Cross Creek Gas/Condensate Field
About Cross Creek
The Cross Creek Gas/Condensate field is located on the Humble Salt Dome about 15 miles from downtown Houston, Texas, and 5 miles from George Bush International airport.
Hydrocarbons were discovered trapped in the Humble Dome following observation of oil bubbles in the San Jacinto River during 1887. During the early 1900’s Humble city became an oil boom-town due to production from the Dome following the first commercial well drilled in 1905.
Texadon has a controlling interest (75% working Interest) and operate the producing Cross Creek Gas/Condensate Field (Cross Creek).
The Cross Creek leases have a gross area of 1,517 acres (about 614 hectares). The Cross Creek leases are held by production and will remain current while hydrocarbons are produced from the field. All of the Cross Creek project wells are now producing at lower than achievable stable gas rates of up to 750 MCFGD and 10 BOPD of 450 API condensate. The plan is to undertake remedial well operations as described in the table to significantly increase daily production and hence increase revenue.
There are no environmental conditions imposed on the field. Nor are there any restrictions imposed by the Texas Railroad Commission (The state government department which oversees hydrocarbon production and exploration).
Geologically, the Dome (which in a hundred years following initial production produced over 150 million barrels of oil), formed as a result of a predominantly deep seated salt diapir rising to within 500 feet of the surface.
Most of the historic production has come from Miocene sands in the cap rock. The Humble Salt Dome is about three miles in diameter having a steep salt face on its north and western flanks.
Discovered by Chevron, the Cross Creek Gas/Condensate Field is situated on the western flank of the Humble Dome. Cross Creek takes advantage of shallow sand reservoirs with potential migrating hydrocarbons and reservoir recharging from deeper flank sands.
There are a number of Wilcox Sands that that have not been not been completed including the sub-salt well that found a gas reservoir at a depth of 16,400 feet and beneath a 4,000 foot salt overhang. Most of the production today, however, has come from Miocene sands at a depth of about 10,000 feet. Since being drilled on the mid 1990’s these wells have produced over 18 billion cubic feet of gas.
Most of the past production at the Humble Dome has come from shallow cap rock sands. This field contains multiple reservoirs which means once one is depleted, new perforations can be shot into other zones to enable production from each well bore to continue. The average unit well production in the region is one million barrels (BOE).
Texas is a major hydrocarbon province and the state has the largest production of oil and gas in the USA. The State alone is ranked 8th in worldwide production. Significant production within the region of Cross Creek means there is existing infrastructure and extensive technical expertise providing lower costs than most places in the world resulting in lower opex and capex. Cross Creek is situated close to the largest refineries in North America which provides low transport costs for liquids and extensive pipeline network for gas transport.
During the mid 1990’s, Chevron leased over 2,000 acres over the western flank of the Humble Salt Dome. While holding the leases Chevron drilled ten directional wells, of which 9 are within the Cross Creek Leases, seeking flank gas production at a depth of about 10,000 feet.
Chevron sold the field in 1998. Since that time the leases have been owned by large companies with a drilling focus elsewhere. No rig workovers or recompletions to the next zones have been performed over the last twenty years. Cross Creek contains six producing wells. All of these wells have leaking tubing, plugged perforations and salt plugs that require remedial rig or coiled tubing work. In addition, the production history for these fracked wells shows precipitous drops in production that can be remedied through coiled tubing HF acidization work. There are also perforated zones available for fracking as well as unperforated sands in the Lower Wilcox A, Wilcox B and Wilcox C sand reservoir zones. Also the subsalt sand at a depth of 16,400 feet was drilled but never been completed. This zone has the potential for a high pressure, high rate gas and oil completion.
- Texadon’s plan is to enhance production from the Cross Creek gas/condensate field near Humble, TX
- Cross Creek is currently producing and generating cash flow
- Has working interest of 75%
- Vendor payments of US$0.36m p.a. over 3 years (Total of US$1.08m)
- Texadon must undertake remedial work on existing wells before receiving revenue
- Development will comprise low-risk workovers, and one subsalt completion
- Cash flow generated will be used to expand the portfolio
Development plan summary
- At least 4 wells scheduled to be completed and generating revenue within 4-6 months
- Option to complete 1 additional workover at cost of US$2.5m
- Priority is remedial work (acidizing and tubing) to boost initial production from three shut-in wells
- Production from each workover anticipated within 30 days
- Receipt of first revenue from production expected within 28 days
- Gas production is ‘wet’ – high value liquids (condensate) produced with gas
|Bahr #7||Multi-stage frack||508,000||2,400||20|
|Bahr #9||Multi-stage frack||508,000||2,400||20|
|Bahr #3||Subsalt completion||2,500,000||5,500||40|
- Low capex delivers immediate production increases
- Workovers expected to cost US$250K – US$350K per well for straightforward remedial work
- Worked over wells can be placed into production very quickly
- Multi-stage new technology workover jobs expected to cost up to US$500k per well
- Using new workover techniques, wells expected to deliver step change in production
Cross Creek Economics
|Proven and probable reserves:||10.1 BCF of gas
114,000 bbls of associated liquids
|Texadon equity:||75% (operatorship)|
|Existing gas production:||400 mcfpd|
|Expected production post work programme:||10,900 mcfpd + 70-90 bopd (gross IP)|
|Low opex:||Less than US$0.14 per mcf|
|Reserve life:||Up to 13 years|
|Low workover capex:||Workovers US$250K - US$500K|
|New wells cost:||US$2.5m – US$5.0m|
|Pay back period estimated:||Within 12-18 months|
Proposed Work Programme
Texadon will revamp 7 productive gas/condensate wells drilled within the lease. The proposed work programme and anticipated results are contained in the table below.
This development programme is expected to cost US$5 million (£3.8 million) for 75% working interest and take 4 months to complete.
Projected net revenue for the first full productive year is expected to be US$6.5 million. All planned operations designed at increasing production and hence production are via workovers on existing wells. No new wells are planned at this time but sidetracks are possible in the future.
The existing infrastructure on Cross Creek has a replacement cost of US$2.5 million while the field has proven reserves of 6.1BCF of gas. Currently before undertaking workovers on existing wells this field is producing in excess of 500 MCF of gas per day. At optimum production the 9 wells on Cross Creek are projected to produce at a rate of over 15,000 MCF of gas per day and 400 BOPD.
The purpose of this Placing is to provide the Company with funds to complete the purchase of a 75% working interest in the producing Cross Creek Gas/Condensate Field by spending funds as detailed above to revamp this field and for general working capital.
The Key terms of the Option Agreement are for Texadon to undertake and complete remedial work on six existing producing wells as detailed above.
As part of its business strategy, the Company may make further acquisitions of similar assets within Texas to increase its revenue.
|Bahr #1||300mcfpd+5bopd||Workover||On production|
|Bahr #4||300mcfpd+5bopd||Tubing job||On production|
|Bahr #7||2400mcfpd+10bopd||Multi-stage frack||On production|
|Bahr #9||2400mcfpd+10bopd||Multi-stage frack||On production|
|Bahr #3||5500mcfpd+40bopd||Subsalt completion||On production|
- Net to Texadon’s 75% W.I.
- Gross funding of US$5.5m generates c.US$15m of cumulative net cash flow
- Net cash flow after payment of royalties, vendor payments, minority interests, all taxes, opex and G&A
- Assumes average US$2.75 gas price, US$60.00 liquids price
- Gas price of US$3.25 per mcf (2018 average) increases project net cash flow to US$17.9m
- Lower gas price of US$2.25 reduces project net cash flow to US$12.4m
|Item (US$ '000)||2021||2022||2023||2024||2025||2026||2027|
|Net cash flow after royalties and local taxes||7,696||6,810||4,398||2,973||2,023||1,447||1,005|
|Minority interest 25%||-1,924||-1,703||-1,099||-743||-521||-362||-251|
|Director and consultant fees||-300||-300||-300||-300||-300||-300||-300|
|Net cash flow after royalties and local taxes||4,932||4,268||2,458||1,750||1,082||605||274|
|US Federal Taxes||0||0||0||-367||-227||-127||-57|
|Net after taxes||4,932||4,268||2,458||1,382||854||478||216|
|Cumulative cash flow||4,932||9,200||11,658||13,041||13,885||14,373||14,589|
- Current Cross Creek infrastructure valued at US$2.5m
- New infrastructure required at estimated cost of US$2.0m to be funded from operating cash flow
- Gas production sold to Transcontinental Gas Pipeline Co. (TRANSCO) in Houston, TX
- Gas price received: Henry Hub less US$0.15 per mcf transportation fee
- Liquids production sold to Truth Resources LP in Houston, TX