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Texas Panhandle’s Red Cave Formation Eyed for Exploration

The Red Cave formation, an overlooked tight sands play in West Texas, may see more exploration underway through newly formed Masterson West II LLC, an explorer that would combine the talents of Tulsa's Empire Petroleum Corp. and long-time Panhandle player Masterson West LLC.

The 8,000 net acres owned by Masterson West LLC in Moore and Potter counties currently produce 1,000 boe/d that is held by production. The leasehold is within one of the myriad reservoirs of the Texas Panhandle. The formation, long considered a natural gas-heavy region, has been drilled by, among others, leading onshore operator Pioneer Natural Resources Co.

Masterson West LLC and related entity Adams Affiliates Inc. have owned and operated the leasehold for more than 20 years,

"We have been actively seeking operating business opportunities for Empire to use as an initial platform to grow as an oil and gas company," Empire President Mike Morrisett said. Under terms of the tentative agreement, Masterson West CEO Gary Adams would become chairman and CEO of Empire while Garry Smith, also of Masterson West, would take over as CFO. Masterson West is to become Empire's largest shareholder.

"We are equally excited about the opportunity to bring Gary Adams, a long-time pillar of the Tulsa oil and gas community, into Empire on a management basis," Morrisett said. "We feel Gary has the experience to grow a public oil and gas company by further developing the initial properties and identify other potential accretive acquisitions.”

The transaction to create Masterson West II, set to be completed by April 1, would require Empire to contribute 40 million common shares and $9-18 million for a 25-50% stake, while Masterson West LLC would contribute the leasehold.

Masterson West has to date identified 380 locations to develop on wells spaced five to 10 acres apart, with 200 proved undeveloped drilling locations. The wells primarily would target the Red Cave formation at a depth of 2,100-2,300 feet. Empire estimated the total cost to drill and complete each well will be around $250,000. The goal for the new entity is to drill 40 wells a year for the next several years.

According to a filing with the U.S. Securities and Exchange Commission regarding the Masterson agreement, Empire is traded over the counter. It said it currently has no revenue, nor does it own oil and gas properties or producing wells. Incorporated in 1996, Empire previously owned a working interest in oil and gas leases in the Gabbs Valley prospect in Nye County, NV, and it a working interest in leases in the South Okie prospect in Natrona County, WY. It also previously owned options to acquire 160,000 gross acres in South Dakota and North Dakota. 

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