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Nighthawk holds a 50% interest in the Jolly Ranch Group project (“Jolly Ranch”) comprising the Jolly Ranch, Middle Mist and Mustang Creek areas, covering approximately 370,000 gross acres of Lincoln, Elbert and Washington Counties, Colorado. Running Foxes is the operator of the project and holds the remaining percentage interest.
Jolly Ranch lies within the southeast flank of the Denver Basin from where significant hydrocarbons are generated from Pennsylvanian sandstones and carbonates. The source of the produced hydrocarbons is the black organic shales that are generally interbedded with the carbonates. The shales at Jolly Ranch are currently within the oil generation window and there is reasonable certainty of reservoir and source rock continuity throughout the project area.
To date, 10 wells of 7,500-8,000 feet have been drilled on a core 50,000 acre area by Nighthawk and Running Foxes, all of which have encountered multiple pay horizons. Nine of these wells have been completed as production wells from which an aggregate test production of 1,088 barrels a day from seven of those wells was achieved. One well is being utilised as a water disposal well due to its prime location thereby lowering the costs associated with water transportation. Two of these wells remain to be tested. A further two shallower wells of 3,000-4,000 feet to test the Codell formation, another major production zone in the Denver Basin, have been drilled and cased for future production.
Of the several conventional production zones which have been penetrated the Marmaton is currently the most prolific. In addition, two major non-conventional zones, namely the Atoka and Cherokee shales have been put on test production.
The oil being produced is high quality ranging from 32-38 API and commands a premium to the West Texas Intermediate price.
The last six months have seen the testing and fraccing of numerous productive formations to determine the optimum production plan and also gain a greater understanding of this combined conventional and non-conventional play.
In addition to testing, our main efforts have been focused on proving up the extent of the asset to establish the project as a high value world-class shale play similar to the Bakken and Barnett shales. Even at this early stage in the development of Jolly Ranch, empirical similarities between these shales have been evidenced.
In July 2009 Schlumberger Data & Consulting Services, completed an independent evaluation of the oil in place covering 246,000 gross acres of the approximate 370,000 held within the project. The study was undertaken to assess resources in place in the Pennsylvanian (Upper Carboniferous) Marmaton, Cherokee and Atoka formations. The P50, or most likely oil in place, was calculated to be 1.462 billion barrels gross. In addition, a further model encompassing an area of 885,988 acres was generated and evaluated. The conclusion was that regional continuity of the formations was such that the resources in place are likely to be laterally continuous across the total acreage.
Development of Jolly Ranch continues with an extensive development programme comprising vertical and lateral wells and selective 3D seismic acquisition over key areas.
Petroleum System
Combining the results of the petrophysical, geological and geochemical analyses has led to an integrated understanding of the petroleum system present in the Marmaton, Cherokee and Atoka formations at Jolly Ranch. A petroleum system comprises the geologic components and processes necessary to generate and store hydrocarbons, including a mature source rock, migration pathway, reservoir rock, trap and seal. These “ingredients” and an appropriate relative timing of formation of these elements including the processes of generation, migration and accumulation are necessary for hydrocarbons to collect and be preserved. Exploration plays and prospects are typically developed in basins or regions in which a complete petroleum system has a likelihood of existing.
The geochemical analyses indicate that the organic rich shales at Jolly Ranch found in the Cherokee and Atoka formations have reached the hydrocarbon generation window and are capable of generating and expelling hydrocarbons. Greater thermal maturity is found as depth increases. Where mature, the organic rich shales found throughout the section, have expelled hydrocarbons over geologic time and have vertically migrated short distances into adjacent reservoir horizons.
As a result of these observations it is considered that there remains considerable hydrocarbon potential in the source rock suggesting that the Cherokee and Atoka plays can be extended, where greater burial depth will lead to higher thermal maturity and a greater volume of hydrocarbon generation.
Drilling downdip of the Jolly Ranch and Craig Ranch sections may be considered as the organic rich shales are likely to be more mature with greater burial depth and there may be clastic reservoirs with preserved porosity present. These potential reservoirs could be shoreline sandstones at the margins of the alluvial fans that were deposited at the eastern edge of the ancestorial Rocky Mountains during the Pennsylvanian period.
Geology
The Denver Basin is located in northeastern Colorado, southeastern Wyoming and parts of Nebraska, Kansas and South Dakota. The basin covers an area of approximately 70,000 square miles and is bounded on the west by the Rocky Mountains, on the southeast by the Las Animas Arch and on the northeast by the Chadron Arch.
Sedimentary rocks from the Cambrian to more recent ages are present in the basin and the sedimentary section is nearly 15,000 feet thick under the city of Denver and gradually thins by erosion, stratigraphic thinning and non-deposition toward the east. The basin is asymmetric, with a steeply dipping western flank adjacent to the Rocky Mountains and a gentle westwardly dip on the eastern flank.
The drilled stratigraphic column in the Schlumberger study area consists of Cretaceous through Mississippian rocks. The Pennsylvanian (Upper Carboniferous) Marmaton, Cherokee and Atoka formations lie at depths of between 6,100 and 7,800 feet. This interval consists of interbedded carbonates (limestones and dolomites) and organic rich, kerogen bearing black shales which are laterally continuous throughout the study area and are the primary source for hydrocarbons in the Pennsylvanian section.
Jolly Ranch Location
JOLLY RANCH
P10
P50
P90
Gross OIP Million Barrels
Nighthawk/RFP Area (246,000 acres)
1,220
1,462
1,742
Gross OIP Per Acre (barrels)
4,950
5,935
7,069
