Tulsa, OK-based Deep Rock Oil & Gas Inc. said last week that it has begun drilling the first well of a four-well project in Northern Oklahoma. The drilling is being done as part of the company's efforts to develop its joint-venture pipeline with Dallas, TX-based Apollo Resources International Inc.
Under the joint-venture agreement announced in December, Deep Rock and Apollo agreed to develop approximately 45 miles of Apollo's 12" oil/gas pipeline in Northern Oklahoma. Deep Rock will pay for the initial cost of connecting the joint venture pipeline into Washington Gathering Systems, which will operate the pipeline.
As part of the agreement, Deep Rock will initially develop gas production within a five-mile radius of the Washington Gathering System. The joint-venture gives Deep Rock a 49.5% revenue interest in all fees for production that flows through the pipeline. Deep Rock noted that the pipeline is located in a large, undeveloped area prone to shallow gas reserves and relatively inexpensive exploration and production costs.
"These initial wells will help establish the well production profile in this joint-venture area and their gas production profile will assist us in determining how vigorously we will proceed with future development in the area," said Robert Garner, CEO of Deep Rock.
When the original agreement was signed, Garner noted that the joint venture had a twofold impact on Deep Rock's future profitability. "First, we will participate in the gas transportation revenues through the pipeline," he said. "Secondly, by connecting the pipeline to the Washington Gathering System, we will open up many exciting opportunities for exploration and development of natural gas in an old oil producing area."
Deep Rock is an oil and gas exploration and production company and currently has working interests in 33 wells, 10 of which the company operates.
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