BRZV History In the 1950’s, Magnolia Oil Com

BRZV History

In the 1950’s, Magnolia Oil Company (now Mobil Oil) drilled a discovery well in Callahan County, Texas on the Jackson Lease which currently contains 870 acres situated on the western side of the Bend Arch of the Fort Worth Basin. The lease is situated 5 miles north of Baird, Texas. The original Jackson No. 1 was an Ellenburger discovery (4450’) which was the beginning of the famous Red Horse Field. Magnolia drilled 3 additional Ellenburger wells on the lease before focusing on the very prolific Moran Sand at 2500’. They produced the Ellenburger wells until the oil and water cut was down to approximately 25-30%. They then came up to the Bend Conglomerate at 4175’. This was a thick zone of conglomerate which had a very high concentration of light oil and distillate. 

This was the objective for Magnolia, despite a drill stem test projecting a 6.930 MMCF per day. Gas in those days was difficult to sell and the market price was somewhere between $.08 and $.10 per MCF. The Bend was produced for the liquids (oil and distillate) for a short period before moving up to the Lake Sand at 4115’, leaving behind the majority of recoverable gas reserves in the Bend. Magnolia was primarily interested in the liquids at that time due to more favorable market than natural gas. The Lake Sand calculated 3.46 MMCF per day with a high concentration of 56.9 degree gravity distillate. It too was only produced as long as the liquids were commercial. A great deal of recoverable gas was abandoned behind a bridge plug. The Jackson No. 1 was then completed in the prolific Moran Sand which had become the major objective for Magnolia and other operators in the area. 

Magnolia produced the other 3 deep Ellenburger tests in the same fashion as the Jackson No. 1. Concurrently, Magnolia drilled approximately 28 wells on the Jackson and adjoining leases proving up the size of the structure. A detailed review of over 40 wells in and around the Jackson Lease proved up a major structure that goes from the surface to the Ellenburger and probably deeper. Two cross sections clearly show the magnitude of this structure. In the late 1960’s, the study and well tests when compared to samples, DST, logs and production tests clearly proved up production or production potential in many of the traditional formations of that area, specifically

Ellenburger
Bend Conglomerate
Lake Sand
Caddo Lime
Gardner (gas)
Morris
Moran
Palo Pinto (gas)
King/Swastika
Cook/Hope
Tannehill Sand

There are additional formations which have not been tested but should be productive based upon drilling reports and well logs. They have been previously omitted and bypassed due to the much more prolific formations listed above. These potentially productive formations are:

Saddle Creek
Flippen Lime
McMillan
Home Creek
Upper Winchell Lime
Caps Lime
Jennings Lime
Gray Sand

Magnolia conducted an internal waterflood study of the Moran Sand in the Jackson and Snyder Lease. They determined that there was a significant amount of oil to be recovered through a Center Point Waterflood. The concept was to utilize the known closed structure which had producing wells throughout most of the structure. They would inject water in the key high points with the expectation of recovering oil from the perimeter wells. They had good results but had not achieved the effective formation sweep as they had envisioned. There were many areas on the structure that did not have producing wells from which to draw. These voids would require additional capital investment which Magnolia reportedly was not willing to expend at this point.

When the Moran production started to decline and the price of oil dropped significantly, Magnolia decided to sell their production to Lewis Production Company. Lewis contracted with Russell Engineering in Abilene, Texas to conduct a waterflood study of the Red Horse (Moran) Field in May, 1976. The study concluded that the original oil in place in the Red Horse Field was 2,000,000 barrels and that there was still 626,000 barrels recoverable in the reservoir. They had recommended the use of secondary and tertiary recovery procedures. Lewis made an attempt to change the flow pattern of the existing waterflood without drilling new wells to sweep the formation and recover the 626,000 barrels. While the production did increase and the potential for waterflood validated, it did not access a large portion of the movable oil in place. This would require the capital expenditure for new wells. Lewis produced the Moran as well as the shallower Tannehill Sand. Oil prices once again declined and Lewis elected to sell the project to Humphrey-Bashford Oil Company. During the next 30+ years, Humphrey-Bashford only produced the existing wells with no new wells drilled to access the known Moran oil reserves. They made an attempt on the Jackson No. 1 to reactivate the Ellenburger but had to abandon the project due to a stuck packer in the hole. The Jackson No. 1 was therefore not considered economically feasible at that time. The No. 1 is excepted and not included in this proposal. Over the past three decades the operator only expended the minimal capital required to keep the producing wells on line. If a well encountered a significant problem, it was shut-in. Today there are only 2 wells that are producible without some service and rehabilitation work. All of the wells need to have as a minimum a change of downhole pump, some form of hydraulic stimulation, and the replacement of some tubing and rods which are now for the most part over 30 years old. Almost all of the wells can be restored to production. Many of the wells can be re-entered and completed in the Moran, Palo Pinto or Tannehill Sand with a low capital expenditure. The wells have behind the pipe additional zones of potential identified above. The saltwater disposal well on the property is fully operational and can handle the projected increase in fluid once our rehabilitation program is initiated.

It is the concept of this program to immediately restore production on those wells shut-in or in need of service. There are a number of wells that we plan to re-enter and establish production in the Moran or one of the other zones. With the price of oil at or above $70 per barrel, even a small well is commercial especially when considering the recoverable reserves available to each well. Consideration will be given to re-entering and establishing deeper production in one or two of the wells which were drilled to the Ellenburger and are not limited by mechanical problems down hole like the Jackson #1. It is envisioned that 2, possibly 3 new wells be drilled to the Ellenburger at some point in the future. It is our plan to conduct a 3-D seismic study within the first year of the project to identify the bypassed Moran reserves still in place. The study will be used to identify the best possible locations from which to drill new wells to access these reserves.

This program has many phases and objectives to be conducted over the next few years. Initially, we plan to restore production, rehabilitate or recomplete some wells, re-enter and establish production in previously plugged wells which will establish solid production at a very low capital cost. Once this has been achieved and production has recovered all or most of the initial investment, we will then look at the seismic study in selecting new wells to the Ellenburger and the Moran. We want to conduct these long term operational objectives in a deliberate manner so the production revenues can be rapidly recovered and sustained while advancing the development of the other proven reserves.