Even with near record prices for oil and gas, theever-optimistic independent exploration outfits in California’straditionally fossil fuel-rich Kern County are having a hard timenailing down financing to continue exploring.

Canadian investors who have backed an initial round of deepdrilling between Bakersfield and Elk Hills, CA, have been hit hardby Canadian economic woes, opening up the opportunity for U.S.investors, but not a lot are biting so far.

“The Canadian national stock market is just devastated rightnow,” said Lyn Blystone, CEO of Tri-Valley Oil and Gas Co.,Bakersfield. “It has been going on for some time, and it why ourCanadian partners couldn’t refinance this year.”

Nevertheless, Tri-Valley is still planning for a refracturing ofone deep (below 19,000 feet) well and starting a second one in thearea southeast of Elk Hills. With separate financial backing, thecompany has moved to an undrilled part of the central valleyfarmland 40 miles north of Bakersfield to sink Sunrise-Mayel No. 1test well, which started operations just after Thanksgiving in anarea whose total potential is in the 500 Bcf range, according toTri-Valley officers. There has been no drilling before in thisarea, according to Blystone, who said the company could haveestimated 22.5 Bcf of output just from the initial test well, withan estimate of “50 or 60” possible other well locations.

“We could have made a case for three times as much gas as wetalked about (for Sunrise) in its financing prospectus,” Blystonesaid. “We just took the primary zones and used 1,500 Mcf/acre-footand with that assumption, it could be 500 Bcf easily.”

Even with the continuing positive geologic projections andTri-Valley’s almost religious belief in deep drilling in KernCounty, which still regularly out-produces some of the world’slargest oil fields, financing is not coming easy, Blystone said allbut one of eight Canadian investors in its Project Ekhodeep-drilling test well have backed out because of Canada’s almostyear-old bear stock market, which has plunged the value of even thelarge oil/gas companies north of the U.S. border.

“If it turns out that the refracturing just won’t work, we willlook at two or three zones above that have not been tested yet,”Blystone said. “Hopefully the fract job will work, and we’ll juststart our production and it will produce until it’s exhausted andthen we’ll move up in the formation.”

He said Tri-Valley is talking to prospective new investors aboutboth the reworking of Ekho No. 1, and starting a second deep-welltest below the 15,000-foot (and probably the 19,000-foot) level.

“I’d say the price of gas right now is adding a lot to it, andit represents the first U.S. attention that we have been able toget,” Blystone said. “We had a little before, but didn’t have anyU.S. activity. And up until today there still hasn’t been any newfinancing.

Richard Nemec, Los Angeles

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.