This Q&A with Mark Plummer was originally published on Chestnut Exploration Companies' blog: It was provided here courtesy of Mike Crouch, account director for Chestnut. He can be reached at
Q & A with Mark Plummer, founder and CEO of Chestnut Exploration and Production
Q: What are the benefits of redevelopment? A: The primary benefit of reclaiming and reworking old fields is that we have pretty favorable chances that oil is already in the ground. One of the best places to find oil is where it has previously been produced. With typical primary production, only a small percentage of the oil in place is produced, so any improvement or refinement of the process leads to great rewards. Q: Why would anyone abandon projects and fields? A: Oil fields were historically abandoned when the price of oil and natural gas were very low. If a well is producing at $6 per barrel and the lifting cost is $5 per barrel or higher, it is difficult to make a profit. If the lifting cost is $10 per barrel and the price is $100 per barrel for the commodity, the field is much more profitable. Chestnut goes into older fields that were abandoned years ago when the commodity prices were very low. Projects are also abandoned when the profit margin drops. Companies sell off assets that are still valuable because they are focusing on other areas and may not have the time and resources to work in both areas. If one area needs reworking, but the profit margin is higher in another project, a company may decide to sell the asset that needs work in order to focus its resources on projects that do not need work. The result of this means there is a lot of valuable projects out there available to be redeveloped. Q: What is your strategy for finding and pursing abandoned fields or projects? A: Most old fields in the U.S. are identified. Unless the fields are pre-1930s, the location and the data on them are public record. However, the data in these public records can be hard to access. This kind of information isn’t readily available on a Google search on the Internet. Chestnut performs anomaly studies to search for trends in these fields that appear out of place. In other words, we look for fields that had originally produced a lot of oil, but only produced a relatively small percentage of what the field could have produced. We then pursue these fields knowing there is plenty of excess capacity to produce if production is improved and reestablished. Q: What other research methods does Chestnut use? A: We perform our own internal reservoir and geologic studies using today’s methodologies, as well as use outsourced licensed reservoir engineering companies to perform independent studies for additional resources. We then compare our findings with theirs to determine how much oil is recoverable. Q: How does redevelopment increase domestic oil production? A: Every new well in an old field and every barrel produced in the U.S. per day is one less barrel the U.S. does not have to buy from a foreign country like Venezuela, Saudi Arabia, Iran, Iraq or Russia. Any time Chestnut redevelops an old field with new wells and generates more production, we are helping America’s domestic oil production. Q: What benefits do smaller companies have over larger companies? A: Independent companies have the ingenuity and time to work on smaller projects. Larger, public companies do not view these projects as being worth their time to work on, but for the smaller companies, these projects can be highly lucrative and are right for our workforce. Larger companies are focused on bigger, more expensive areas because they want to generate a much higher margin of revenue for their stockholders. Chestnut aims to generate the same profit margin, but independent companies are not necessarily tied to the size of the return that public exploration companies are. For this reason, we can look into data with a deeper scope and the specifics of each fields due to our size.