Coastal Petroleum signs deal to drill a Twin well

Coastal Petroleum signs deal to drill a Twin well

August 18, 2006 Filed Under: Mining Services, Oil and Gas  

Coastal Petroleum Company has signed a farmout agreement with two other oil and gas companies to drill a twin well to Montana’s only producer from the Lodgepole Formation.

Under the Agreement, Coastal acquired the right to drill the twin to the Evaline 1-18 well located in Section 18, Township 30 North Range 45 East in Valley County, Montana. In addition, Coastal has been named the operator of the well until such time as the well has reached production and would receive an 11.75% working interest in the well. The Joint Operating Agreement covering the drilling operation includes Oil For America, Helis Oil & Gas Company, L.L.C., and Coastal.

Unlike with Coastal’s other Lodgepole Reef prospects in Montana, this is an opportunity to drill into a Lodgepole Reef already known to contain oil and gas. The Evaline 1-18 produced from the lower edge of a Lodgepole reef when it was completed in December 2002 at calculated rates of 1400 barrels of oil per day (”bopd”) from drill stem test results and 1508 bopd from initial production testing before drawing in water. The twin will target the higher top of the reef further from the water contact and is expected to reach those same production rates without water. The existing surface facilities can immediately process the oil. Coastal may also participate in two additional wells involving other Lodgepole Reef prospects within one mile of the existing Lodgepole producer.

In mid January of this year, Coastal began drilling a well in Blaine County, Montana, the Listou well, to test the farthest margins of the Williston Basin for Mississippian Lodgepole formation reefs. This well is 165 miles west of known production in Valley County at the Evaline 1-18 Well in eastern Montana. Coastal hit the Lodgepole reef as predicted by its geologic technologies, but the reef had been flushed with fresh water, presumably from mountains to the south. There were several other prospective formations and some of those have subsequently been tested without success, but two remain to be tested that have potential for gas production. One is being evaluated and the second remains to be tested. The Listou well tested the technology’s ability to locate the reefs on the margin of the Williston Basin successfully, but because they are apparently flushed with fresh water in that area, Coastal will continue to focus on its Valley County, Montana Assembly close to known production.

The principal focus of Coastal’s exploration strategy in Montana is the Valley County, Montana Assembly, made up of 137,163.26 net acres. Coastal has identified a large number of Lodgepole Reef prospects within the Assembly and is currently high grading these prospects so they may be permitted. The Assembly also has a number of other prospective formations that may produce oil, gas or both, including shallow Eagle and Judith River gas sands and the deeper Bakken Shale formation. Ware said Coastal has obtained four permits from the State of Montana to drill wells to test prospects in the Assembly and that Coastal is making preparations to form a Federal Exploratory Unit which could increase the acreage under operation significantly. The information and experience with Evaline and the twin well will also enhance and assist in exploration on Coastal’s other Montana leases in the Valley County, Montana Assembly.


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