Imperial Resources, Inc. (OTCBB: IPRC) is focused on the rapid development of niche oil and gas assets in continental North America to rapidly grow revenues and assets through its 100% owned subsidiary, Imperial Oil & Gas.
Strategically, Imperial concentrates on obtaining large working interests in development opportunities toward the low end of industry risk norms, but which have the growth potential normally associated with higher risk projects. This risk averse strategy aims to exploit high-growth projects which can deliver cash flows normally associated with higher risk projects, but without exposure to high risk failure rates.
- Imperial has existing production from its share of a well in Colorado County, Texas
- Imperial is well advanced in securing the Chisholm Trail (“potential Company Maker”) and the Salt Water Disposal Project (“low risk, cash cow”) opportunities
- A number of other substantial pipeline opportunities are also available to Imperial and are under evaluation
Imperial also expects to identify opportunities which lack the enormous potential of Resource Plays but which may provide solid base cash flow at minimum risk to strengthen the foundations of the business. The operational team have excellent access to projects suitable for Imperial across continental North America. These assets are available for many reasons; they may be considered too small for the Oil Majors, poorly developed by the existing operator, or in need of partners in a capital starved environment who can also contribute high level expertise. Imperial can provide this expertise, its management having considerable reservoir development, land acquisition, operational and experience skills.
Management Remuneration
To ensure oil and gas subsidiary management operates most efficiently, operational management and consultants are predominantly motivated by a success based equity structure, on a project by project basis, as opposed to receiving salaries and consultancy fees regardless of success for Imperial. This dramatically reduces operational operating overhead and puts the management responsible for building value firmly in the same boat as investors: Success for Imperial is the fundamental key to operational management reward.
There are no long term large cash salaries or consultancy fees to drain shareholder’s funds at the subsidiary level. Operational management are predominantly rewarded by way of royalty payments derived from the revenue from successful projects, aligning their interests directly with shareholders.
Opportunities are reviewed on an almost daily basis. Management actively pursue any opportunity which fits the criteria of lower to low risk at the same time as delivering quick payouts and long term profits. Imperial has extensive industry relationships and a strong management team, both in-house and contracted-in, working to strict investment criteria to identify low risk opportunities which combine rapid payouts with long term revenue streams.
Imperial believes all companies should work this way, especially in the oil and gas industry, where critical drilling decisions have to be made.
Colorado County, Texas Project
Imperial owns a 14.9% working interest in a drilling opportunity in Colorado County, Texas. This prospect is operated by El Paso Corporation (a top 10 independent US explorer and producer) and Imperial receives monthly production revenues from the first well completed in this project. Imperial believes this to be a high grade prospect with considerable exploration upside under the correct market conditions. Imperial has identified a project which it believes can deliver massive upside at an acceptably low risk in a true resource play in Oklahoma. Management has successfully negotiated an agreement with the Operator and is under contract for a 50% working interest ownership targeting an initial 5,000 acres of land with an estimated 15 wells. The operator has already enjoyed considerable success in their similar projects having already drilled and completed a number of horizontal wells with outstanding results. Imperial is in discussions to acquire a substantial interest in a Salt Water Disposal Facility in the heart of the Barnett Shale in Texas.
Management believes the business to be at the lowest end of the risk spectrum. Once the required work has been completed and the facility is operational again, it is expected to generate very substantial, predictable monthly cashflow and immediate capital value uplift.
Chisholm Trail – Key Project One
Large, early positions in successive Resource Plays offer smaller oil companies an opportunity to build massive asset bases relatively rapidly and out of all proportion to their original size. Minor oil companies can be transformed by a single judicious choice of development: the stock market has happy history of success stories based on successful “Company Maker” Resource Play developments, such as the Bakken Shale, the Eagleford Shale and the Marcellus Shale. Imperial has agreements in place to take a 50% working interest participation in this major Resource Play in Oklahoma. This is a fifteen (15) horizontal well development program including an acreage position of 5,000 acres.
The wells are relatively low risk being categorised as Proven Undeveloped Reserves, attracting a P90 or 1P rating. Imperial believes the reserves could be worth up to 3,450,000 barrels of oil and 30 bcf for this prospect alone, equating to 7,500,000 BOE (energy equivalent over fifteen wells). The key to exploiting these plays is to get into them early. In Imperial’s case the Chisholm Trail Prospect offers this opportunity at a relatively low risk, being predicated on recent proven technical advances to rapidly develop a well known productive formation.
Potential “Company Maker” and Resource Play in Oklahoma
Imperial has entered into a contract for a 50% working interest ownership in this potentially transformational project, a “Resource Play”. The Chisholm Trail Prospect is an absolutely ideal fit for Imperial in its ambition to rapidly transform itself, at relatively low risk, into a significant oil and gas producer. The Chisholm Trail Prospect is therefore a potential “Company Maker” for Imperial.
A number of offsetting wells nearby have recently been completed with great success; all wells drilled have been completed and are producing. Initial flow rates from some wells have exceeded 200 barrels of oil per day and 2,000 cubic feet of gas per day. Produced oil is sweet with a high API specific gravity. The associated gas is also sweet and has a very high BTU content commanding a premium price. No H2S is present.
Infrastructure is already in place with gas pipelines less than a mile from virtually all drill sites. Engineering risks are minimized. The formation is of relatively low pressure with shallow drill depths and reasonable length lateral well bores. Imperial believes that a successful development of these fifteen relatively low risk wells could result in over $130,000,000 US of undiscounted cumulative gross cash flow to Imperial at current prices. Additional potential. The aerial extent of this formation could allow a larger field development of several thousand additional wells, offering a stratospheric upside for Imperial, well beyond even “Company Maker” success.
Salt Water Disposal Project in Heart of Texas Barnett Shale
Key Project Two
Imperial Investors can be confident that Imperial will spread risk, even across is portfolio of already low end risk projects. The Salt Water Disposal Project fits that bill, being a unique, very low risk (non exploration) opportunity. Imperial is currently re-negotiating this contract to acquire a majority participation interest in a supremely located Salt Water Disposal Well.
Immediate Imperial valuation uplift on completion:
- Highly desirable business in best location in field, $5.5m invested to date by previous owners, the property
- Disposal well facility will likely be worth considerably in excess of the invested amount on the day it is opened.
- Significant oil sales income from oil recovered from the disposal water in addition to disposal fees.
All wells in the Barnett Shale (the biggest gas producing structure in Texas) must be fractured (“frac’ed”) to produce. After the frac treatment, the water used in the frac is pushed back up to the surface by the gas. The well produces this frac water for years after the well is frac’ed. The frac water picks up salt and other contaminants whilst in the ground. This contamination, combined with the chemicals added prior to the frac, requires that the water be disposed of in a safe and ecological manner, the most efficient way being by disposing back into the ground into a naturally salt water containing formation by injection via a salt water disposal well.
The Salt Water Disposal Project facility provides this solution in the very heart of the Barnett Shale. Previous owners invested $5.5m cash to develop the Salt Water Disposal Well facility and then operated using a well that disposed in a shallower formation. Due to this injection into a shallow formation, the operator of a nearby gas well alleged that the well affected his well’s performance and operations were halted by the Texas Railroad Commission. The Commission, recognizing that the approved facility had a vast amount of capital already expended and the facility was much needed, approved it to continue operations subject to drilling the injection well into the deeper and more preferred Ellenberger formation and at the same time they authorized the disposal of many more barrels of frac water. A subsequent lack of funds required to deepen the well to the Ellenberger caused the property to become available to Imperial creating this opportunity. The Ellenberger is the favoured formation for disposal purposes in this part of Texas. It is separated by thousands of feet of rock from any fresh water bearing formations.
The Imperial plan is to deepen the existing well to the approved depth, reopen the facility and to immediately secure contracts with certain water hauling companies who will welcome a very local facility to reduce transport costs. This is expected to assure Imperial of success leading to consistent, substantial cash flow that can be counted on every month. Once operations have been proven successful, Imperial will request that the Commission
increase the daily rate permit to double capacity at no development cost to Imperial. This permission is expected to be granted administratively.
“Low Risk, Cash Cow” Imperial has identified and negotiated this solid transformational project, a virtually unique, cash generative opportunity.
The Salt Water Disposal Project is optimally located for a disposal well being the closest disposal facility to the “historical core area” of the Barnett Shale and optimally located in the area of the Barnett with the largest concentration of wells. The Barnett Shale is the largest gas field in Texas. There are approximately 6,000 wells producing contaminated water within a 20 mile radius, which will continue to produce salt water for many years to come.
- Location is critical for quicker turnarounds for the disposal trucks and more trips per day to increase their profitability.
- Barnett Shale gas wells flow back contaminated water for years, producing a constant and known demand for disposal.
- One of the most cost effective ways to increase production from a Barnett Shale gas well that has depleted is to re-frac, starting the entire production cycle over again and consequently, to Imperial’s advantage, the entire salt water disposal cycle.
- Perpetual permit from the Texas Railroad Commission to dispose of 15,000 barrels (current prices between $0.40 and $0.60 per barrel) of contaminated water per day with a strong possibility to increase (by way of an increased permit) to 30,000 barrels per day after 6 months of operations;
- Estimated to generate over $300,000 per month gross to Imperial after Year Two with early cashflow increasing up to that amount during the proceeding months;
- New competition unlikely to affect revenues due to misconceptions regarding environmental effects waste disposal permits nearer metropolitan areas are unlikely.
- Current competition is operating at or near full capacity despite being further from the largest number of wells and more remote from the targeted original core production area of the Barnett Shale;
- Effectively unlimited total volume disposal capacity, virtual perpetual asset;
- Surface Facility already complete, including pumps, tanks, separation units, turning lanes into the facility.
- Everything is ready to go upon the well being deepened into the Ellenberger formation, a massive 2,000 thousand feet thick structure capable of sustaining a constant input of huge amounts of disposal water without contamination risk to other oil and gas producing formations;
- Experienced operating personnel familiar with the facility available and ready to go back to work;
- Large acreage surrounding facility for value added services: truck parking close to the field and pipe yard.
Mineral Lease and Well Bore – Montague County, Texas
Imperial Oil & Gas completed initial due diligence relating to the non-binding Letter of Intent (‘LOI’) for the purchase of a 35 acre mineral lease and an associated existing abandoned well bore in Montague County (‘Target’), Texas announced on December 21, 2010.
Review of historical offset well data obtained from the Railroad Commission of Texas (the primary regulator of the oil and natural gas industry in Texas) and other sources indicates that in the area of the Target:
- A number of nearby wells provide adequate well control;
- Nearby commercially successful analog wells produced cumulative totals generally in excess of 17,000 barrels of oil;
- Nearby commercially successful analog wells had a long life span;
- The existing wellbore is adequately distant from, or is up-dip of, the bulk of the productive wells in the area so as to assume its drainage area has not been affected by previous production;
- The most promising Target formation will require a minimal deepening of the existing wellbore of only approximately 1,250’.
The Company expects to run a wireline into the existing wellbore in the next few days to assess its condition and to concurrently verify title claims. In the event that the Company is satisfied, it expects to close the acquisition of the Target as soon as possible. In line with Imperial’s aversion to risk all due diligence is expected to be completed at a very low cost enabling the Company to walk away with minimal impact if it is not entirely satisfactory.
The Target contains multiple productive formations, including the Strawn and Cado Conglomerates. Imperial understands that the existing wellbore was abandoned due to a lack of completion funding in a commodity price environment far different from that prevailing today. Imperial intends, subject to satisfaction of the balance of due diligence, to re-enter the well with a view to deepening the well bore. In the event that the deepened well is commercially successful Imperial plans to complete it using modern technology not available at the time of abandonment or at the time of completion of the nearby analog wells. The Company’s aim is to rapidly put the well on production at a very low entry cost.
The Strawn Conglomerate in this area is known to consist of multi-pay zones containing both oil and high BTU content gas, with long term flow characteristics. If progressed to contract, Imperial believes that the potential cashflow from a well successfully completed and put on production will provide useful revenues as the Company progresses its planned transformational Oklahoma Resource Play and Salt Water Disposal Well opportunities.
Imperial Oil and Gas, Inc. Management
Robert R. Durbin – CEO
Mr. Durbin as an attorney who practices exclusively in oil and gas has acted in a General Counsel capacity to several oil and gas exploration and production companies and related service companies. He has used his technical undergraduate background to litigate hundreds of cases to successful conclusions. He has drafted and reviewed thousands of transactions for many energy companies, except from 2002 through 2003 when he was General Counsel and Vice President of Star of Texas Energy Services, Inc. Prior to that Mr. Durbin practiced primarily oil and gas law at his own firm (1987-2002), was Adjunct Professor, Southwestern Professional Institute (1998-2002) and regional manager at APL Services, Inc. (1979-1986).
Imperial Oil and Gas, Inc. Significant Contractors
Eugene G. Lawley, III – Land Manager
Mr. Lawley is an attorney by trade who is licensed in Texas and Mississippi. He has practiced exclusively in the oil and gas industry for the past 29 years. For the most recent 10 years his practice has been focused primarily on Title Examination and Land Management. Prior to that time he has practiced in those areas as well as Securities Transactions, Broker/Dealer registrations and compliance and was General Counsel for Trilogy Oil Corporation from 1984-1987. He has worked with major energy corporations, including Shell, Chevron, Exxon & Mitchell Energy, to develop land acquisition strategies and supervised as many as 20 Landmen toward achieving those goals.
Richard C. McPherson, RCM Inc. – Independent Evaluator
Mr. McPherson is a member of the Society of Petroleum Engineers and is a Registered Professional Engineer in Texas. He is President of RCM Engineering, Inc. and co-founder, Vice President, and Chief Operating Officer of McDay Energy Corporation. He is a graduate of Texas Tech University (1975) with a B.S. degree in Chemical Engineering. He has worked for El Paso Natural Gas Co., and in 1978 became the Area Drilling Engineer for Good Hope Refineries, Inc. in Laredo, Texas. His duties at Laredo included engineering support for ten drilling and workover rigs, well evaluations, plugging recommendations, compressor designs, and operations of 350+ wells. Since 1981, Mr. McPherson has been an independent petroleum consultant, and in 1985 formed RCM Engineering, Inc. He has also owned and operated a well servicing company operating in West Texas and as an independent consultant has extensive experience drilling, completing, and operating wells ranging from shallow (300’) pumping oil wells to deep (20000’+) high pressure gas wells. Mr. McPherson has also conducted reservoir evaluations for public and private oil and gas companies as well as for several lending institutions. He has no interest in any aspect of Imperial Resources, Inc. or any of its subsidiaries and is compensated only as an engineer for third party independent evaluations.
Imperial Resources Inc.
106 East 6th Street, Suite 900
Austin, Texas 78701
Phone: 888-575-4772
Phone: 888-575-IPRC
Website: http://www.imperialresourcesinc.com
Link Here to Download PDF Summary
Forward-Looking Statements: Statements in this news release that are not statements of historical fact are forward-looking statements, which are subject to certain risks and uncertainties. Forward-looking statements can often be identified by words such as “expects,” “intends,” “plans,” “may,” “could,” “should,” “anticipates,” “likely,” “believes” and words of similar import. Forward-looking statements are based on current facts and analyses and other information that are based on forecasts of future results, estimates of amounts not yet determined and assumptions of management. Actual results may differ materially from those expressed or implied by forward-looking statements due to a variety of factors that may or may not be foreseeable or within the reasonable control of the Company. Readers are cautioned not to place undue reliance on such forward-looking statements. Additional information on risks and other factors that may affect the business and financial results of the Company can be found in filings of the Company with the U.S. Securities and Exchange Commission, including without limitation under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K filed on July 9, 2010. Except as otherwise required by law, the Company disclaims any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this news release to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
IPRC Disclosure: Pentony Enterprises LLC entered into an investor relations consulting and market awareness contract on January 7, 2010. A non-controlling third party has agreed to compensate us nine thousand five hundred dollars for coverage. We have taken no free trading shares. To avoid all potential conflicts of interest, we never sell shares into the open market during an active market awareness or investor relations program. This means that as we release new information about a particular client company either on our site or otherwise authored by us, you can be confident we are not selling shares at the same time. We hold only restricted shares and will not register or sell these shares at anytime during the promotional period. Pentony Enterprises is not a registered investment adviser or a broker/dealer. Pentony Enterprises LLC makes no recommendation that the purchase of securities of companies profiled in this web site is suitable or advisable for any person, or that an investment in such securities will be profitable. In general, given the nature of the companies profiled and the lack of an active trading market for their securities, investing in such securities is highly speculative and carries a high degree of risk.
