Clouds over the oil investment space are obscuring a few rare wealth-creation opportunities. The history of exploration indicates that massive discoveries are often made in environments of gloom.
Golden Giant Mine (1982), Eskay Creek (1987), Voisey Bay (1993), Ekati Diamond Mine (1996), Crescent Point Energy (2003) are examples of companies that struck it rich by exploring aggressively when the market thought they were crazy.
Saturn Minerals (TSX.V: SMI) (FRANKFURT: SMK) is a junior Canadian Energy Company focused on the northern section of Williston Basin which has oil bearing formations similar to the production center in the southern parts of the basin in Manitoba, Montana and North Dakota. Saturn acquired more than 370,000 acres of oil and gas exploration permits for the Bannock Creek and Little Swan projects near the town of Hudson Bay in Saskatchewan.
“We have encountered strong evidence that we are operating in a new petroleum system,” stated Stan Szary, Saturn’s CEO in an exclusive interview. “We’ve discovered at least two traps on the Bannock Creek property, which we believe could contain large amounts of conventional light oil, at less than 1,000 meters in depth.”
Saturn has completed the interpretation of the latest seismic data totaling 60 km. The first identified structures on Bannock Creek are approximately 480 and 1,920 acres in size and compare well to the “Tyvan” oil pool, producing from the Red River and Winnipeg Sands Formation.
“Oil is migrating through our property,” stated Stan Szary, CEO “ and we believe it is coming from the deeper parts of the Williston basin. Oil will move until it is trapped. You want your structure to be closed off on four sides and sealed at the top”.
Szary is pleased to report that the recently acquired data has confirmed the anticlinal four way closure of a drillable prospect on the Bannock Creek property.
This closed fault bounded roll over structure is 480 acres minimum in area and has the potential to contain up to 38 million barrels in place of resource from all three targeted reservoirs. Saturn has recently been granted a permit and license to drill this oil well.
“The present oil environment has caused drilling costs to come down,” stated Szary. “We originally estimated about 750,000 CAD to drill the well to depth and confirm a discovery. Recently, we got a quote of 550,000 CAD to confirm a discovery.”
There’s an old saying that ‘the market never lies’. Saturn’s stock price is about 30% higher than it was a year ago - reflecting the market’s optimism that there is potential for a significant petroleum discovery.
“This is a brand new area of the Williston basin that has had very sparse exploration,” stated Szary. “Our goal is to expand the production profile of the Williston Basin to a new area with a conventional light oil discovery”.
Light crude oil produces a high percentage of gasoline by volume. In the exploration stage, it offers an attractive risk/reward ratio for investors because the required conventional vertical holes cost 350,000 - 700,000 CAD per hole (ten times cheaper than a horizontal frack well).
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“We are able to explore on a modest budget,” explains Szary, “But the production economics are even better. Our geological team estimates the cost of production, based upon a successful discovery, at less than 25 CAD a barrel (including transportation). With optimized economies-of-scale, that could go down to 15 CAD a barrel.
With horizontal drilling and fracking, the costs per barrel recovered are typically 60 CAD and up - so clearly our economics are much better.”
The Williston Basin is a large area within the Western Canadian Sedimentary Basin, which goes from the Northwest Territories down into South Dakota, North Dakota and Montana. It is comprised of several ancient seas over 400 million years old.
“This is an excellent development environment for us,” stated Szary. “The Canadian dollar recently declined from par with the US dollar to about 80 cents. That’s a significant boost for us, because our costs are in Canadian dollars and our sales will be in US dollars.”
In the current market, SMI would receive 65 CAD per barrel, with costs of about 25 CAD per barrel.
“Timing is important,” confirms Szary, “It is good time to be drilling for conventional oil. The price of oil will go up. We don’t know when. But any movement up is pure profit for us.”
The proposed vertical drilling has an estimated total depth of less than 1,000 meters (3,280 feet), down to the Precambrian zone with no horizontal drilling or fracking required. The drilling time is estimated to take 10 days plus coring and testing.
“We have a once-in-a-lifetime opportunity to build an oil production company in the best extraction jurisdiction in the world,” stated Szary, “Throughout history ‘Wild Cat Drilling’ has created astronomical wealth for early investors. My geological team, the data we are receiving, and the market, are telling me that this is not just a dream.”
Annual oil production in the Williston Basin has increased 2,000% in the last decade. Since 2006 it has produced 550 million CAD worth of oil.