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TEXAS PROPERTIES

HISTORY

South Plains Petroleum, Inc. (SPP) acquired the Swenson and Kieke properties located in Haskell County, Texas from Landmaster Partners, Inc. (LP). LP is related to SPP through the common ownership of Richard Quintal and Suzanne Ruffini.  Ms. Ruffini is President of LP and Richard is the Vice President of LP.  They are in the process of winding down LP to concentrate on growing SPP.

When Landmaster purchased the Swenson lease in the fall of 2012, it was intent on developing remaining reserves in the Lower Swastika Sand (previously call the Swastika Sand or Swenson Sand) and the Gunsight Limestone based upon records showing the 2 formations had produced over 2 million barrels of oil from about 160 acres.  Over the next 2 years, Landmaster invested over a million dollars in testing pay zones and replacing old equipment dating back to the 1960’s.

In 2012 Landmaster re-entered the Swenson 17 well and tested 4 pays for oil as well as bottom hole pressures.  A great deal of information was gleaned from this well but it was not successfully completed until July of 2014 into the Upper Swastika Sand at a rate of 3 bopd.  Over the next 6 months, its production increased to 22 bopd and it currently produces at 12 to 14 bopd and has produced over 9,000 barrels of oil.

In 2014 Landmaster decided to test the Upper Swastika Sand in the Swenson #14 well after reviewing numerous pages of old well tests and logs.  The well came in producing over 270 barrels of oil per day (bopd) and was not being pumped at capacity.  Landmaster then attempted the same pay in the Swenson #12 and it came in at over 30 bopd, but the well had no cement between the Lower and Upper Swastika Sands and the well produced too much water as it was previously used as a water injection/supply well.  Landmaster then completed the pay in the Swenson 1A, #6 and #9 wells.  These completions resulted in successful completions ranging from 15 to 60 bopd in each well.

PROPERTY OVERVIEW

OIL PLAY

800+ acres of low risk oil and mineral leases for development in the state of Texas.

50+ Conventional Wells

50+ oil wells to develop across our Texas leases with an estimated 3 to 5 million BBLS.

3 - 5 MILLION BBLS OIL

Substantial recoverable reserves exist across our Texas portfolio.

DEVELOPMENT & WORKOVER

Our lease portfolio consists of both workover and development wells.

SWENSON LEASE OPERATIONS AND DEVELOPMENT

The Swenson 1A well is the well in the video shooting oil over the top of the workover rig in April 2018.  This well was originally drilled to the Canyon Reef and produced briefly.  The well was shut in when Landmaster acquired it and they attempted to produce the very top of the Swastika Sand and the Tannehill Sand unsuccessfully.  After a successful completion in the Upper Swastika Sand, Landmaster recompleted the well in the Upper Swastika Sand at 30 bopd and 200 bwpd.

Currently, this well has holes in the 5 ½” production casing and needs a liner run inside.  The process is to run 4 ½ casing inside the 5 ½ by having the collars turned down to fit inside the production casing and pump cement.  Then we would either perforate the pay or use a sand notch to open it up again for production.

This well has been producing between 8 and 18 bopd with about 300 bwpd.  With the jet pump set up, we would expect its oil production to increase to between 25 and 35 bopd.

The Swenson 2A well has been shut in for several years due to excessive holes in the production casing.  It was originally planned to be plugged, however with the implementation of a jet pump management may attempt to run a slim hole set up on it and produce it using the same jet pump as is placed on the Swenson 1A well which is 120 feet away.  The well has made over 33,000 barrels oil from the Upper Swastika Sand and was making 3 to 6 bopd when it was shut in.

We have chosen to drill the Swenson A-3 well approximately 330 feet from the north lease line and 1,650 feet from the west lease line or about 660 feet directly north of the old Swenson #5 well and about 660 feet directly west of the Swenson #15 well.  This location should result in an excellent producer and allow us to test the Tannehill Sand in the 1850 foot range to determine if it is carrying hydrocarbons.

This location for the Swenson A-3 development well is supported by the geological mapping of several oil formations on the property which currently, or have in the past, produced large volumes of oil.  The proposed drill site is spotted on the six (6) accompanying maps in the NW/4 of the Swenson property (the Swenson Lease is outlined in Yellow).  A review of those maps indicates that the proposed location should encounter an area in the Lower and Upper Swastika Sand and Gunsight Limestone which are all productive.

During the production of the Lower Swastika Sand in the 1950’s, a pressure maintenance program was implemented to extract more oil.  It was very successful as the wells produced for several years before any pumpjacks were used in the production.  However, once water was introduced, it quickly broke through from the injection wells to the producers and it is believed a substantial amount of oil remains between the wells.  This was confirmed when the Swenson A-1 well was drilled and indicated a 10-foot oil column in the top of the Lower Swastika Sand.

Water was reportedly injected into the #3, #8 and #12 wells.  The oil well records in Landmaster’s offices also indicate that water may have been injected for a short time in the #13 well before it was plugged in 1958.  Landmaster found the bottom hole pressure in the Lower and Upper Swastika Sands as well as the Gunsight Lime formations is still near their original virgin pressures or a bit higher due to the injected water.  This means that production rates should be very good.

At this location we expect to find the Lower Swastika Sand about 25 feet thick and based on several structure maps, only 1 included herein, and production rates on the Kieke, an oil cut between 20 and 40%.  The average production for the Lower Swastika Sand on the Swenson lease was 159,281 barrels of oil per well.  However, we believe this number includes about 20,000 barrels of oil from the Gunsight Lime as the pays were comingled later.

At the proposed location for the Swenson A-3 well, the Upper Swastika Sand should be about 40 to 45 feet thick and structure-wise, about the same as the Swenson #7 well.  It will be about 35+ feet higher than our Kieke Hess #5 well which came in producing about 18 bopd and 280 bwpd.  The Swenson A-2 well produced over 33,000 barrels oil from the lower section of the Upper Swastika Sand before the well was shut in.  In the few other wells in the field that produced the Upper Swastika Sand, they averaged better than 40,000 barrels of oil each.

And the Gunsight Limestone at the proposed location should be about as thick and high as the Swenson #4 well which produced 23,538 barrels of oil from the Gunsight formation before it was comingled with other production on the lease.  From what we can ascertain from the well files in the office, the average Gunsight well produced between 15,000 and 23,000 barrels of oil each on the Swenson Lease.

Thus, for the 3 oil pays identified, we could be looking at producing over 100,000 barrels of oil from the new well.  While that may be high, even half of that number translates into a great well.

Also, a bonus could be the Tannehill Sand at about 1850.  This pay tested oil in the Swenson A-1 well a few years ago, but did not produce as we believed it to be tight at that location.  The Tannehill Sand produces about 6 miles SW in a small field and about 15 miles ESE.  And generally speaking, when a Tannehill Sand is found, it produces between 500,000 and several million barrels oil.  There is a small field inside the city limits of Abilene which has produced nearly a million barrels of oil from about 6 wells.  The pay generally has little to no gas drive and does not start to really produce until water is injected.  If the Tannehill is productive on the property, it is up to 55 feet thick to the east of this well.

We will also have a possible pay with the Flippen Limestone and Sandstone at about 2200 feet.  The pay had shows in the Swenson #19 well’s sample logs.

For the above reasons, we are recommending drill the Swenson A-3 well at the appointed location.

During December and January 2019, Landmaster tested the use of a jet pump instead of a conventional pumpjack to produce its Swenson #6 well after having run a liner inside of it as described under the Swenson 1A well.  Prior to the installation of the jet pump, the pump jack was producing about 400 barrels water per day and 3 to 5 barrels oil per day.  The jet pump increased the electric bill by 5 times to around $2,000 per month from about $400 per month, but oil production rose to a steady 12 to 13 barrels oil per day.  The volume of fluid moved was increased to over 1,500 barrels per day.  At the same time, the electric bill on the saltwater injection well decreased even though the well was moving more water than before because the injection pressure had dropped.  This confirmed our suspicions that the 2 wells were in communication with one another.  However, even with the communication problem, the oil increase of 7 bopd more than made up for the increase in the electric bill.

The Swenson #6 and #9 wells are direct offsets to the Swenson #8 well which is the saltwater injection well and it is believe both #6 and #9 are in communication with the injection well.  The remedy for this is to inject a polymer solution which diverts the water to other areas of the reservoir where oil is located and will again begin to move toward the producing wells.

The Swenson #9 well is a direct offset to the Swenson #8 saltwater injection well and is thought to be in communication with it.  The well currently has a 4 ½” liner inside the 7” production casing set, but it has a hole in it also and is stuck.  This well will be one of the last wells we rework due to costs.

The Swenson #8 and #12 wells are designated by the Texas Railroad Commission (RRC) as saltwater injection wells.  The #8 well has 4 ½-inch casing cemented in it and was taking all the water we produce (sometimes over 2,000 barrels water per day) at about 600 psi before the installation of the jet pump.  After that, injection pressure dropped to around 400 psi. We are injecting the water into the Upper and Lower Swastika Sands.  The main problem here is moving the water through a ½-mile 2 3/8-inch tubing pipe.  Ideally, we should move the water injection pump to the wellhead which would lower our risks of a saltwater spill.  Costs to move the pump and set up a couple of water storage tanks would be approximately $30,000.  Or we could lay a new Salta Tubing line and purchase an additional water storage tank for a bit less.  A decision will be made later.

The #12 well was completed into the Upper Swastika and it tried to flow on the 4th swab after fracking.  The well was producing up to 30 barrels oil per day but also about 700 barrels of water per day with a progressive cavity pump (screw type pump).  The tubing anchor came unseated and dropped 20 feet.  We screwed back into it, but the little rig could not unseat it and its tongs were not strong enough to turn it.  It needs to be returned to production as a saltwater injection well at this time to accommodate the additional water we will be producing.  We have another saltwater injection pump on the property to set on it and power is already at the location.  The pump will handle 2,500 barrels of water per day – the same as the one on the #8 well.  We will need to set a couple of water storage tanks and another satellite telephone alert system.

Operating expenses on the Swenson wells have been extraordinarily high due to holes in the old well casings.  The #9, #14 and #15 wells originally had 7-inch production casing.  In the late 1980’s 4 ½ inch liners were run into these wells with a packer on the bottom.  When the #14 well was recompleted into the Upper Swastika, the 4 ½-inch casing began to come up out of the well during an acid job and had to be pulled.  Since we were running 2 7/8-inch tubing for production, it was thought the 4 ½ inch casing would be too small and could pose a danger of losing the well should anything fall into the well or a hole develop and drill cuttings or scale fall around the tubing.  Therefore, in that well’s case, no liner was put back in the well and instead a larger packer has been used to produce the well.  The result has been that the saltwater on the backside of the tubing has caused it to prematurely fail and when it does, it allows some of the water to seep into the tubing and then it works on the sucker rods causing them to prematurely fail also.  This well needs to have a new liner set inside the old casing set on a packer.  The procedure to run the casing would also require us to use a reverse circulating unit to clean the old production casing inside of any scale and debris so the 4 ½-inch casing may be inserted in the well.

Based upon tests with a jet pump in December 2018 and January 2019 in which oil production was more than doubled and water production more than tripled, the company plans to replace the small pumpjack on the #14 well with a jet pump.  This well was producing between 10 and 15 barrels oil per day so, based upon the previous tests, we would expect its production to increase to between 30 and 40 bopd recouping the investment shortly.  (See Swenson #6 Well History)

The #15 well needs to be recompleted into the Upper Swastika.  This well had all but a few joints of the 4 ½ inch casing removed from it years ago.  Reportedly, there are still 2 or 3 joints of 4 ½ inch casing and the packer sitting inside the 7-inch casing.  Again, we would need the reverse circulating unit and power swivel to clean the well out and wash over the 4 ½ inch pipe to pull it out.  Once it is out, we would complete the well and then run the 5 ½ inch casing inside of it to prevent premature tubing and rod failures.  The electric log looks much better on this well than some of the others and it is anticipated that it should be a very good oil producer.  And too, the Lower Swastika has much more separation from the Upper Swastika in this well than most of the others which should allow for much less water production.

THE KIEKE PROSPECT

The Kieke Lease is located in Haskell County, Texas approximately 1 mile northwest of the town of Stamford, Texas and covers approximately 228 acres.  It has had many wells drilled on it over the years with most targeting the Canyon Reef, the Lower Swastika Sand, and the Gunsight Lime.  Each of these pays have produced prolifically with the Canyon Reef and Lower Swastika producing over 70,000 barrels of oil in many of the wells in the field.  The Upper Swastika, however, has been produced in only a few wells. 

The Kieke Hess #5 well was reentered in August 2017 and completed in 2 sections of the Swastika Sand for 18 bopd and 280 bwpd.  Believing the water was being produce by the lower sand, a plug was set over that sand.  Production dropped to 6 bopd and 90 bwpd but was inconsistent.  Another plug was set over that sand and the well recompleted into the Gunsight Lime for 8 bopd and 15 bwpd.  This well needs to be reopened to the lower sand once a closer injection well is drilled.

SEEKING A PARTNER OR HAVE A TEXAS BASED PROJECT TO SELL?

South Plains Petroleum are always on the lookout for exciting new projects. If you have a project and are looking for a partner or you are looking to sell a project please contact our Prospect Acquisition and Appraisal Team on admin@southplainspetroleuminc.com