Bushwhacker Project

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PALO BUSHWHACKER PROJECT
Warner & Blue Jacket Heavy Oil Formations
Vernon County, Missouri

Palo’s Bushwhacker Prospect is located in West-Central Vernon County, Missouri between Nevada, Missouri on the east and Fort Scott, Kansas to the west. It is composed of a large Warner Sand body (the Deerfield Lobe) that is a point bar and channel complex consisting of merged Upper and Lower Warner Sands. The lobe is isolated from neighboring Warner sand bodies in the area due to it having an oil column at least 86 feet in height and a lowest known oil level 32 feet lower than in the Warner Sand body (the Richards Lobe) to the west. Well and core data indicate that the Deerfield Lobe holds substantial oil deposits.

Steam flooding in various forms has been used for decades to produce heavy crude. The SAGD method which is extensively used in Canadian heavy oil fields has proven to be a very successful method. The SAGD method utilizes two parallel, horizontal wellbores. One wellbore injects steam into the reservoir, and the other wellbore collects the heated, more viscous oil. While the SAGD horizontal steam flooding method has been quite successful in very thick 200-300’ and deeper heavy oil deposits, it isn’t designed to develop the vast and more common shallow oil deposits with thin 50-60’ layers found throughout the United States.

Palo initially pursued the Bushwhacker Project in the Spring of 2011 with an exclusive license for the United Sates utilizing a new heavy oil recovery process developed and patented by Frank J. Schuh – the CHOP Process. Mr. Schuh served as the trouble-shooting drilling engineer for Arco for many years and while there invented several pieces of equipment and developed numerous processes which have helped revolutionize the oil and gas industry. His work was instrumental in the development of horizontal drilling as we know it today. With considerable input from Halliburton, General Electric through their VetcoGray division, Principal Technology and others, Mr. Schuh developed the CHOP Process. The CHOP Process uses a dually completed horizontal well to simultaneously inject steam and produce heavy oil from a single wellbore. Palo acquired the exclusive license agreement for the implementation of the CHOP Process. A nationwide search and evaluation of heavy oil deposits was conducted by Palo geologist Bill Frew in order to identify the most optimal areas for testing the CHOP Process. Mr. Frew selected the Bushwhacker Prospect, and Palo obtained oil and gas leases on the identified acreage. Several months after completing the initial test well, the ICT#1, it was determined that the CHOP Process was not meeting its high level of expectations so Palo and their team of experts went back to drawing board to redesign certain aspects of the CHOP Process in order to enhance its ability to perform in the very consolidated Warner sand body.

Palo drilled a second horizontal test well, the ICT#2H, in the Fall of 2012. This time the well was drilled without a linear, open hole, to allow the heated, more viscous oil easier access into the wellbore. Palo decided to add a downhole pump to the new design to increase production based on the lack of gravity flow drainage that was expected to occur in the initial CHOP process design plans. The ICT#2H showed very impressive results, but was still missing the vital ability to provide top-to-bottom and North-South control of the steam front to prevent steam breakthrough and maximize oil recovery.

In the Fall of 2013, Palo abandoned the CHOP process and drilled its third and final test well, the ICT#3H. The completely redesigned (Phase II) process was made possible by Palo’s initial efforts and the continued support and determination from Principal Technology, Horizontal Well Drillers (HWD), and Drill Right. Principal Technology Inc. (PTE) is a provider of total system solutions for natural gas, refining, chemical, processes and manufacturing facilities. PTE not only designed the surface equipment for the Bushwhacker Project but has provided support through the life of the project with technical assistance, troubleshooting and equipment changes as needed to support the evolving process.

The Palo Bushwhacker (Phase II) heavy oil production process is unique to the area using a combination of horizontal production wells (ICT#2H & ICT#3H) and multi-zoned vertical steam injectors to provide top-to-bottom and North-South control of the steam front to maximize oil recovery. Using the only outside utility available, natural gas, PTE and Palo developed a self-sufficient and fully integrated facility to generate electricity and steam, separate the produced oil and water, and provide a means of disposal for the resulting waste process water.

A critical element of the Palo Bushwhacker (Phase II) controlled steam flood process is the ability to monitor and control the steam injection in real-time. To meet this need, PTE provided a modular e-house and PLC control system integrated with the surface facilities and field instruments for live data monitoring and history logging for future analysis.

A study conducted by the petroleum consulting firm Cawley, Gillespie and Associates concluded that there is between 31.5 and 45.2 million barrels of oil under the Palo Bushwhacker leases. The decision to move forward with drilling the third horizontal test well using Palo’s revised (Phase II) controlled steam flood process was backed with successful economic modeling and support from engineering firm Schlumberger. Additionally, Palo entered into a joint venture with Blue Tip Energy covering a defined portion of this basin to add their expertise, financial strength, dominate land position in the area and to help develop Palo’s heavy oil acreage. Palo is currently experiencing reliable surface systems, successful operations and trending oil production at the Missouri well site, which promises to take steam flooding of heavy oil reserves to the next level of efficiency and profitability.