The Permian Basin of West Texas and New Mexico has been producing oil on a regular basis for more than 90 years. More than 20 billion barrels have been produced during that time, representing over $2 trillion worth of oil. The reserves are unmatched in the States with the exception of Alaska with 17 percent of all U.S. production coming from those reserves each year. Majors such as Linn Energy LLC (NASDAQ: LINE), Concho Resources, Inc. (NYSE: CXO), Pioneer Natural Resources Co. (NYSE: PXD) and SandRidge Energy, Inc. (NYSE:SD) have all expanded their holdings in the Permian Basin over the past year.
Also tapping into the vast reserves is junior RainChief Energy Inc. (OTCBB: RCFEF), a British Columbia, Canada-based company focused on bringing oil and gas properties to production in North America. The company is exploring acquisitions to add to its portfolio which now contains its flagship property, the Gulf Jensen Oil Prospect in New Mexico. The prospect includes 2,400 acres of oil and gas leases. Last week, RainChief reported that it exercised its option with Calgary-based Nueva Oil & Gas Corporation to acquire a 90-percent working interest in the Gulf Jensen Prospect. Nueva, a company controlled by C&C Energia Ltd. (TSX: CZE) founder Norman Mackenzie, will retain a 10% working interest in the property and will manage all exploration and development activities. Under the terms of the option and concurrent with the execution of the agreement, RainChief paid Nueva a total of $110,000.
Located in the heart of the Permian Basin, the property is appropriately named as it was once part of a massive area of land leased by Gulf Oil in the 1970’s. Like many other wells during that time, oil and gas were identified, but deemed not economically feasible because of very low oil prices (oil was only fetching about $3 per barrel in 1970). Moreover, Gulf Oil was dismantled in the 1980′s by Boone Pickens as Exxon choose to move the majority of its operations offshore, leaving the Jensen Prospect behind. Modern drilling techniques and oil prices over $100 per barrel has opened the doors of opportunity to bring many of these properties to very profitable production in recent years.
RainChief’s expectations for the Jensen Property are high. In the neighboring Peterson Oil Field, wells have recorded production rates to 492 barrels of oil a day with 193 barrels of formation water from the reef oil trap. Per well oil recoveries range up to 230,000 barrels of oil with 1 billion cubic feet of natural gas. Given a general consideration to the prolific nature of the Permian Basin on the whole would suggest that the project could be large scale, which has further been supported by analysis and comparison to Peterson produced data indicating similar levels of oil and gas are present at Jensen.
The news didn’t harken much of a response from the investment community as shares eased back to 10 cents (and even dipped briefly to 7 cents yesterday), but the dime area represents a substantial support level for the RainChief chart. A newer trading issue with volume starting to perk over the last month, shares of RCFEF appear to be trying to hang-on to this support level. The last time the dime mark was hit in early March, a run all the way to a high of 60 cents followed. Now possessing a large holding in the largest oil and gas producing areas in North America, RainChief could be a company that is drawing much more attention from investors and majors in the area. Technical traders will be watching for the support to hold.
RainChief Energy (RCFEF) Stock Quote and News:
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