Business is Booming

Crude Energy

Crude Energy is working to develop onshore oil and natural gas projects. This is a company that is not afraid to try new things and take on jobs that other companies shy away from. Business in Focus spoke with Crude Energy President Parker Hallam.

A relatively new company, Crude Energy was founded in 2013 and it has offices in Dallas, Texas; it presently has projects in Texas and Oklahoma. The oil and gas industry has seen quite the positive turnaround since the advent of new technologies in fracking and horizontal drilling made certain deposits economically feasible to recover. Due to this boom, investors are flocking to companies like Crude as they recognize the potential for profit. I asked Mr. Hallam about this time of unparalleled growth.

“I think it’s going to last for a long time to come,” he says. “The amount of oil that they are actually getting out of the formations with the new technologies – like fracking – only represents a small percentage of what is actually in place within that rock.”

Mr. Hallam says that only four to eight percent of the available resource is being extracted and that, over time, enhanced recovery methods and down spacing (reducing the distance between wells) will enable further potentials. There are many areas, predicted to have large deposits, which have not yet been explored. Drilling these will continue to fuel the boom.

There was a time when theorists believed that Peak Oil was rapidly approaching and that alternative methods were necessary to assure that future energy needs would be met. Mr. Hallam explains that it may be more expensive to get the oil out of shale formations, but the possibility of Peak Oil is now farther away than originally described.

“There were so many factors, in that first report, that were not really considered and that people didn’t really know about five years ago. This includes most of the fracking technology and horizontal drilling currently taking place. Nobody saw it coming. George Mitchell really invented the whole process and got it started.”

Indeed, almost every technology in the industry has seen developments and improvements over the last ten years. The industry has proven itself to be very innovative despite increased costs incurred through facing challenging situations.

Drilling in a Bakken shale well in North Dakota is an example of how new horizontal drilling technologies are furthering extraction. Companies drill down for two hundred feet then slowly begin to deviate from the vertical and establish a curve. It takes about eight hundred feet of curve before horizontal drilling begins through the areal extent of the reservoir. A hydraulic frack then pumps in millions of gallons of fresh water along with lubricants and sand. The high pressure forces the mixture into the rock, cracking it to free trapped oil.

“It [oil] doesn’t have the ability to move through the rock. So that water in the sand goes up and creates small fractures. The sand holds those cracks open and it allows the oil to come into your well bore so that you can produce it, along with gas as well.”

Acquisitions that the company has made this year are predominantly based in the Permian Basin in West Texas. The amount of recoverable reserves, using today’s technology, is much higher here than in either the Eagle Ford shale or Bakken shale. Close to a quarter of the drilling rigs in the entire world are currently focused in this area. That’s nearly 560 rigs or half the rigs in Texas! It’s an area that has been in development for a long time but, with fracking and horizontal drilling, it is even busier now. Most of the major publicly traded companies in the oil and gas industry are operating in the area.

“That would be the area that we’re developing or growing the company. We have a specific set amount of acreage out there that we are just in the beginning of developing.”

Crude Energy is a small company compared to some in the industry but this can be beneficial. Smaller leases are picked and, instead of drilling hundreds or thousands of holes, it can drill three to five small offsets in a field that where oil has already been discovered.

“It is a little tricky in reference to the geology base or new seismic processing and techniques, and you can better understand what was going on in those oil field today, but they are not a big enough area that a publicly traded company could put a whole bunch of resources in to just little one-offs.”

Crude Energy is better positioned to go into these areas as it’s more efficient and economically viable for smaller companies to work in the smaller leases.

The main focus, for at least for the next year or so, will be on the specific assets it possesses in the Permian Basin. The company has, however, also worked on a handful of standalone projects in other areas. There is a great deal of potential there; however, these are more exploratory in nature and are known as wildcatting within the industry.

Future goals for Crude Energy would be to continue drilling the acreage in its inventory and to get all of its West Texas acreage into production using mostly vertical wells. Once it has established a clear picture of that acreage, it will drill horizontally into the best formations.

Without the oil boom, oil prices could likely be much higher. This would cause an oil shock for the economy, bringing it to a potential economic crisis. Mr. Hallam sees the oil boom as vital because it is one of the things that are working to bring the U.S. toward energy independence. According to today’s headlines, the U.S. is presently seen as the largest oil producer behind Russia and Saudi Arabia, and gains continue to be made.

The company works with financial institutions, self-directed IRAs and accredited private investors. Investors have the ability to actually purchase working interest or ownership in a well as their investments pay for a portion of its development. Then, when the well produces, they get a monthly revenue cheque from the profits of the well. There are also a host of tax benefits. “I want people to know that they are able to participate with us at that level with my company.”

“Wherever the oil is you have the most prosperity, and we have good laws that incentivize drilling on private land – which accounts for most of the drilling in the U.S. Very little is on federal or public land. When you drill on private land there are private mineral owners who get portions of that gross revenue and that money goes back into the economy. Now is the time to capitalize on it and build a new infrastructure.”

Every boom has its challenges, and this one is no different. Infrastructure concerns are one example as it can be difficult to get oil and gas to specific markets. There is also a lot of gas that could easily be captured, but will not be as natural gas prices are staying low for the foreseeable future, making it not economically viable for companies to drill. The cost of the wells can be a challenge. A company must get out there and drill in the acreage before leases expire and then get it into production. Challenges to the practice of fracking are also an issue.

In the state of New York, there is now a moratorium on fracking. In Denton, Texas (close to the Barnett shale formation in the Fort Worth area), a town hall meeting took place in July. The town was going to vote on whether or not to ban fracking but the vote has been moved to November.

“I think that a challenge for the entire industry would be to have better transparency and better education of what exactly is going on when you are fracking a well so that it doesn’t stymie the growth for what this technology is really doing for the country.”

The work of companies like Crude Energy is needed since America runs on oil and gas. Fracking, however, is controversial and the company has to deal with the public’s environmental concerns. It does this through education; speaking engagements are done at conferences across the U.S. Mr. Hallam and Crude Energy produce the Oil & Gas Investing Report Podcast to help educate the public and investors alike on a variety of energy-related topics. Additionally, Mr. Hallam is a regular on Powering America Radio, broadcast in several markets, where he discusses the merits of fracking and takes calls to engage with the listening audience. Breitling Energy CEO Chris Faulkner, who is also a regular on the show, recently released a book called The Fracking Truth to attempt to dispel public fears.

“We are taking it upon ourselves to educate the public on what it does, “ shares Mr. Hallam, “because it provides a lot of jobs not only for the oil and gas business; it also provides a lot of ancillary and secondary benefits to all sorts of industries.” Mr. Hallam says that the industry is in a far better position than it was six to seven years ago.

You can visit Crude Energy’s website at http://www.crude.com/

December 11, 2017, 2:17 AM EST