Independent Touts EOG Interest in CA Field

An already bullish California oil/gas developer with both deep-drilling and shallow gas exploration in separate parts of Kern County received another shot of optimism earlier this month on reports that EOG Resources plans to expand its oil drilling program in the general area within 10 or 15 miles of the town of Delano, CA. EOG officials in Denver denied having any such plans.

Denver, CO-based EOG's Ty Stillman said the North American E&P company is currently assessing the results of two wells among 12 it has drilled so far in the North Shafter Field, which is five to 10 miles from Tri-Valley Oil and Gas Co.'s recent gas find in Delano (see NGI, April 16).

"It is the exact same intervals that we are playing," said Tri-Valley CEO Lynn Blystone. "EOG is about 2,000 feet down the dip from us in the oil phase of the reservoir. They have about 60 feet of pay (for oil), according to their logs which we have reviewed, and we're sitting here with 300 feet of pay in the same formation." (EOG is west and southwest of Tri-Valley's work.) Last month, Tri-Valley reported it might have found the West's largest natural gas field ever near Delano, estimating 3 Tcf in reserves. However, Blystone indicated the company likely would need a partner or a buyer to fully develop the play.

In contrast to Blystone's enthusiasm, however, EOG's Stillman said "the jury is still out" on the area. Half of the 12 wells drilled in recent years have been "less than economic." He said the "field is still being explored," and as they find new "surprises and information" they plow the data back into an overall model assessing the field's potential production.

While these are "oil wells in the traditional definition," Stillman said, EOG's overall emphasis is on finding and producing natural gas throughout North America. The Kern County work is its only active exploration in California other than joint projects with Texaco near the town of Shafter. EOG swapped all of its land leases with Occidental Petroleum last year.

Blystone said the former division of Enron Corp., which is now totally independent, appeared to struggle with its oil drilling program until it switched to horizontal drilling, something Tri-Valley is using in its exploration of the potential gas finds closer to Delano.

Tri-Valley has about 6,600 acres; EOG about one-fifth of that, so about 8,000 acres overall is part of the "interval," Blystone said. EOG is around 9,000 feet depth; Tri-Valley is 6,000 feet down.

If EOG eventually expands its drilling program, Blystone said, it would validate what Tri-Valley is doing with its gas wells. Stillman, however, was adamant in insisting there are no expansion plans currently in place.

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