Alan Alexeyev PETE 2050 Fall 2013

Outline for Creating an Oil and Gas Company

Brief description: We are trying to create an oil and gas producing company, operating in
Wyoming in Powder River Basin. Weve registered a name Wy Oleum as our company name. We plan to start production in 1 year and be profitable in 5 years.

Wy Oleum Corporation
I. Legal Setup
a) Create an LLC named Wy Oleum, registered with the state of Wyoming b) Itll be regulated by the SEC c) Corporation will have 86 people in it, and to each of them well issue 100 equal shares of common stock (preferred)

II.

Funding/Finance
a) Equity Financing i) ii) Each member of the company will contribute $100k Attract private equity firms, giving them share in the company for the exchange of investment.

b) Debt Financing (doesnt apply to our case because we do not have any assets initially)

III.

Finding Prospects
a) Acquire a prospect that contains hydrocarbons i) For that we hire an oil and gas geological consulting company that will advise us on which prospects they have b) Negotiate a fee with the company for acquiring the found prospect

IV.

Geology

There are 4 important things that need to be in place in order to determine if the deposit has oil

a) Reservoir Rock i) ii) iii) Porosity need to have 15-20% Permeability ability to move under pressure. Saturation

b) Source Rock c) Path for migration d) Trap i) Salt domes - serve as good indicators that theres a trap

Tools for determining if the well is worthwhile a) Test well geologic control b) Seismic Survey from seismic reflections we can generate the subsurface. c) Geochemistry

V.

Acquire the Land (Leasing)

a) Specify what we are leasing b) Make sure we have an access to a property c) Royalties and payments i) ii) iii) Initial lease payment few thousands of dollars Royalty usually 1/8 Annual bonus

d) Term of the lease e)

VI.

Financing
a) Inviting others as a working interest b) Inviting other companies will help to share the risks c) third for a quarter: when a company issues a third of a

VII.

Drilling
a) Hire an oil service company, that specializes in drilling. Their fee may be either daily rate ($/ft) or lumpsum. b) Construct a Drilling Prognosis the plan about how a well is going to be drilled.

VIII.

Completion
Completion is At this stage we decide if we want to complete a well. Tools we are going to use a) Well Logging electronic devices that determines if theres a productive zones underground.

IX.

Well Testing

X.

Stimulation of a Well
Perform fracturing of a well

XI.

Production
We can produce oil and gas from a well. After a certain time the production drops, i.e. it reaches the economic limit of a well, as illustrated in the graph below.

Electronic Submersible Pump (ESP)

XII.

Petroleum Reservoir Engineering i)

a) Primary: 15-20% primary production, but then 80% left underground b) Secondary: recover another 15-20% c) Tertiary: consists of 3 stages 1) chemical 2) thermal 3) Miscible Gas Injection ii) Heating up the formation iii) Injecting gas underground iv)

XIII.

Gas Production
Convetional gas production Unconventional gas production 1) Coalbed methane 2) Tight Gas sands 3) Shale Gas i) reasonable porosity ii) low permeability 4) Geopressure acquifiers 5) Gas Hydrates

XIV.

Monetization of oil
1. Converting assets into a cash flow stream; monetizing on current, future production. 2. The company is going to sell the reserves, that are going to be profitable produced. There are various reserves categories: a) proved b) probable c) possible 3. Do a cash flow analysis projected for the next 10-20 years (including discounted cash flow analysis), taking into account capital expenditures, royalty payments, severance taxes, etc.