EnerJex’s Adena Project is located in the Denver-Julesburg (“D-J”) Basin in Morgan County, Colorado, where the company owns a 100% working interest in 18,760 acres covering the majority of Adena Field. This acreage has been held by production since it was unitized by the Union Oil Company of California (Unocal) in 1956. According to the Colorado Oil and Gas Conservation Commission, Adena is the third largest oil field ever discovered in Colorado behind Rangely Field and Wattenberg Field, having produced 75 million barrels of oil and 125 billion cubic feet of natural gas. Nearly all of the producing wells in Adena Field were temporarily abandoned or shut-in during the secondary recovery phase in the mid-1980’s when oil prices collapsed, and only a small number of wells have been producing in the field since that time.
As of December 31, 2013, approximately 125 wells on EnerJex’s acreage were shut-in or temporarily abandoned. The company has used new data, analysis and engineering to initially identify approximately 90 of these wells to be reactivated in the J-Sand formation or recompleted uphole in the D-Sand formation. Recompletions and reactivations are expected to cost approximately $200,000 to $250,000 per well and are expected to result in stabilized production rates of approximately 10 barrels of oil per day. EnerJex has also identified a number of idle wells on its acreage that are prospective for natural gas production from the J-Sand and D-Sand formations.
As of December 31, 2013, this project was producing approximately 150 gross barrels of oil per day from 10 J-Sand wells and 9 D-Sand wells at a depth of approximately 5,500 feet. In addition, multiple wells capable of producing natural gas were shut-in at the end of 2013 which have subsequently been returned to production following completion of a new purchase contract.
EnerJex’s Adena Project acreage is also located on trend with emerging unconventional oil resource plays that are being explored by multiple competitors.
EnerJex’s Mississippian Project is located in Woodson and Greenwood Counties in Southeast Kansas, where the company owned an 83% working interest in 6,370 acres as of December 31, 2013. EnerJex has identified hundreds of drilling locations on this acreage and the company’s drilling success rate in this project has historically exceeded 95%. As of December 31, 2013, this project was producing approximately 200 gross barrels of oil per day from the Mississippian formation at a depth of approximately 1,700 feet.
According to the Kansas Geological Survey, the Mississippian formation has cumulatively produced more than 1 billion barrels of oil in Kansas and represents a significant portion of the state’s 47 million barrels of annual oil production. EnerJex’s acreage in this project is estimated to have produced more than 5 million barrels of oil since 1920.
EnerJex’s Cherokee Project is located in Miami and Franklin Counties in Eastern Kansas, where the Company owned an 86% working interest in 9,789 acres as of December 31, 2013. EnerJex has identified hundreds of drilling locations on this acreage and the company’s drilling success rate in this project has historically exceeded 95%. As of December 31, 2013, this project was producing approximately 250 gross barrels of oil per day from the Cherokee formation at a depth of approximately 600 feet.
This project is located in the prolific Paola Rantoul Field. According to the Kansas Geological Survey, this field has produced approximately 30 million barrels of oil and continues to produce more than 1,000 barrels of oil per day.
Niobrara/Codell Oil Project
EnerJex’s Niobrara/Codell Oil Project is located in Weld County, Colorado, where the company owns a 98% working interest in 4,040 acres (see map) located in two distinct areas of the emerging horizontal Niobrara and Codell oil plays as further described below.
Wattenberg Extension Area
In the Wattenberg Extension area, EnerJex owns an 85% operated working interest in 640 acres representing the entirety of Section 16 / Township 8 North / Range 61 West. This acreage is held by production and includes three vertical wells, two of which produce oil from the Niobrara and Codell formations, and one well that produces oil from the J-Sand formation. This acreage is located in the heart of the Colorado Mineral Belt thermal trend in Weld County within Noble Energy’s “West Pony” area of development, and it is surrounded by leasehold interests and horizontal wells operated by Noble Energy and Carrizo Oil & Gas. Management believes this acreage is highly prospective for horizontal development of the Niobrara A, B, and C zones in addition to the Codell formation. This acreage has the potential for at least 16 horizontal Niobrara drilling locations and as many as 32 horizontal Niobrara drilling locations based on recent down-spacing tests being conducted by nearby operators that have yielded positive initial results. In addition, this acreage has the potential for up to 16 horizontal Codell drilling locations and it is also prospective for horizontal development of the J-Sand and Greenhorn formations.
Noble Energy recently completed four Niobrara wells with horizontal laterals of approximately 4,400 feet from a drilling pad located approximately 1.25 miles to the southwest of this acreage. According to the Colorado Oil and Gas Conservation Commission’s (COGCC) website, these wells had a combined 30-day initial production rate of approximately 1,169 barrels of oil per day (BOPD) and 2 million cubic feet of natural gas per day, or an average rate of 375 barrels of oil equivalent per day (BOEPD) for each well. Management believes the reservoir characteristics of the Niobrara and Codell formations underlying the company’s acreage in this area are nearly identical to the surrounding leasehold interests held by Noble Energy and Carrizo Oil & Gas.
In the Hereford area, EnerJex owns a 100% operated working interest in 3,040 acres. Two-thirds of this position is located in Township 10 North / Ranges 63-65 West and includes three entire 640 acre sections with an average acreage tract size of 450 acres. The remainder of this position is located in Township 9 North / Ranges 63-65 West with an average tract size of 170 acres. All of this acreage is located on State owned mineral and surface lands and 95% expires between August 2018 and February 2019.
This acreage is located in Northern Weld County near the Hereford field, where EOG Resources launched the horizontal Niobrara play with its Jake 2-01H well in Township 11 North / Range 63 West that had a peak 30-day production rate of approximately 765 BOEPD (89% oil). Importantly, this acreage is on trend with the emerging Codell horizontal oil play which is actively being pursued by EOG Resources, Anadarko Petroleum, and Cirque Resources near the border of Weld County and Laramie County, Wyoming, with numerous recent 30-day peak production rates exceeding 1,000 BOPD. EOG filed 20 horizontal drilling permits this area during June 2014, including one permit that directly offsets a 640 acre tract held by EnerJex, and dozens of additional horizontal drilling permits were filed during September 2014 by Cirque Resources and Anadarko Petroleum in Townships 11-12 North / Ranges 63-65 West.
Management believes this acreage is highly prospective for horizontal development of the Niobrara A, B, and C zones in addition to the Codell formation. This acreage has the potential for at least 16 horizontal Niobrara drilling locations and as many as 32 horizontal Niobrara drilling locations per 640 acre section based on recent down-spacing tests being conducted by nearby operators that have yielded positive initial results. In addition, this acreage has the potential for up to 16 horizontal Codell drilling locations per 640 acre section. Management believes that the Codell and Niobrara formations underlying EnerJex’s acreage in this area are thermally mature and have comparable reservoir characteristics to successful nearby horizontal Codell and Niobrara developments.
EnerJex intends to acquire 3D seismic data covering all or a majority of this acreage and plans to develop these assets by drilling horizontal wells with 4,000’-9,000’ laterals. All of this acreage is located in rural areas and the company does not anticipate any drilling setback issues associated with the development of these assets. EnerJex is currently planning its next steps in both areas and may entertain joint ventures or strategic transactions involving these leasehold interests which have an average net revenue interest of approximately 80%.
Niobrara Gas Project
EnerJex’s Niobrara Gas Project is located in Phillips and Sedgwick Counties, Colorado, and Perkins County, Nebraska, where the company owned a 97% working interest in 59,291 acres as of December 31, 2013. This acreage has been high-graded from an original position of 330,000 acres based on the analysis of 114 miles of 2D and 165 square miles (105,000 acres) of 3D seismic data. The company has identified more than 150 high-ranked Niobrara drilling locations on its acreage based on 3D seismic analysis, which has historically yielded success rates of approximately 90% in this play. EnerJex’s acreage is also well situated with dircect access to the Cheyenne Hub market in immediate proximity to the 1,679-mile Rocky Mountain Express pipeline and the 436-mile Trailblazer pipeline.
As of December 31, 2013, EnerJex owned and operated a 100% working interest in 24 wells and owned an overriding royalty interest of approximately 6% in 180 wells in this project that are operated by a third-party. EnerJex’s gross production from this project was approximately 250 thousand cubic feet of natural gas per day as of December 31, 2013, the majority of which was attributed to its overriding royalty interests. A majority of the company’s operated wells were awaiting workovers at year-end, a number of which have subsequently been completed. All of EnerJex’s production from this project is attributed to the Niobrara formation at a depth of approximately 2,500 feet. According to the Colorado Oil and Gas Conservation Commission, the Niobrara formation has produced more than 500 billion cubic feet of natural gas in Colorado.
EnerJex’s Niobrara Gas Project acreage is also located on trend with emerging unconventional oil resource plays that are being explored by multiple competitors.
El Toro Project: EnerJex’s El Toro Project is located in Atascosa and Frio Counties in Texas, where the company owned a 40% working interest in 458 acres as of December 31, 2013. The company has completed 12 wells in this project since 2009. While petro-physical data obtained from these wells has been consistent across the project acreage, production results have been inconsistent. The 3 most recent wells completed in this project have been successful, although the costs and time lag associated with drilling and completing them significantly exceeded EnerJex’s expectations. This is a direct result of the high demand and limited supply of services and equipment available in the El Toro Project area due to the rapidly expanding Eagle Ford Shale play. As a result of increasing costs in this area, EnerJex did not drill any new wells in this project in 2013 and decided to focus 100% of its capital budget on its Kansas and Colorado properties. However, the company believes this project is prospective for horizontal drilling and intends to evaluate this potential during 2014.
As of December 31, 2013, this project was producing approximately 30 gross barrels of oil per day from the Olmos formation at a depth of approximately 4,500 feet. Multiple oil fields surround the company’s acreage, which combined have produced more than 100 million barrels of oil since the 1950’s from the Olmos formation. EnerJex believes its El Toro Project acreage was neglected due to its relatively tight (low permeability) reservoir characteristics. Recent advances in stimulation technology have enabled the company to drill and complete new oil wells in this project with a high degree of success. The first two wells drilled in this project during 2009 produced approximately 100% more oil during the first 12 months of production than the best well in a directly adjacent field which has produced approximately 10 million barrels of oil.
Ownership Interest in Oakridge Energy, Inc.: EnerJex owns approximately 15.5% of Oakridge Energy, Inc., which owns 1,850 acres in La Plata County, Colorado. This acreage is on a mesa located adjacent to the City of Durango and offers breathtaking 360 degree views. The land is prospective for real estate development and was previously under contract to be sold for $35 million in November 2006. Oakridge also owns and operates oil and natural gas properties in Texas.
Lonesome Dove Project: EnerJex owns an overriding royalty interest of approximately 2.4% in approximately 2,250 acres located in Lee County, Texas. This acreage is prospective for oil and natural gas production from multiple formations including the Eagle Ford Shale, Buda, Austin Chalk, and Taylor Sand. Industry activity appears to be increasing in this area, and drilling permits were filed during early 2014 for four horizontal wells located adjacent to this acreage with total depths ranging from 13,500 to 15,000 feet.