Waterfloods: The Next Big Profit Phase of the Shale Oil Revolution

Waterfloods: The Next Big Profit Phase of the Shale Oil Revolution by Keith Schaefer, August 10, 2012, Oil and Gas Investments Bulletin
Waterflooding has been around for 70 years or more, but the Big Question over the last five years has been—can you do it effectively with tight oil? The answer is a Big Yes, and waterflood potential has become so important that institutional investors now see them as major share price catalysts for junior producers—and track them closely. Waterfloods start 1-2 years after drilling the well, in a time window producers call “secondary recovery.” (Drilling is primary recovery.) Waterfloods are cheap to try and cheap to run (with most operations costing just $5-10 per barrel!), and now the industry is seeing that they are sometimes doubling reserves from a well. “Secondary recovery is where you really make all your money in this industry,” says Dan Toews, VP Finance and CFO of Pinecrest Energy (PRY-TSX.V). … “First you find a resource, and then you drill it like crazy. But the second stage is to go in for your secondary recovery, through waterflooding of some kind if possible.” … Another Canadian oil junior, Raging River Exploration (RRX-TSX), also explains the waterfloodpotential in their powerpoint. They expect to be swimming in 1 million EXTRA recoverable barrels of oil per square mile, courtesy of waterfloods—at an even cheaper cost of $5-10 barrel, vs $30 barrel for the first 600,000 barrels. Raging River is developing the Viking formation in SW Saskatchewan—a large, tight oil play that since the 1950s has had an improved outlook from 2 billion barrels of oil to an estimated 6 billion barrels of oil in place, all thanks to horizontal drilling. … “A lot of these unconventional plays (tight oil) are in high decline. By implementing waterfloods, we can lower the declines in the field, and increase reserves. There’s huge value to that.” Crescent Point started waterflooding its properties five years ago when multi-stage fracking (MSF) was new on the scene. Now they have five years of knowledge that the method works, and that they can use it across all of their fields. … “Water flooding is basic, in that you pump water into the ground,”