SOURCE: VantageWire.com -- In oil and gas, exploration costs effect everything down the line towards production. The longer you take to pick a target, the more it’s going to cost you. While companies boast large land bases, in reality, only 5-7% of that land is actually prospective. So rather than blast up the countryside with seismic over an entire land base, some companies are taking a bird’s eye view of their land packages, walking away from the dead zones, and proceeding with data collection, from an airplane.
Piloted by NXT Energy Solutions [SFD-TSXv, NSFDF:OTCBB] the Stress Field Detection System (‘SFD’) is successfully identifying and ranking high-potential prospect leads. The client list includes majors and National Oil Companies such as BP, Pemex, Pacific Rubiales (PRE-TSX) and Ecopetrol to name a few. , Through separating the wheat from the chaff, NXT’s exclusive process is gradually beginning to gain widespread acceptance as the first stage in oil exploration.
From the sky, the SFD technology can identify trapped reservoirs in the first stage of the exploration cycle, and significantly reduce exploration risk when paired with seismic. For explorers, the difference can mean tens of millions in savings, while also speeding up the exploratory process by years. NXT airplanes are able to cover massive amounts of land, no matter the terrain. According to the company, SFD can identify the best oil and gas prospects in the first stage of exploration for a fraction of the cost of any other technology.
Take for instance the case of Colombia, where NXT is working with large Latin American E&P companies Between 2009 and 2012, 11 SFD prospect areas have been drilled resulting in 7 successful wells, and over 1.26 billion barrels of original oil in place (OOIP) discovered. That’s probably close to $20B worth of recoverabele oil discovered in three years.
In addition, 8 wells that have been drilled along SFD survey lines that did not warrant a recommendation from SFD (no indications of a trapped reservoir from the airborne survey), zero barrels were discovered.
While industry is steadily waking up to this new first stage of exploration, investors should take note the money this could possibly represent. We’re looking at $12 billion Global Geophysics market in 2010. If just 1% of that spending is equal to $120 million, it’s not that unreasonable to see NXT reach for even 0.33% of the market share by 2014. Being the only ones on the market capable of this technology makes the skies widen further.
The company seems to be built solely outward from its own cash flow, having a debt-free balance sheet, $4 million in the bank and pipeline of $5M in contracts expected to be completed in the next three months. Moving forward, the company’s growth should come organically, as their reputation builds around the world.
So far some of the better contracts that NXT has been able to deliver on have been over underexplored areas of Latin America. A recent $5.8M contract with Pemex will be completed in roughly 12 weeks showing just how quickly these surveys can be completed.
The process works by detecting the perturbations in the gravity field, which is affected by changes in sub-surface stress. By seeing the macro data provided by SFD, companies can obtain micro data with more targeted seismic, and far less disruption.
THE BOTTOM LINE
Spending your money wisely in the early stages of exploration can mean a significant improvement in netbacks per barrel. Major companies are already stepping up to use SFD in the first stage of their exploration, and with each success there should be more to come.
NXT’s goal of becoming a widely accepted first stage exploration tool by the industry puts the potential value of the SFD technology in the category of “superlative”.
Don’t be surprised if the next major oil discovery grabbing headlines comes from exploration that started with an SFD survey.
G. Joel Chury
for the Bottom Line Report
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