Ranking AGYP’s 12 Exploration Projects

Allied Energy Corp. (OTCMKTS:AGYP) has been in the news frequently this fall.  Two of the biggest releases from the company were production announcements for two of their 12 oil exploration projects.  This news caused a surge in investment and has created profit opportunities for traders in the security.

One of the most innovative and efficient factors about AGYP’s exploration strategy is its focus on proven past producing wells.  All of their projects are on leases that have produced at a high level in the past.  So they know they have viable resources, the only thing they have to figure out is the best way to extract them.

Knowing that the company can go from zero to production in a relatively short period of time, and that the market has reacted favorably to their project-related news, I have decided to rank their 12 projects based on their value to investors and the likelihood of positive announcement in the near future.

  1. The Green Lease

The Green lease is AGYP’s first producing lease, they just announced this major milestone earlier this fall. Being the furthest along in the production process makes The Green Lease an easy choice for #1 on this list.  The Green lease is situated on the Bend Arch between the Midland Basin, to the west, and the Dallas-Fort Worth Basin, to the east. The area has a long history of oil and gas operations due to world class hydrocarbon sourcing from the Barnett shale and multiple stacked reservoirs in the Canyon Group, Strawn Group, Caddo Formation, Palo Pinto Formation, Marble Falls Group and Mississippi Limestone. These reservoirs can be accessed through both vertical and horizontal drilling and respond well to modern completion techniques.

In a recent geological study, the Green lease was found to have Proven, Possible and Probable reserves as follows:

Proved: $2,026,500

Probable: $5,781,300

Possible: $12,755,300

TOTAL:  $20,563,100

One major note to make about these numbers is they are factored at a price of $45 per barrel.  That’s just over half of the current WTI spot price, so you can almost double these numbers to get an accurate assessment of how big an opportunity the Green lease is.

This lease alone makes AGYP worth strong investment consideration, the next thing investors could learn about this project is the actual production output.  Any news on this subject could move AGYP’s market.

  1. The Annie Gilmer Lease

The Annie Gilmer lease is AGYP’s other producer.  The company released this news recently, and the stock jumped on the announcement.  

The lease is located in the small community of Crystal Falls, Texas on the banks of the Clear Fork of the Brazos river, approximately thirty miles north of the town of Breckenridge, Texas. There are a total of five wells drilled on the lease, that is approximately 300 acres. There are five wells on the lease that were drilled to the Mississippi formation that is encountered at approximately 4100’ below the surface of the earth. The Mississippi formation, when caught on good geologic structure can produce prolific oil and gas cumulative numbers. There were six wells drilled on the lease starting in the mid 70’s with the last being drilled in 1989. Since the initial well, the lease has produced over five hundred thousand (5000,000) barrels of high gravity oil and over five hundred million (500,000,000) cubic feet of very rich natural gas. There are two permitted saltwater injection well on the lease. One of the wells will be re-converted to an active oil and gas producer.

In the same geological study referenced above, the Annie Gilmer lease was found to have Proven, Possible and Probable reserves as follows:

Proved: $6,704,900

Probable: $1,902,200

Possible: $3,587,700

TOTAL: $12,194,800

Again, as we stated above, these numbers are factored at an extremely low price per barrel ($45).  Given AGYP’s streamlined approach to exploration, and the current direction of oil prices these reserves will be even more valuable than the above numbers suggest.

That’s only two leases worth a conservative estimate of just over $30 million.  

Like the Green Lease, we could see production numbers soon which would most likely bring positive momentum to the stock.

  1. The Prometheus Lease

The rest of the projects referenced are pre-production, however, are all proven producers.  Ranking them comes down to how much potential the lease has and my speculation on how likely the company is to start work on the project in the near future.  The Prometheus Lease ranks third because it is the company’s latest acquisition.

On October 6th, AGYP announced the acquisition of the 325 acre Prometheus Lease located in Garza County, Texas.  AGYP’s interest is the 28 Unit Well 1H, which was producing approximately 200 barrels of oil per day and 300,000 cubic feet of natural gas per day as recently as 2016.   There are multiple wells included in the Prometheus Lease, one of which is currently producing about 60 barrels per day. But of utmost initial importance for Allied is bringing the Prometheus 1H Well back online. When this well was originally tested and submitted to the Texas railroad commission by Apache Corporation in 2014 their report showed 335 barrels production per day along with 298,000 cubic feet of natural gas per day with 2557 barrels of flow back and formation water. Allied will utilize 2021 technology combined with their experienced crew to bring these numbers to fruition.  

Natural Gas prices are also near record highs which is an added bonus to this lease.  

The well was spudded to begin drilling in November, 2013, and was completed in April of 2014. The well was drilled horizontally to a total measured depth of 11,370’ with a vertical depth of 7,792’. The well was drilled to test the Mississippian formation that has been a very prolific formation in nearby vertical wells. The well was drilled with great observation and completed and treated with the best industry practices in all phases of drilling and completion. The well completion phase consisted of an amazing 24 stage fracturing program to fully expose the Mississippian formation for potential production. An assortment of logs were run to determine areas to determine the best locations along the lateral for potential oil and gas production. It should be noted that several other oil and production zones encountered in the vertical section of the well indicated commercial oil and gas potentials according to well logs and analysis, providing even more behind pipe reserves.

This could be the company’s next project.

  1. Byers Heirs #2 Deu Pree Field, Wood County

A well originally completed in the Woodbine formation from perforations of 5736’ – 80’ making 74 bbls per day of 16 deg gravity “heavy” oil and accumulating 78,000 bbls of oil.  When abandoned in 1997 the well was capable of making 60 bbls of oil per day but at the time there was no market for heavy oil and the price per bbl was discounted considerably due to the low gravity.  Today there is a large demand for this type of crude oil and it can receive a significant bonus over the posted price of West Texas Intermediate.  The produced oil will be blended with condensate to raise the gravity of the product and lower the gravity of the condensate.  This will alleviate any pricing discounts applied due to lower gravity of the oil and the higher gravity of the condensate.

The well has been successfully re-entered and is waiting on final completion, which will entail the drilling of 4 or 5 short lateral legs (horizontal) information to enhance the daily production rates.

There is another productive zone above the Woodbine that has been produced in the field, the Sub-Clarksville, that can be completed for commercial production. 

Despite being ranked below The Prometheus Lease, I would not be surprised to see the Byers Heirs #2 as the next news worthy lease for AGYP.

  1. Byers #1, Deu Pree Field, Wood County

Despite being called #1 it ranks 5th on our list ranked below #2 on its own site.  The Byers #1 is a well that is an offset to the #2 well and was completed in the Woodbine formation. It had an initial rate of 122 bbls of oil per day and accumulated 120,000 barrels of oil. It was abandoned in 1997 when a leak in the casing occurred and attempts to patch the leak failed. Today technology has improved dramatically and repairing a casing leak such as this one is much more successful. A re-entry of this well will be proposed to re-establish commercial production in the Woodbine and/or from a completion in the Sub-Clarksville. If the repairing of the casing leak is not successful a liner can be cemented inside the existing casing to repair the leak.

  1. Cameron #1, Deu Pree Field, Wood County

A well that was drilled south of the two Byers wells ranks just south of the wells on our list. The well was completed in the SubClarksville formation as it was not drilled to a depth sufficient to evaluate the Woodbine formation.  The initial rate was 91 bbls of oil per day and accumulated 30,000 bbls of oil.  It was abandoned when the price of oil fell below $10 per bbl.  Consideration should be given to deepening this well to the Woodbine for evaluation and possible completion.

Both Byers wells and the Cameron well, are on the same field meaning if AGYP devotes resources to the area we could see news on all three simultaneously.

  1. Continental State Bank #14, East Texas Field, Gregg County

Located in the East Texas Field this is a shut-in, fully equipped well capable of commercial production of oil from the Woodbine formation. Wells surrounding this well are currently producing commercial oil.  The pump jack should be replaced with a submersible pump to allow for a greater daily fluid rate.  In this field the amount of oil produced daily depends mainly on how much fluid is produced.  Costs for the disposal of produced water is minimal as a connection to the East Texas Saltwater Disposal System is on the lease.

The Austin Chalk formation sits on top of the Woodbine and the well is located in an advantageous position geologically to afford the opportunity to produce commercial oil from that zone, which can be commingled with the Woodbine.

The Continental and the rest of the projects on this list are the farthest from any positive announcements in our completely speculative list, however, AGYP’s strategy of acquiring proven producers could easily end up being “next”.

  1. Thrash “A” #1 & #2, East Texas Field, Rusk County

Each well is equipped for production with the exception of a pump jack missing from the #2 well. A submersible pump should be placed in the well to increase the daily fluid rate.  If successful in increasing the oil produced the pump jack on the #1 well should be replaced with a submersible pump.

The Austin Chalk is present in the wells but the quality of the rock is such that a completion in that zone is not recommended at this time.  This is why this project ranks where it does on our list.

  1. Julia M. Finney Lease, East Texas Field, Rusk County

There are 8 shut-in wells on this lease completed in the Woodbine formation, of which 6 wells are fully equipped for production. The wells should be reworked and placed back into production.  There are wells on all sides of the lease that are currently producing.  Also, the lease is in a position whereby the Austin Chalk should be commercially productive.  The company is planning to eventually re-complete 3 or 4 of the wells in the Austin Chalk and 2 to 3 wells will be reconditioned to produce from the Woodbine using submersible pumps.

This well also is being held back by the Austin Chalk issue.

  1. Dora Hastings #1-R & #2, Glen Hummel, SW Field, Wilson County

2 wells located in south Texas that are completed in the Poth B Sand and equipped for production. In this area the Poth A, B, C and D sands are productive in various wells.  The Poth A sand produces from a waterflood operation on adjacent leases to the east.  The Poth C sand produces immediately to the north.  The A, B and C sands are present in the offset wells to the east and in 2 wells that were completed in the Austin Chalk immediately to the west, and each are expected to be productive in our 2 wells. If warranted additional development may occur on the lease with new drilling or a re-entry on one of the Austin Chalk wells.

Again, this suffers from the Austin Chalk issue. 

  1. F. M. Ezzell #2, Palmer (Poth B) Field, Wilson County

A well fully equipped for production with the exception of not having stock tanks and oil/water separation. There are other Poth sands that are productive in wells in the immediate area of this well and are expected to be present in this well.  A cased hole log should be run in the well to evaluate other productive zones for re-completion.  Also, the well should be reworked to re-establish commercial production from the B sand.

It seems this well is lower on the company’s priority list.

  1. Moody & West Lease, Loma Novia & Government Wells S. Fields, Duval County

Last but not least, the Moody & West Lease is a prospect to drill a well to 2,800’ and complete in 1 of the 5 productive sands that are present in the Loma Novia and the Government Wells formations. The lease has produced previously but each productive well was not produced from each productive sand. The wells were abandoned due to the condition of the well equipment but were still productive.  Also, there are 7 to 10 drilling sites for future development.

There is a lot of potential with this project, but seems to have the least work completed as of press time.

That’s 12 leases for one small company that might not remain so small if they continue on their current trajectory.

Make sure to do your due diligence on AGYP.