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Shenandoah Energy Plan Pays Off for Chevron

Shenandoah Energy Plan Pays Off for Chevron

A deal reached last year that transferred all of Chevron's oil and gas assets in Utah's Uinta Basin to the newly formed Shenandoah Energy (SEI) in exchange for an equity ownership interest is paying off big time for the energy giant, said Chevron North America President George L. Kirkland.

Kirkland told a Houston audience of the Independent Petroleum Association of America last week that the SEI venture, which began from a "cold start" on Jan. 1, had been "very successful," and said the change from owner to equity affiliate was a good fit with Chevron's worldwide growth plan.

Shenandoah CEO Mitchell L. Solich said that the Denver-based independent, which focuses its E&P in the Rockies, currently has total proved reserves of 514 Bcfe, with about 73% of that in natural gas. Probable reserves from the three basins total 574 Bcfe, with 80% in natural gas. There are 335 producing wells, and 95% are operated.

"Being a part of the creation of SEI has put more value in the ground than if we had sold the property outright," Kirkland said.

Kirkland, who is responsible for Chevron's exploration and production operations in the United States and Canada, has been president of the division since January, about as long as SEI has been in business. The new company was officially formed Dec. 30, 1999, and it only drilled its first well six months ago on Jan. 30.

Created by The Chandler Company, its core operations are in the Uinta Basin. It also has operations in Colorado's Raton Basin, and significant gas storage in the Piceance Basin of Colorado. Solich said that there also is "wanna be" land in Wyoming.

Currently, Shenandoah is on a growth plan to have more than 1,000 drilling operations --- nearly all gas wells --- with 869 on its Wasatch properties. Long term, he said that Wasatch would have 1,250 Bcf of reserve. The Green River properties have ultimate recovery of about 0.36 Bcf at 51 wells, costing $400,000, and the Raton's 82 wells will produce 2 Bcf for about $273,000. All of the wells should pay out in less than two years, said Solich.

Carolyn Davis, Houston

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