Cherry-Picking (Seeking prospects industry-wide)
We screen the industry for the best developmental prospects available with the best operators in the business. After over 20 years of doing business with many other oil exploration companies that generate prospects, we receive a steady flow of prospects to review.
When a company tries to generate its own oil prospects, the process requires large investments by the company, sometimes millions of dollars in 3D seismic to maybe find a few marginal prospects. Marginal prospects put pressure on the company to decide whether to lease the land and then try to find partners. If the company decides to lease the land, money has to be invested to begin leasing, and there is the risk the company will not be able to get all the leases they need.
U.S. Emerald waits until projects are ready. We will only look at a deal after it is completely leased and researched, and seismic shot and reprocessed – in other words, when the deal is ready to drill. This allows us to look at a lot of prospects and cherry-pick only the very best. It is from this pool of completed ready-to-drill prospects that we start the evaluation process. In each prospect selection cycle, we are typically approached to look at 50 to 100 oil and gas prospects. We can usually narrow them down to four or five solid developmental prospects to research and do our due diligence on in great detail. Part of that due diligence process involves having the prospect broken down and rebuilt by one or more independent geologists. This process will often kill a couple more of the prospects, and from the remaining set we pick the best one available based on all relevant considerations, including when it will drill.
This process has allowed us to pick very solid developmental and well-researched prospects, and has given us a very good track record for over 20 years.
We drill only safer developmental wells
While investing in oil and gas is a risky proposition, you can significantly reduce your risk by drilling in a known oil or gas productive area. We do not drill wildcat wells, which are drilled in areas with no surrounding production. We only drill developmental wells, which are wells drilled in a known productive area.
Although for some developmental prospects other data is so supportive that 3D seismic is not necessary, the combination of drilling in a known productive area and using 3D seismic data can be an especially powerful combination. Many wells and fields were drilled before 3D seismic technology was even developed, and the drilling was not precise at all. Today 3D seismic, when shot over a known productive area, can allow you to drill the sweet spots that were missed.
Although 3D by itself does not show the presence of oil, only structures and traps that may hold the oil, if you have a nearby well that has penetrated the formations and they have been productive, you know the trap in the well you are drilling most likely will be productive.
Proved undeveloped (PUD) zones are zones of pay that have been identified but not produced. While not all developmental wells have a PUD zone, most do. The industry average of success for wells with PUD zones is around 80%. If you add 3D or any other technology to a PUD location, your chance of getting a successful well can be even better.
Multiple pay zones
We try to only drill wells with multiple potential pay zones. If you drill for a single objective, you have one chance to hit a successful pay zone. If, however, you drill in an area where multiple zones are productive in the area, you may have three to five chances to hit pay, plus any other zones that you may encounter serendipitously.