ESTEVAN, Saskatchewan – To increase daily production and reserves are 2 of the most important mandates set forth by the board of directors for every oil and gas company. These requirements are also shared by executive management and of course the public shareholders, and they therefore ultimately trickle down to every employee in a PNG operating outfit.
But every now and again, a company devises a strategy to increase daily production that requires little in the way of exploration, infill drilling, or even traditional production optimization efforts, and Second Hand Energy is just one such firm.
The Moosimin, Saskatchewan-based junior intermediate operator has been able to increase its Q1 2014 production rate to just over 35,000 bopd by forming a new environmental restoration division whose Modus operandi is to recover the oil spilled by other operators, and then sell it. The company’s President and CEO, Mrs. B.J. Cobbledick, explains the new strategy.
I am very pleased to annouce the results of the EOR (Environmental Oil Recovery) team that we assembled this time last year. Once our Spill Recovery Estimation Engineers assess a spill, and estimate that there is an economical volume of oil to recover, they would then tender a $0 bid to execute the cleanup work.
The EOR team then had a simple mandate to recover the oil and then ship or truck it to our closest custody transfer point for sale. The technique, as simple as it is, has enabled us to significantly increase our daily production at immaterials costs. – Mrs. Cobbledick speaking at this morning’s press release.
According to the company’s Q1 2014 results brochure, it is seeing internal rates of return for most projects exceeding 7,946%, especially for the onshore spills where the oil is contained within primary or secondary containment berms. The company is also able to improve economics by having special royalty incentives applied by most regulatory bodies.
Second Hand Energy is in a special category with its new EOR division. By virtue of being in the busines of cleaning up spills, they are technically not extracting oil from the ground where we own crown mineral rights, so they are exempt from royalties altogether.
What’s more is that royalties were paid on the oil in the first place, and our member organizations are not allowed to double-dip. – Jack Rufferson, spokesman for the International Oil and Gas Regulatory Steering Committee
The company plans to continue building the EOR division of its business and it has set a production guidance to exit 2014 with 55,000 bopd, 75% of which will be generated by the new revenue stream. Share price for SHE.TO surged on the TSX early this afternoon on news of this annoucement and even environmetal groups applaud the small-town producer for its forward environmental thinking.