I’m starting to shift my resources back to expanding my oil and gas business. Not that it has been on autopilot completely, it just hasn’t required much attention lately, which can be attributed to having good people run the day-to-day production.

It’s time for more though, and I’m looking to increase production through additional acquisition or drilling.

This weekend I’ll attend a land auction with five different tracts for sale. Tract four is the one I’m interested in, as it has existing production on a full section, which equals about 640 acres. According to state records, there are five producing wells on the section, and between the five wells, the lease produces 150 barrels of oil per month, and has done so for the last several years. They are shallow wells drilled to about 1,700 feet, so consequently there is little to no reservoir pressure to push oil into the well bore.

The land, including the mineral rights are up for auction, and the existing lease would have to be upheld. However, that’s not to say that a new land owner could come in and force the existing producer to drill a certain number of wells per year to hold the rest of the acreage.

The timing of this is not all that great. Crude oil ($wtic: chart) just closed above $100 per barrel, so picking up any acreage for cheap will be nearly impossible, and there are a lot of big players in the game right now that are willing to risk more capital than I am.

The nice part about buying land with existing production is that the drilling risk is fairly low, especially in widely developed fields with long production history (production in this area dates back 80 years or so).

I suspect I’ll be a little out of my league on this, but it will be interesting to see what 640 acres brings in terms of $/acre. If it goes for anything less than $1,000 per acre it will be a steal. I’ve been doing quite a bit of digging on the state geological surveys website, and I’ve determined that there is a lot of potential in the area, all it takes is money.

I’ll let you know how it goes.

Business, Oil & Gas acquisitions, business development, land auction, leases, oil and gas, petroleum

Iranian President Ahmadinejad came out Sunday at the end of a rare OPEC summit stating that OPEC’s members have expressed interest in converting their cash reserves into a currency other than the depreciating U.S. dollar, which he called a “worthless piece of paper.” (It later became clear that the “members” he is referring to is none other than Iran and Venezuela… go figure.)

He went on to blame President Bush’s policies for the decline of the dollar and its negative effect on other countries.

In an effort to tag-team the idea, Venezuelan President Hugo Chavez jumped in from the sidelines saying “the empire of the dollar has to end.”

Chavez sees the Euro as a better option to hold in reserve, and further went on to affirm his position stating that the U.S. dollar has been in a free-fall without a parachute.

While it’s easy to see that the the Chavez-Ahmadinejad duo are taking any opportunity to take shots at the U.S. while on an international podium, I have to wonder if the declining dollar could force OPEC’s hand to switch to another currency.

The question then becomes, what effect does that have on the U.S. economy?

Economics, Energy, Oil & Gas, Politics Ahmadinejad, Chavez, Currency, dollar, oil and gas, OPEC, petroleum

On Friday, legendary oilman T. Boone Pickens predicted that oil will hit $100 a barrel, possibly in the fourth quarter, but definitely by sometime next year.

The reasoning behind is prediction is that he believes worldwide demand has outpaced global output of 85 million barrels a day. Consequently, Boone, as a believer in supply and demand (as am I) says oil prices have nowhere to go but up.

“I think you’ll reach $100 (a barrel) before you go back to $80,” Pickens said before speaking at a gathering of the Association for the Study of Peak Oil and Gas at a downtown hotel. “It could happen in the fourth quarter, but you’ll see it within a year.” -Source

The jury is still out though on whether daily oil output has reached its maximum level. The federal GAO reported in March that most studies have found oil production will reach a peak between now and the year 2040.

In regards to alternative energy, Pickens is big on wind, although he said that any alternative fuel has a chance to offset petroleum.

You can’t discount Boone Pickens, his history in the oil and gas sector speaks volumes.

I think he’s right, oil will probably see $100 before it comes back to $80, however I believe the 100 dollar mark will be a psychological event that could stimulate a bust in the oil industry.

Alternative Energy, Energy, Oil & Gas Alternative Energy, oil and gas, petroleum, T. Boone Pickens, wind energy