Innocent, which has honed its focus down to de-risked, proved petroleum reserves in Wyoming’s prolific Powder River Basin, is currently pursuing a strategy that emphasizes 100% acquisitions, as well as JVs, to achieve maximum production values. While the basin is classically known for its rich coal deposits, accounting for some 40% of the 1B tons we use here in the states each year, INCT is working with industry veterans Evergreen Petroleum out of Dallas, Texas to explore the oil-bearing formations in the region that generally run as shallow as 2.5k feet below surface. Oil in the basin has become an increasing focus in recent years as enhanced oil recovery techniques have made the pursuit highly economical, and INCT looks to carve off a healthy slice of the pie for the company’s shareholders.
While the oil formations in the basin are generally lower API gravity, a comprehensive strategy involving secondary recovery via water and gas, or even steam and fire flooding, has been put together and the JV with Evergreen will also employ the latest in radial horizontal drilling techniques to further increase output. Radial drilling is an extremely effective enhanced oil recovery technique that creates multiple laterals into a given horizon, removing material in channels and optimizing access to the targeted reservoir(s). By focusing the majority of development activity strictly on direct offsets to formerly producing wells that had solid oil and gas shows, INCT plans to create a stable, predicable revenue platform.
Partner Evergreen has an incredible 150 plus years in the industry and makes a great GM for the JV project given their extensive knowledge of the region and its geology. The JV has even tapped local experts, Pacer Energy, LLC out of Gillette, to handle the majority of the due diligence on titles and to do the actual lease acquisition, further reinforcing the company’s streamlined approach to forming a solid production base in the region. The operator, L & J Operating, Inc., is also local and based out of Gillette. Moreover, L & J will be watched like a hawk to ensure that expenditures satisfy INCT’s current, strict policies with regard to the bottom line.
Of particular note for interested investors is the very recent success majors have been seeing in the basin, with Anadarko Petroleum (NYSE:APC) and Chesapeake Energy (NYSE:CHK), number one and number three respectively in terms of production, both seeing output from the Powder River Basin rise markedly during 2013, with figures keeping pace well into Q1 of this year. Wyoming’s oil industry is now kicking some major butt in fact, with the Powder River Basin region alone responsible for roughly one third of some 60M bbls produced in the state during 2013. Anadarko and Chesapeake have both doubled down on CAPEX in the region as well, with Anadarko’s outlays rising from $5M in Q1 2013, to over $47M in Q4, closing out the year with 19 producing wells. Chesapeake managed to add as much as 25% to their production compared with 2012, closing 2013 with over 2B bbls produced on the strength of increased drilling. Obviously, emerging Niobrara, Frontier/Turner and Parkman targets are accelerating activity in Wyoming as horizontal drilling opens up more and more of the formations to operators and INCT is gearing up to take advantage of the resurgent oil boom, with eyes peeled for juicy acquisitions that will be accretive to their bottom line.
More details on Innocent, Inc. is available at www.innocentinc.com
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