San Leon Energy: Back in the ‘Reality Space’

John Buggenhagen, Exploration Director at San Leon Energy, said he recently drew his colleagues a depiction of what he termed his “emotional index” regarding the unconventional gas industry in Poland.

He recalled, “In the beginning, it went through the roof; then it dropped through the floor. I’m very excited that we’re back in to what I call the ‘reality space.'"

“Now unconventional gas exploration in Poland can start developing as it always should have,” he stated of the industry. “We’re starting to do what the data and the rocks are telling us, and we’re not reacting to this emotional exuberance – positive or negative – that has existed over the past few years.”

Still, Buggenhagen now has reason for some exuberance following some outstanding results for San Leon Poland’s first exploration well in the SW Carboniferous basin.

“I have to tell you, it’s probably the most exciting well drilled in Poland so far,” he remarked, admitting that it might be a bit premature to call it an absolute victory. Still, he said the most exciting things in the well at Siciny were tight gas sandstones in what San Leon terms the A and B sands.

He explained: “What’s most exciting is the amount of gas in place that has been calculated in the wells and that there is a significantly thick tight gas section in the well to test. What’s interesting about the two sands – what we call the A and the B sands – is that combined there’s 290 BCF of gas in place per square mile if you total up all the gas.”

Of that, he said, 227 BFC of gas has been calculated as free gas – gas sitting in the pore space, per square mile.

“So think about that in terms of 10-20% recovery factors. If we were able to drain these with vertical wells, let’s say eight vertical wells per square mile, you’re talking about huge recovery rates, and therefore with our well costs getting lower and lower in Poland and San Leon’s operating capabilities getting stronger and stronger by the day, it’s a huge positive.”

As for what this said about Poland’s Carboniferous play, Mr. Buggenhagen said it showed it was a very viable play.

He commented: “The great thing about the Carboniferous play is we’re sitting in the middle significant gas infrastructure, so all of the problems that people have had in the Baltic basin and other places are avoided.”

However, he added that he had not lost any of his enthusiasm for the Baltic basin.  “There’s huge potential up there!”

In connection with that, Mr. Buggenhagen explained of San Leon, “Part of our strategy is to build and diversify our exploration portfolio. We don’t want to rely on any play to make or break this company, and I think it just shows that that strategy had paid off for our company and that there is another viable play in Poland (the Carboniferous) that nobody’s really considered and because of that, we basically picked up all of the land: we have over 2 million acres in the Carboniferous play.”

One could do the math, he recommended.

“Let’s say that 20% of that area works and 20% of my gas in place gets recovered – those are huge numbers.”

According to him, San Leon hoped to tap into that gas with vertical wells, but that had yet to be determined.

“Tight gas should be easier than shale gas,” he explained. “It’s kind of between shale gas and conventional gas.”

He reported the Carboniferous play had very low clay content, very low water saturation and a very thick gas column.

“All of these suggest we’ll be able to use vertical wells will be able to drain them,” he said.

Well results from the old Siciny-1 had been helpful in terms of the shallower shale sections. “But the exciting zones in this well are in the bottom 500 meters, which were not drilled in the first well. And that’s why we came out and said this was a stratigraphic test. We wanted to see what modern data told us about the shallow sections, but, more importantly, wanted to see what was deeper, and that paid off,” said Mr. Buggenhagen.

New 3D seismic data for the play, being acquired by San Leon’s seismic subsidiary, NovaSeis, are set to be processed and interpreted by the end of the summer.

“It’s purpose is to image the deeper structural picture of the Carboniferous, which is more complex than the Baltic in that it’s probably more faulted, but we also see the potential for natural fracturing as a real positive.”

In the releasing of its well results, San Leon, he said, was being extremely careful in what it promised.

“I’m not promising flow rates, recovery factors. What we see is very exciting, but we’re going to go through this diligently and systematically. We’re going to do a formation test, go perf and frac, try to flow it and we will stage our releases to the market based on data, not hope.

“Early on, I think a few companies here in Poland have tried to play the market, and they regret it to this day.”

Regarding San Leon’s recent cooperative agreement with Hutton Energy, he said San Leon would take over operatorship for Hutton’s Polish concessions.

“We want to pool this into a larger acreage play and think we can prove it all up; whether we bring partners in or not is yet to be determined, but if we do it’s a great opportunity to present a very large, contiguous acreage position that’s operated by San Leon,” he explained.

Few, he said, were able to operate like San Leon does in Poland.

“We’re full staffed here, we have a large footprint on the ground, including all the relevant experts – we live and breathe here in Poland and I think Hutton realized that was the best way to develop their acreage and that’s why we did the deal with them,” said San Leon’s John Buggenhagen.