Risk Factors. There has been quite a bit of debate about the risk levels of the MGM well going down. I would refer you to the article "Big Profits and Big Oil in the Great White North" on the "Seeking Alpha" webiste for more details, but here is a summary.
There are a number of risks in exploration:
MGM well is called I-78
1. Is there oil there? Risk low as well is being drilled 1 1/2 miles north of old well I-77. As can be seen below there is seismic line across I-78 and I-77 and I-55. The later two wells have logs and there is lots of oil there. I-77 has as much as 6 times the typical Eagle Ford well. This really is for real. How much of it will flow is the question.
2. Will the oil flow? (are there technically recoverable reserves).
- The Canol has higher porosity and Total Organic Content than Eagle Ford. This is positive.
- The wells are shallower and hence lower pressure. This is negative.
- The Canol is much more brittle and has less clay. This is positive.
- The formation is naturally fracture. This is very positive.
On balance, I would say that the Canol is as good or better than the Eagle Ford. However, as Sigma Kappa has pointed out. All this is speculation until oil flows. However, I think the odds ride with us. In gambling the house has the odds. In investing the odds ride with us.
3. Is there enough oil to make this commercial (economically recoverable reserves). Many folks are familar with the Husky/IFR Summit Creek. It has technically recoverable reserves, but no economically recoverable reserves in spite of some pretty impressive test results. The reason is because while the test was big, the reserves were small. The amount of technically recoverable reserves where too small to make it economic. (the size of the Summitt oi bearing formation is small) The Canol is different than the Summit property because we know that there is a hell of a lot of oil down there. Good flow tests will mean big technically recoverable reserves which the likelyhood of it being economic is higher.
The huge amount of oil down there makes it more likely that this play will be economic as the recovery rates don't have to be very high in order to get a lot of oil. In formations like the Bakken, the zones are much thinner. Because there is less oil in the rock, they need higher recovery rates to make things economic. On the other hand they have lower wells costs.
Remember that the MGM well is a vertical. We can expect flow rates 1/5 of a horizontal, so do not expect flow rates similar to what you hear for the Utica or Eagle Ford at this stage. A 100 bopd test will be good.
