Junior Oil and Gas Companies Not Expected to Recover

Junior Oil and Gas Companies Not Expected to Recover

The ORM Agency has noticed that many junior oil and gas companies are not expected to recover any time soon since they have been hit by the combination of soft energy prices, disinterested investors and higher-cost projects that are favoring larger companies.

The oil and gas exploration sector had lost 17 publicly traded juniors in the past 30 months as benchmark U.S. oil prices had fell over US$100 about half as much. These small oil companies have played an outsized role in discovering and developing new oil and have pools and are often becoming targets that helped grow the reserves of their larger rivals. At the end of March, there were just 25 publicly listed junior companies that were producing between 500 and 10,000 barrels of oil per day and well down from 94 in the late 2007.

A single Duvernay well costs $13 million to $14 million to drill and complete which is an amount that could tie up a small firm’s entire annual exploration budget. If you use manufacturing processes to drill and complete several wells at the same time, you can cut then cost of a Duvernay well to $10 million.

The CEO of the company explained that you need to have a market cap in excess of a billion dollars in order to survive in the oil exploration industry and typically that means a production of more than 10,000 oil barrels per day. It is difficult as a junior and small company to raise so much money and get in the game and if you don’t have great currency, you’re just spinning your wheels says the CEO Brian McLachlan of junior Yoho resources. Yoho and two other small public companies, Trilogy Energy and Celtic Exploration, in 2010 were to drill one of the first Alberta Duvernay shale oil and gas wells using a horizontal drilling and multi-stage hydraulic fracturing. The only way to be able to get ahead is to come up with innovative technology begind the boom in U.S. oil and gas production.

Category Tech