Exploration and Production
Recovery Energy's primary focus is on growing revenue, cash-flow and reserves through conventional drilling as well as unconventional drilling of the various prospective oil horizons on its leasehold. In addition to being prospective for the Niobrara oil shale formation, the Company's asset base is comprised of current production and reserves from the J sand and possesses extensive potential for other hydrocarbon-bearing formations such as the Pierre Shale, Codell, Greenhorn and Paleozoic horizons.
Recovery Energy is continuously evaluating its geologic and reserve recovery potential and currently has identified upwards of 150 drilling targets, both conventional and unconventional. Of primary interest are cost-effective exploration and development opportunities proven by geologic and geophysical analysis in both the J sand and the significant emerging Niobrara oil shale formation and other hydrocarbon-bearing formations such as the Pierre Shale, Codell, Greenhorn and Paleozoic horizons. Recovery Energy is either directly conducting or has agreed to participate in 3-D seismic shoots on much of its holdings.
Conventional Drilling Activity:
J Sand – A Foundation on Current Production and Cash-flow
The company’s conventional drilling activity is primarily focused on the J sand. Beginning in the 1940s and through the 1970s the J sand was the primary producing horizon in the DJ Basin.
Recovery Energy’s conventional drilling focuses on historical efforts, which included concentration on fluvial facies of the J, and another subset of the J sand’s sedimentary depositional environment: the marine facies. The marine facies doesn’t have as high a porosity and permeability as the fluvial facies, but it is very conducive to current frac techniques. The Company’s geologic data shows that Recovery Energy’s land is well-positioned to exploit both fluvial and marine facies potential. J sand drilling efforts will be through vertical well drilling in conjunction with fracing to explore for oil. The excellent economics and the low cost, low risk attributes of the J Sand give foundational value to Recovery Energy. Total reserve potential is estimated to be in excess of 10,000,000 BO.
Unconventional Drilling Activity: Emerging Niobrara and Additional Horizons
The DJ Basin, due to its close proximity to The Rockies, has a natural advantage over other shale plays such as the Eagleford and the Bakken, as a result of its structural tectonic setting. The increased stress of the region, due to higher pressure, creates natural fracing where permeability exists with oil existing in the fractures. The Silo Field, for example, was drilled targeting natural fracing.
The DJ Basin’s stress field is more anisotropic than the others; rather than being uniform, it has properties that differ according to the direction of measurement, thus imposing more natural fracing. Utilizing 3D seismic and sophisticated geochemical data, Recovery Energy’s Niobrara strategy focuses on areas with fracture-dominated reservoirs and matrix-dominated reservoirs. The company will incorporate this natural advantage with its technologically advanced horizontal drilling program.
Early industry results suggest that the DJ Basin’s extensive Niobrara Oil Shale likely contains multiple core areas with the following characteristics: 1) 6,500’-9,000’ target depth, 2) 250’-350’ thick, 3) substantial in scope and scale based on 3D seismic models, and 4) contain natural fractures. Recovery Energy’s acreage positions throughout the northern half of the DJ Basin give the company significant exposure in what is believed to be both the matrix porosity and naturally fractured areas of the Niobrara Shale.
Additional Recovery Energy Oil Shale Horizons/hydrocarbon-bearing formations include:
• PIERRE SHALE: Parkman Sandstone has hydrocarbon sample shows.
• CODELL: 10’-30’ thick, oil-saturated, tight sandstone with limited production in the prospect area. Major productive interval in the Wattenberg Field. May provide multi-lateral upside with Niobrara.
• GREENHORN: Limestone / Shale Interval – Self-sourcing rock (300’ gross thickness) is similar to Niobrara with adequate log response, depth of burial and free oil recoveries (DST’s) nearby to be prospective within the area. Behind-pipe potential may exist in vertically drilled and cased wells.
• DAKOTA: Dakota and Lakota Sandstones – Fluvial-deltaic systems. Produces at Pine Bluffs Field area leasehold.
• WOLFCAMP: Paleozoic – Permian limestones and dolomites with shows and major production near the Company’s Wilke and Vrtatko area leasehold.
Recovery Energy holds 150,000 gross, 132,500 net acres of mostly long-term leasehold in the Denver-Julesburg Basin, primarily in Weld County, Colorado, Goshen and Laramie Counties, Wyoming, and western Banner and Kimball Counties, Nebraska. The company continues to evaluate additional DJ Basin acquisitions on an ongoing basis.
