Last month, a surprise discovery coming out of Colorado and Utah’s Paradox Basin oil field captured the attention of the entire petroleum industry. More than 9 billion barrels equivalent (BOE), to be exact, which when looking at today’s oil price structure comes in at a value of $450 billion.
Ryder Scott, which is a well-respected consulting firm, released a compelling 51-101 Estimated Prospective Oil and Gas Resource in the Paradox Basin. For those who don’t know, the basin spans the Utah and Colorado border. According to the report, there are estimates that tallied up to almost 8 billion barrels of oil in place, as well as an additional 7 trillion cubic feet of gas, at its highest potential. The mining resource companies in focus include the following: Kosmos Energy Ltd. (NYSE:$KOS), SeaDrill Limited (NYSE:$SDRL), Parsley Energy, Inc. (NYSE:$PE), Diamond Offshore Drilling, Inc. (NYSE:$DO), and Pioneer Natural Resources Company (NYSE:$PXD).
As for the leaseholders in question, they are not a major such as Noble Energy, Anadarko Petroleum, or Encana.
Instead, MGX Minerals (OTC:$MGXMF), a junior resource company, is thought to be the pioneer leading the pack in the development of domestic lithium production, via an innovative method of extraction which involves petroleum brine water (‘petrolithium’).
As of right now, MGX Minerals is a $68-million company that has one of the largest lithium portfolios in North America. Due to the fact that the small Vancouver-based miner now has a verified Ryder Scott estimate in hand, MGX Minerals is in position to add a potentially major petroleum player to their resume.
Even though the 9 billion barrels number sits at the very upper limit of Ryder Scott’s Paradox Basin assessment, walking back the numbers to their realistic potential is still extremely impressive for the future of the company.
The best estimate total comes to almost 6 billion barrels of oil, as well as 6.8 billion barrels of oil equivalent. Additionally, of the three tables shown in one of the company’s press releases regarding the assessment, the best estimate prospective resource net to MGX Minerals is almost 26.5 million barrels of oil equivalent (BOE).
So, why is the resource so large? Well, for starters, it’s comprised of 23 clastics, otherwise known as payzones. Plus, even after considering the averaging of the report’s chance of commerciality at 5.6% on each zone, as well as using a rough estimate towards its value, the resource is still worth a minimum of $74 million net to MGX Minerals.
The 51-101 assessment enhances the play, which MGX has labeled its ‘petrolithium’ project. Due to the fact that the ‘petro’ side of the equation has been firmly established, MGX Minerals can now move forward and complete the circuit by targeting the lithium bonanza on their lands that they strongly believe is out there.
New Technology Means New Economics
The Ryder Scott assessment comes on the heels of a significant gas field discovery made by BP (NYSE:$BP) called the NEBU 602 Com 1H, which obtained early production rates that were the highest achieved in the past 14 years in the region’s San Juan Basin.
The discovery was made via a well drilled into the Mancos Shale, which oil and gas companies have been probing at for the last couple of years.
Even though MGX Minerals assets involve Paradox Shale, the discovery in the Mancos Shale brings in a new era of non-traditional oil and gas in the region. Therefore, it was not a surprise to see that Ryder Scott’s numbers came back as high as they did.
With petrolithium, MGX Minerals plans to derive value from each element of output from their wells. By doing so, the company will be able to target petroleum, and extract lithium, magnesium, and other minerals at a rapid pace. All of the minerals will be extracted from the excess water produced during operations.
Here’s The Kicker
So, why is MGX Minerals making a name for itself? Well, it comes down to one simple fact: unlike major producers, MGX Minerals does not see water production as an environmental headache, and they plan to derive value from both the oil and the water they produce.
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