sensitive areas or offshore close to the coast line.

Drilling

The well is created by drilling a hole (5 to 30 inches wide) into the earth with an oil rig turning a drill bit. After the hole is drilled, a metal pipe slightly smaller than the hole size (called a ‘casing’) is run into the hole. The outside of the casing is then bonded and secured to the hole with cement. The casing provides structural integrity to the newly drilled wellbore in addition to isolating potentially dangerous high pressure zones from each other and from the surface.

With these zones safely isolated and the formation protected by the casing, the well can be drilled deeper (into potentially more-unstable and violent formations) with a smaller bit, and also cased with a smaller size casing. Modern wells often have 2-5 sets of subsequently smaller hole sizes drilled inside one another, each cemented with casing.

Recent Outlook Industry of Petroleum

Energy Information Administration
Official Energy Statistics from the U.S. Government

Trends in energy supply and demand are affected by many factors that are difficult to predict, such as energy prices, U.S. economic growth, advances in technologies, changes in weather patterns, and future public policy decisions. It is clear, however, that energy markets are changing gradually in response to such readily observable factors as the higher energy prices that have been experienced since 2000, the greater influence of developing countries on worldwide energy requirements, recently enacted legislation and regulations in the United States, and changing public perceptions of issues related to the use of alternative fuels, emissions of air pollutants and greenhouse gases, and the acceptability of various energy technologies, among others The Energy Information Administration projects increased consumption of biofuels (both ethanol and biodiesel), growth in coal-to-liquids (CTL) capacity and production, growing demand for unconventional transportation technologies (such as flex-fuel, hybrid, and diesel vehicles), growth in nuclear power capacity and generation, and accelerated improvements in energy efficiency throughout the economy.

Despite the rapid growth projected for biofuels and other nonhydroelectric renewable energy sources and the expectation that orders will be placed for new nuclear power plants for the first time in more than 25 years, oil, coal, and natural gas still are projected to provide roughly the same 86-percent share of the total U.S. primary energy supply in 2030 that they did in 2005 (assuming no changes in existing laws and regulations). The expected rapid growth in the use of biofuels and other nonhydropower renewable energy sources begins from a very low current share oftotal energy use; hydroelectric power production, which accounts for the bulk of current renewable electricity supply, is nearly stagnant; and the share of total electricity supplied from nuclear power falls despite the projected new plant builds, which more than offset retirements, because the overall market for electricity continues to expand rapidly in the projection.

History of oil: Power of energy by Holding Petroleum US

The modern history of petroleum began in 1846, with the discovery of the process of refining kerosene from coal by Atlantic Canada’s Abraham Pineo Gesner. Poland’s Ignacy Lukasiewicz discovered a means of refining kerosene from the more readily available “rock oil” (“petroleum”) in 1852 and the first rock oil mine was built in Bra, near Krosno, in southern Poland in the following year. These discoveries rapidly spread around the world, and Meerzoeff built the first Russian refinery in the mature oil fields at Baku in 1861. At that time, Baku produced about 90% of the world’s oil. The battle of Stalingrad was fought over Baku (now the capital of the Azerbaijan Republic ).

In the 8th century, the streets of the newly constructed Baghdad were paved with tar, derived from easily accessible petroleum from natural fields in the region. In the 9th century, oil fields were exploited in Baku, Azerbaijan, to produce naphtha. These fields were described by the geographer Masudi in the 10th century, and by Marco Polo in the 13th century, who described the output of those wells as hundreds of shiploads.

The first commercial oil well drilled in North America was in Oil Springs, Ontario, Canada in 1858, dug by James Miller Williams. The American petroleum industry began with Edwin Drake’s discovery of oil in 1859, near Titusville, Pennsylvania. The industry grew slowly in the 1800s, driven by the demand for kerosene and oil lamps. It became a major national concern in the early part of the 20th century; the introduction of the internal combustion engine provided a demand that has largely sustained the industry to this day. Early “local” finds like those in Pennsylvania and Ontario were quickly exhausted, leading to “oil booms” in Texas, Oklahoma and California.

By 1910, significant oil fields had been discovered in Canada (specifically, in the province of Alberta), the Dutch East Indies (1885, in Sumatra), Persia (1908, in Masjed Soleiman), Peru, Venezuela, and Mexico, and were being developed at an industrial level.

Even until the mid-1950s, coal was still the world’s foremost fuel, but oil quickly took over. Following the 1973 energy crisis and the 1979 energy crisis, there was significant media coverage of oil supply levels. This brought to light the concern that oil is a limited resource that will eventually run out, at least as an economically viable energy source. At the time, the most common and popular predictions were always quite dire, and when they did not come true, many dismissed all such discussion. The future of petroleum as a fuel remains somewhat controversial. USA Today news (2004) reports that there are 40 years of petroleum left in the ground. Some would argue that because the total amount of petroleum is finite, the dire predictions of the 1970s have merely been postponed. Others argue that technology will continue to allow for the production of cheap hydrocarbons and that the earth has vast sources of unconventional petroleum reserves in the form of tar sands, bitumen fields and oil shale that will allow for petroleum use to continue in the future, with both the Canadian tar sands and United States shale oil deposits representing potential reserves matching existing liquid petroleum deposits worldwide.

Today, about 90% of vehicular fuel needs are met by oil. Petroleum also makes up 40% of total energy consumption in the United States, but is responsible for only 2% of electricity generation. Petroleum’s worth as a portable, dense energy source powering the vast majority of vehicles and as the base of many industrial chemicals, makes it one of the world’s most important commodities. Access to it was a major factor in several military conflicts, including World War II and the Persian Gulf War. About 80% of the world’s readily accessible reserves are located in the Middle East, with 62.5% coming from the Arab 5: Saudi Arabia (12.5%), UAE, Iraq, Qatar and Kuwait. The USA has less than 3%.

Invest in oil or in gas

ome of the world’s wealthiest individuals and companies made their fortunes in oil and natural gas. Investments in this area have the potential to be very profitable, sometimes generating multiple returns on investment. Oil and gas is also an investment that is particularly timely right now, for some of the following reasons:

 

1. U.S. domestic oil production increased throughout the 1950’s and 1960’s. Writing in the 1950’s, American geologist M. King Hubbert predicted that the production of U.S. oil fields would peak in the early 1970’s. It happened that U.S. production began to decline in 1970. Hubbert’s key insight was that production peaks once half the oil in any field has been extracted. Far more oil is extracted in the early stages of production than later on. In 1970, the U.S. satisfied about 70% of its needs from domestic oil production. Now, however, the picture is much bleaker, as the U.S. satisfies about 35% of its needs from domestic production and imports the rest.
2. Since 1969, the North Sea utilizing advanced technology has produced about 15 billion barrels of oil, helping Norway become rich, and Britain to shed its status as a third rate economy. Production in the British sector, however, has already started to decline and Norway close to peak production. The North Sea has shown that technology is a double-edged sword by extracting more oil up front, but hastening the day of reckoning when production starts to decline.
3. Princeton professor Kenneth S. Deffeyes, a colleague of Hubbert, sought to apply Hubbert’s geological precepts on a worldwide basis. Other geologists have made the same effort, and while they do not all agree on the same year, the general conclusion is that world oil production is now close to peaking!
4. The reserves of the OPEC countries are overstated. Quotas for the members are determined by production capacity, and production capacity is directly related to reserves. In 1988 for example, Iraq announced that their reserves had more than doubled to 100 billion barrels. This was a miraculous feat, despite continued production and the total absence of exploration. The Saudis, Iraq, and Iran have all engaged in overstating reserves.
5. China’s economy is growing by leaps and bounds, and has an insatiable thirst for energy. If China’s per capita energy consumption comes anywhere close to that of the U.S., their need for oil will surpass that of the U.S.
6. Present world oil production is around 77 million barrels per day, and the International Energy Agency projects that world oil production will peak at around 80 million barrels per day.
7. Oil from new exploration, including any efforts to open up the Arctic National Wildlife Refuge, will barely make a dent in our growing need for energy.