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Independent Eyes More Drilling in Northern California

San Diego-based Royale Energy Inc., a small independent with some big plans for Alaska's North Slope shale plays (see Shale Daily, Jan. 18, 2012), is launching a drilling program in the Sacramento Basin dry natural gas fields, following a successful well in Tehama County, 130 miles north of the state capital.

The well has a ready market since drought-stricken California’s hydroelectric power output is down. Characterizing the new well at an undisclosed location as a "multi-Bcf" well, Royale confirmed a statement earlier in October that said that based on thickness, pressure and area extent the new well, called McKinney, "is likely to be counted among the company's largest discoveries." It achieved a sustained rate of 1.6 MMcf/d.

"Following the installation of a pipeline now underway, the well will be placed on production for seven to 20 days before opening an additional 30 feet to incrementally add to productive capacity," a Royale spokesperson said. "The full 65-foot interval [on the drilling] is expected to be opened late in the year as winter gas demand rises."

The McKinney was drilled in September based on Royale's 3-D seismic data, the company noted, attributing current local gas prices that are tracking 55 cents/Mcf higher than Nymex due to the lower hydroelectric supplies as an incentive for more gas drilling in the state.

Royale sells its supplies to Pacific Gas and Electric Co. (PG&E), and had announced last February a stepped-up drilling program in the Sacramento Basin, following the announcement of a productive well it tapped at the end of last year in nearby Colusa County to the south of Tehama.

Last month, Royale reported the McKinney well had been drilled to 7,000 feet with electric logs indicating "several potential intervals that could contain substantial reserves." At the time, Royale's Stephen Hosmer said the company was encouraged that "the logs show a substantial target zone that has potential to significantly increase new production for the company."

The company said the McKinney well is a "naturally flowing" well that needed no hydraulic fracturing (fracking) or other well stimulation technology.

Last year, Royale Energy formed a $43 million joint venture (JV) agreement with an unnamed company to fund exploration costs on its Alaska North Slope acreage (see Shale Daily, April 12, 2013). Under the JV, Royale received $100/acre in cash, stock options and exploration cost-sharing for a total of more than $1,200/acre for up to 50,875 acres of its 96,000-acre North Slope holdings, the company said.

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