First let me start by telling you that when we do an acid cleanup treatment after perforating the casing it is with the purpose of cleaning any jagged steel edges around the perforations and breaking down any cement that may clog the perforations.  We then swab the hole dry and then shut it in overnight to see if any gas/oil will flow into the wellbore naturally from the formations pressure. Any show of oil/gas would tell us if there is one or both present and it now warrants a Sand Frack to bust the formation open which will let the oil/gas flow freely to the wellbore.

Today, D&M arrived to check on the amount of gas buildup & fluid entry on the Llama 13-2 well. When we first opened the valve to release the gas pressure we didn’t get a small blow of gas but a very strong gas blow.  D&M then ran in the hole with their swabbing tool, pulled a swab from just below the perforations at 3100′. When the swabbing tool got close to the top it had approximatey 250′ of total fluid

ahead of it. The top 75′-80′ was all oil.  I would say this is much more than a “show” of oil/gas.

Needless to say it was all we wanted to know to confirm the need for a Sand Frack which we have moved up to mid-afternoon tomorrow. 

After swabbing down the 13-2 well this morning, D&M rigged down and moved to the 13-1 location to strip everything out of the wellbore in preparation for the 4000 Gal Acid Frac that SPS will do the first thing in the morning on the Viola formation.

More tomorrow….stay tuned.

Today, about 11:15 Oklahoma Cementers Cushing pulled onto the Llama 13-1 location, rigged up to perform our scheduled Squeeze Job. While flushing out all the fluid from the tubing and casing prior to starting pumping cement into the top of the Wilcox we were surprised to see quite a bit of oil come out of the backside (see Video).  By the time we had all the fluid out we had nearly filled the temporary pit we had dug to contain the fluid. We then pumped the pit down and transported it to the tank battery where we ran it through the separator. Out of 104 BBls we pumped out of the pit we recovered 65 BBls of oil,

 a pleasant surprise.

The overall Squeeze Job went as well as we could have asked. We have the well shut-in and will let the cement cure until Monday morning, we want it to be as hard as possible before we start casing swabbing the well to see what entry we get. It may be necessary to drop a couple hundred gallons of acid to clean up any cement that may have been pushed into our Viola perforations.

At this point we feel very confident that we were successful in cutting off the flow of SW. The proof will come the first of the week. 

What if I told you that the U.S. government may reimburse you for a considerable portion of the costs of developing an oil and gas project, while letting you retain full ownership of the investment? 

That’s exactly what’s happening today, as part of a nationwide economic stimulus program. Depending on your tax bracket, Uncle Sam could fund up to 30% of your next oil and gas project, or possibly more. And it won’t last long. The window of opportunity closes in less than six months. So let’s get right to it – here’s how it works…

Special Tax Break as Part of COVID-19 Stimulus Program

In response to the unprecedented economic fallout from the COVID-19 pandemic, congress recently passed the CARES Act legislation. The Act helps a wide range of individuals and businesses, but it offers particularly generous benefits to oil and gas investment partnerships.

The key provision of interest deals with net operating loss (NOL) carrybacks – a tax benefit the IRS terminated in 2018. The Act temporarily re-establishes and enhances (NOL) carryback provisions, allowing individuals and companies to recover 100% of any losses incurred in the 2017-2020 tax year, using income taxes paid out over the preceding five years.  See Bloomberg Article

Now, here’s why this offers a potential windfall for oil and gas partnerships…

Unlike most businesses that capitalize their expenses, direct oil and gas investors can treat 100% of the intangible drilling costs (IDCs) as losses in the current tax year. In some cases, these IDCs represent up to 90% of the entire investment into an oil and gas project. That means the U.S. government could fund a substantial portion of any investment you make into an oil and gas partnership in the 2020 tax year.

Consider an example…

A $1 Million Oil Well for the Cost of $700,000

Let’s say you paid out $1 million in taxes from 2014 – 2019, and you have no other businesses with operating losses in 2020 that will claw-back your prior five years of paid-up income taxes. You could allocate $100k into a direct investment into an oil well offering monthly income potential.

In this scenario, you can claim $100,000 in operating losses in 2020. With the new CARES Act provisions, you can then go back five years in time and reduce your taxable income by $100,000. Assuming a 30% tax bracket over the last five years, Uncle Sam will then send you a check for $30,000 next year. The end result: a $100k investment for a net cost of just $70,000.

As you can see, the CARES Act legislation offers incredible benefits for direct investments into oil and gas partnerships. Projects like the Buffalo Ridge & Llama – where most of the investment dollars go towards IDCs – are perfectly structured to exploit this opportunity.

Importantly, we’re not tax experts – so please consult with your CPA or tax advisor for what makes sense in your personal tax situation. But we’re here to provide any information that can help you take advantage of this special situation. As always, feel free to reach out to me or Dennis with any questions.

Sean (307) 622-1645

The worst in the oil market is over, Amin Nasser, president and CEO of the world’s biggest oil company, Saudi Aramco, says, adding that he is “very optimistic” for the second half of this year. Currently, global oil demand is somewhere around 90 million barrels per day (bpd), up from 75-80 million bpd in April, Nasser told IHS Markit Vice Chairman Daniel Yergin in an interview for CERAWeek Conversations. “We see it in China today – it’s almost at 90%. In gasoline it’s around 95% in China. Gasoline and diesel are picking up to pre-COVID levels,” the top executive at Saudi Arabia’s state-owned oil giant said. Recovery in oil demand will depend on whether there will be a second wave of infections, Nasser said, but noted that he is not overly concerned about that because countries and medical professionals will be much better prepared if a second COVID-19 wave hits. Saudi Aramco, as the enforcer of the Kingdom’s oil production policy, has been instrumental in oil supply management to the market. This year, Aramco pumped 12 million bpd in April, and Saudi Arabia exported record volumes of crude, making good on its promise to flood the market with oil after the collapse of the previous OPEC+ deal in early March. After the new deal was reached, Saudi Arabia’s oil production was slashed to in May to the required level of 8.5 million bpd. The Saudis are now trying to reduce the inventory overhang in the United States and to tighten the market in Asia as the demand recovery continues to be slow while oil prices continue to be volatile and lower than what the Kingdom finds comfortable for its budget revenues. Aramco is working to reduce its carbon footprint, Nasser told IHS Markit, while several European oil majors are going the extra mile and have pledged net-zero carbon emissions by 2050. “I still believe that oil and gas will continue to be strongly part of the energy mix over the long-term. However, it’s going to be cleaner because we are working to make sure that we are reducing our carbon footprint,” Nasser said.

Yesterday, we were able to turn on both the Llama 13-1 & 13-2 wells briefly.  As it would be the Llama 13-1 transformer was discovered to be leaking some type of oil. We were checking the meter just after we had the pumpjack going when drip drip down it came. Not knowing what it was we immediately shut the well down and contacted East Central Electric.  As it turned out East C Elec came out this morning and checked it. They said it appeared some oil of some type had been spilled on top of the transformer when they were installing it. A quick wipe down, turned the well back on, all is well

The Llama 13-2 was turned on and appeared to be running well. After a few minutes of running it was detected that the Separator was not working properly. Shut the well down.  This morning we opened the Separator up to find that the plunger had been damaged, probably during transit or loading and unloading. Install new plunger, turn the well on, all is well. 

This is just normal stuff that happens during start ups. We will be making adjustments for a couple of days on each pumpjack until we get the optimal balance.

With the Acid job we put into the Llama 13-1 (4000 Gals) we flushed it with 760+ BBLS of SW which will be the first product out of the hole. It will take 3-4 days of pumping to get the flush back before we have any idea what production we will be getting from the Viola Formation..

With the Llama 13-2 we did a 3000 Gal Acid job and flushed it with just over 600 BBLS of SW. Again this will be the first product back out of the hole before we will be able to see what the Viola Formation will give up, possibly 2-3 days.

Also yesterday and today we were able to finish up the Tank Battery on each well. Looking good. We still have some adjusting, clean up, and dressing up to do on and around each pumpjack which we will complete the first of the week.

It will be an interesting weekend in anticipation of what we will Have next week, I will keep you posted.

Below Pic’s of Llama 13-1 pumpjack and tank battery.  Llama 13-2 video & Tank Battery coming on next e-mail.

June 25 2020

Yesterday, East Central Electric did get the Transformers and Meter bases installed on the poles next to the 13-1 & 13-2 locations, later today they returned to hang the meters (see Pic’s).

Adam’s tank completed the installation of the tank battery as well as the flowlines and connections.

Emerald Oil Co completed the laying of all the remaining electric line, made all the connections, and have the entire system ready to turn on tomorrow on the 13-1 well.

Tomorrow they will complete the hooking up of the electric lines to the panel box, phase converter, and motor on the 13-2 well (it was still too muddy to get to the location today). Tomorrow both wells should be ready to turn on by noon.

Yesterday, Adam’s Tank & Lease began delivering the tanks, gunbarrel, and separator to the Llama 13-1 location. It was a little bit sloppy but they were able to get them off loaded and in position on the pad.

Last night the skies opened up again enough to make it difficult to get around today. Fortunately the next few days are forecast to be dry so the lease should dry up fairly quick.

The best news of the day is that East Central Electric showed up this morning. Being the poles that they are to hang the transformers and meter bases on are on the county road there will be no issues with mud there.

I’ll update you again as progress is made.

I’ll say with caution that there is a good possibility we can have the Llama wells on by weeks end, key phrase being “with caution”.

Well Thursday night and yesterday ended our long dry spell as the clouds opened up with some pretty severe thunderstorm.

East Central Electric was a no show again yesterday, I called the office yesterday afternoon to be informed that there was a couple of pole snaps the night before which required them to divert their crew to deal with that first. I asked when they would be out, they said they “have a procedure”  which is they send our work order back to dispatch to be re-scheduled and would call.

Adam’s Tank worked his crew 60 hours last week and sent them home for the weekend. They will be back Monday to deliver and set up the rest of the Tank Battery

For now all I can say is I hope you all have a blessed restful weekend and all you Fathers, I hope your families smother you with Love.