A mom-and-pop oil company prospects for gas in central Wyoming

  • Aaron Otteman, exploration manager for Wold Oil Properties, climbs a holding tank to check the depth of oil inside at a wildcat well his company operates in central Wyoming.

    Emilene Ostlind
 

In 1954, the Empire State Oil Company drilled a gas well in central Wyoming. The well turned out dry but showed some gas in an unexpected shallow formation. It wasn't worth much at the time, so Empire plugged the well and abandoned it. A geologist named John Wold, however, believed the area merited further exploration. "I thought for many, many years we ought to take another look at that," he says.

So 55 years later, when the price of natural gas rose, Wold Oil Properties drilled a vertical well near the old site. Exploring for oil and gas in areas not known to harbor fuels in commercial volumes is called "wildcatting," and it's risky business: Only one or two out of every 10 wells produces enough to be viable. Each well costs $1 million to $5 million or more to drill, so a couple of dry holes can bankrupt a small company. Wold passed the business on to his sons, but at 95 he still comes into the office every day, hooked on the challenge.

In the U.S., independent companies -- many of them multigenerational family-owned businesses like Wold's -- do most of the wildcatting, drilling more than 93 percent of the nation's new oil and gas wells and accounting for about 67 percent of total oil and gas production. Meanwhile, major corporations like ExxonMobil and ConocoPhillips tend to wait for the wildcatters to strike black (or gassy) gold, then buy them out and develop the proven resources.

But wildcatting is becoming trickier as conventional reserves are depleted and drillers must figure out how to tap harder-to-reach stores of fuel. "We are burning more oil and gas in the world today than we are finding," Wold says. "Every field you find is one less target. It's getting harder and harder to find new prospects worth exploring."
The U.S. passed peak domestic oil production around 1970. When prices dropped in the '80s and '90s, wildcatting slowed down. Then, in May 2000, a Montana contract geologist named Richard Findley became a wildcatting legend. He was just about to ditch prospecting to flip burgers in a buddy's restaurant when he figured out how to open up North Dakota's formerly unproductive Bakken Shale by marrying horizontal directional drilling with hydraulic fracturing. With that, he launched what's now North America's largest oil play and became a millionaire overnight.

The once sparsely populated North Dakota plains have since been transformed into an industrial landscape, from which more than 6 percent of U.S. domestic oil flows. And Findley's breakthrough has started a whole new boom worldwide, opening dozens of other previously unreachable energy reserves -- and inspiring wildcatters like Wold, who believes his company might be on the brink of discovering a significant new play near the old Empire well.

The pickup bucked over frozen snowdrifts on a March afternoon as Aaron Otteman drove toward the 2009 well. He hunched his tall frame to see out the windshield, his reddish beard jutting forward. A geologist by training, Otteman, 35, was hired as exploration manager for Wold Oil Properties in 2009. He grew up climbing and skiing in the mountains near Pinedale, Wyo., and got into geology because he wanted a career that would let him explore his home state. He grimaces when he thinks of how the recent Pinedale Anticline gas boom has industrialized his hometown, but, like Wold, he loves his job. It allows him to raise his children in Wyoming while using his scientific training for what he considers responsible, locally based energy development.

It's hard work, finding oil and gas hidden thousands of feet underground. Fifty years ago, geologists relied on aerial photos and surface mapping to discover new reserves, looking for conventional traps such as domes of geologic layers buried underground, like a facedown onion half, holding the fossil fuels in place. These are obvious to a trained eye, especially in Wyoming's treeless basins. But most of the easy targets were drilled long ago. Those once-valuable aerial images are now freely available through Google Earth; if you pick out an oval of colored striations in Wyoming and zoom in, you'll likely see it pocked with oil wells.

"Rather than just mapping the surface like conventional geologists did back in the day, now we map the subsurface," Otteman explained as the truck approached the well. Using his "three-headed girlfriend," a computer with three monitors, he compiles any data he can get -- geologic maps, seismic data, gravity and magnetic information, well logs from existing boreholes showing things like gamma rays, density and conductivity -- and diagrams his best guess of what's underground.

Otteman helped oversee the drilling of the 2009 vertical well, based on Wold's hunch. It didn't produce gas from the targeted formation, but there was a little oil from a layer of limestone at the bottom of a formation called the Niobrara Shale -- the same layer that's hosting a huge oil play some 200 miles away in the Denver-Julesburg Basin where Wyoming, Nebraska and Colorado meet.

"I said, 'Well, that's interesting,' so I threw a lot of science at this well bore," Otteman recalled.

He ran a suite of well logs. Then he used "a very small frack" -- only 33,000 pounds of sand compared to the 5 million pounds used on deeper wells in thicker formations -- to break up the limestone bench. When the frack fluid flowed back out, about 75 barrels of oil came with it, "a good show, but certainly not economic when you spend a million dollars on a well. And so I just sat here going, 'Well, what do we do now?' "

A wild horse, its tail wrapped around its haunch by the wind, watched from a hill as Otteman parked on the gravel pad by the wellhead. He clamped a hardhat onto his head and scuttled up a ladder welded to the side of a 20-foot-tall tank to measure the depth of the oil inside. Then he climbed back down and cracked a valve on the wellhead, peering carefully at the pressure gauges. Gas hissed through the narrow metal pipe connected to the tank and gurgled up through the oil inside. After a while, oil followed, not much -- around 30 barrels a week -- but enough to convince Otteman to drill a second well nearby, this one horizontal, more expensive but better able to access the trapped oil, he hoped.

After eight months of permitting and regulatory hurdles, the company drilled the horizontal well in August 2011 and finished fracking it in November. "It's not easy to find oil and gas in commercial volumes," Otteman said worriedly at the time. "It's incredibly expensive and there's a lot of pressure, especially as the sole geologist on something saying, 'OK, boss, I think you should go spend $2.6 million here on a small horizontal well and we can test this concept.' 'Are you sure?' 'Well, no, I'm not sure.' " The new well cost over $3 million, enough to "make or break small folks if this does not work out," Otteman explained.

In late December, oil production looked promising and Otteman sounded optimistic. Then, in early January, production fell off, and the well's economic future became uncertain. "It's a strikes and gutters game," Otteman said. "Unfortunately, it seems like there are more gutters than strikes."

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