MARION ENERGY LIMITED - ASX: MAE

The data on Australian Shares.com is intended as a guide only and is compiled from information in the public domain. Data on this website should not be used to make an investment or trading decision.

Description

Marion Energy Limited is following a low risk strategy of pursuing gas reserves and associated production in the Rocky Mountains and Mid-Continent regions. The Company’s activities are generally within the geographic confines of or adjacent to known production and within easy access of existing pipeline infrastructure. We have been able to accumulate an enviable lease position where the company is undertaking a highly successful development drilling program.

Favorable long-term industry fundamentals and advances in drilling, completion, and fracture stimulation techniques have allowed the Company to pursue several attractive projects in Utah and Oklahoma. Based on a recent independent report by MHA Petroleum Consultants, Inc., Marion has 243 BCF in proven, probable and possible reserves. The Company currently has a substantial inventory of drilling opportunities - over 240 driling locations identified in the Clear Creek and Helper fields and over 300 additional prospective locations - which gives our investors exposure to significant reserve upside. Complementing this Marion controls field operations associated with large acreage and working interest positions.

Clear Creek, Utha - 100% Working Interest

Located on the Wasatch Plateau, the Clear Creek Federal Unit encompasses 17,092 acres under which a dominant north-south trending fault-sealed structure traps gas in the Cretaceous aged Ferron Member of the Mancos Shale. In the vicinity of the unit, the Ferron is fractured and capable of high flow rates and large ultimate recoveries.

Originally developed in the 1950’s as the primary gas source for Salt Lake City, the unit has produced from the Ferron a total of 137 Bcf of gas from 18 wells. Due to the rugged nature of the Wasatch Plateau and the fact that the unit was developed prior to the onset of directional drilling, wells were drilled from locations dictated by topography and not structure.

Aside from the original poor structural position of the wells, most of the original completions were open-hole and involved the use of nitroglycerin for stimulation over the entire ±600 foot Ferron interval. Due to later attempts of running well liners to isolate individual Ferron sand intervals, much of the original flow rates were lost and the unit was all but shut-in by the early 1970’s.

During the course of development drilling Marion identified pay and established gas production from the Mancos Shale that overlies the Ferron sands in the ASD 3-17 well. This discovery adds an additional reservoir to the Clear Creek Unit and is one of four unconventional, and previously unknown, new reservoirs inside the unit. In addition to the Mancos Shale significant coal reserves are anticipated to be developed from the Star Point, Emery, and Ferron. Independent engineers have estimated a gas-in-place potential resource for these coals of 1.5 Tcf of gas. Because of the large potential for new reserves, this is the most significant property in the Company's portfolio.

Seven newly drilled wells are tied into production facilities. Production rates have not yet stabilized. The Ridge Runner 8-19 is awaiting fracture stimulation. When all eight wells are on production, Marion will continue with its development drilling program. The typical drilling and completion cost of future wells should be in the US$1.3 million to US$1.7 million range. These eight wells are the first in a series of wells that will take the original 1000 acre spacing down to 160 acres per well.

Helper, Utah - 100% working interest

Situated at the northern end of the Ferron Coal Bed Methane (CBM) Fairway, the Helper Project (“Helper”) represents a major proven under-developed asset for Marion. Production from the fairway currently exceeds 6.5 BCF of gas per month and combined has produced since the inception of the play a total of 824 BCF of gas from 879 wells.

Productive western, eastern, and southern boundaries for the fairway were defined by drilling in the 1990’s – early 2000’s. The northern extent of the fairway was developed down-dip to the base of the Book Cliffs. Marion’s Helper position of 9,220 acres is situated in-trend to the CBM fairway and extends down-dip into the canyons and up onto the bluffs of the Book Cliffs. Development drilling by Marion through year-end 2007 has included the completion of six vertical and one deviated well into the Ferron. These completions have proven the productivity of the down-dip CBM fairway in conjunction with significant conventional gas in the sands of the Ferron. Based on reduced spacing of 160 acres/well, an additional 50 new drill locations exist.

In the process of development drilling in the Ferron, and similar to the Clear Creek Unit, Marion discovered the presence of gas in the overlaying Mancos Shale. The presence of gas can be observed on mud logs through the Mancos Shale and is found to be most concentrated in the sandier Emery Member sequence. One well has been drilled and completed to-date in the Emery by Marion and is currently being produced. The results of this well indicate the productivity of the Mancos Shale and sets up a development drilling program of 115 wells (spacing of 80 acres per well).

Current development drilling inside the Helper Field area by Marion has most recently defined through logging and production tests significant over pressured gas reserves in the Cedar Mountain and Morrison formations. These formerly unexploited reservoirs represent a significant reserve growth potential for the company. Exploration for these objectives is currently underway over an area covering 400 square miles. Within this area Marion operates and or controls a total of 28,938 gross acres. Average reserves per well are projected to be in excess of 5 BCF. Initial production flow rates from the KRR #1A well have exceeded 1.5 MCFD.

Roan Cliffs, Utah - 100% working interest

A buyout in 2006 from Robert Bayless LLC, an industry competitor, has positioned Marion for exploration and development, north of the Helper project, in the Roan Cliffs and Emma Park-Whitmore Park Valley. The Roan Cliffs acreage, totaling 19,718 acres, is positioned in-trend to the West Tavaputs Plateau development drilling program currently underway by the Bill Barrett Corporation (BBC).

Wells have been successfully completed by BBC on the plateau in the Navajo, Entrada, Dakota, Mancos Shale, Price River, North Horn and Wasatch formations. The Navajo, Entrada and Dakota formations are structurally controlled plays that are enhanced with the interpretation of seismic imaging. Conversely, the Mancos Shale, Price River, North Horn and Wasatch formations are more akin to resource type plays with gas saturated rock spanning thousands of feet vertically. The physical nature of this rock sequence compares well to the prolific Mesaverde Group located in the Piceance Basin to the east. In both cases the rock is well suited to the application of modern multi-stage fracture completions techniques.

With a thick gas saturated interval and the likelihood of needing high density well spacing the Roan Cliffs and Emma Park-Whitmore Park Valley position brings many future opportunities for Marion to exploit.

Wichhita Uplift, Oklahoma - 100% Working Interest

The Wichita Uplift and the western extension the Amarillo Uplift comprise a gas/oil productive east-west trending structural high that extends from southwestern Oklahoma through the Texas Panhandle for approximately 120 miles. The uplift along with the northern extending Texas and Kansas Hugoton fields together make up the largest gas province in North America with an original gas in-place estimated to have been as much as 117 Tcf. Gas production occurs from draped structures created over an uplifted basement complex and is from the Pennsylvanian and Permian aged Granite Wash and Brown Dolomite.

These reservoirs were charged by the rapid burial and maturation of source rocks in the adjacent Anadarko Basin starting in the Late Pennsylvanian and were sealed by the Late Permian aged Panhandle Lime/Wellington Evaporite sequence. Migration of the gas/oil out of the basin to the uplift occurred along the northern bounding fault system that separates the uplift from the Anadarko Basin.

Jester-Bloomington Project

The Jester-Bloomington Field is located in Greer County, Oklahoma and is part of the eastern most extension of the Panhandle East Field. Discovery of the field occurred in June of 1959 with production from the Brown Dolomite and Granite Wash. Two wells together made, prior to the field being shut-in, a total recorded volume of 431 million cubic feet from depths no greater than 1,400 feet.

Combined Jester-Bloomington has a productive footprint of 14,200 acres and a structural footprint of 24,000 acres. To date the cumulative volume of gas produced from the field stands at 7.9 Bcf with the field all but being shut-in since 1998. Original gas in-place for the two reservoirs averages 131 mcf per Acre/Foot (“AC/FT”). Production and reservoir analysis suggest an optimum spacing for both reservoirs of 40 acres/well. Taking into consideration that there are two reservoirs and a total of 33 wells have been drilled and completed to date, there remains room for an additional 268 new drill locations.

Marion has leased to date a total of 7,904.14 net acres (11,169 gross), drilled and completed one deviated well, purchased 9 producing and/or shut-in wells, and has acquired through a buyout portions of the gathering system and access to a regional sale point. Rates of individual wells have been tested at sustained rates of 280-750 mcf/day.

Willow Project

Situated north of the Jester-Bloomington Project, Marion’s recent acquisition of the Willow, South Erick, North Bloomington, and Moravia Fields adds a total of 18,354.32 net acres (23,802.99 gross) to the Company’s Wichita Uplift development program. These fields have produced a combined total from the Granite Wash and Brown Dolomite reservoirs of 5.7 Bcf from 48 wells.

Similar to the Jester-Bloomington Field original gas in-place for the two reservoirs averages 131 mcf per AC/FT and the optimized spacing for both reservoirs is 40 acres/wells. Using a drainage pattern of 40 acres/well leaves behind an undrained acreage position capable of having an additional 327 new drill locations.

Current Operations

Marion Energy, Inc. has completed four new drills in Beckham County, Oklahoma in December of 2007. The Eagon #1-18, Eagon #1-7, Speed B #6, and Dalton-Counts #1-16 were perforated and fracture stimulated in the Permian aged Brown Dolomite Formation and are currently flowing back the fracture with strong gas shows and high flowing pressures. Marion anticipates perforating and commingling secondary gas productive formations. All four wells are currently tied into the field pipeline infrastructure.

Mine For

oil, gas

Location of operation(s)

USA

Address

Suite 3, Pacific Tower , 737 Burwood Road
HAWTHORN, VIC, AUSTRALIA

Phone

03 8862 6466

Email

Website

http://www.marionenergy.com.au

Last Updated

8/3/2011