San Leon Energy: Doing It Their Way

At a presentation he recently gave at the First Energy Capital Global Energy Conference in Toronto, John Buggenhagen, Director of Exploration at San Leon Energy showed a slide which depicted a downward trend of 12-month share prices for some of the unconventional gas explorers in Poland, including San Leon and some of its peers like BNK Petroleum, 3Legs/Lane Energy, and Aurelian Oil & Gas.

“All of this,” he said, “is based upon little to no news.”

He emphasized that San Leon was a pure exploration company: “It’s important to understand, there’s a huge upside for our company, but it does have inherent risks.”

While most of our San Leon’s focus was on Poland, the company had taken advantage of market downturns in recent years to build a very attractive position through the takeover of three key companies: “Goldpoint Energy, which basically was the foundation for what you see in Poland today; then we took over Island Oil & Gas, which enhanced our acreage position in Morocco and gave us attractive acreage in Albania and Ireland; the most recent Realm Energy transaction was designed to enhance our unconventional position across Europe, expanding with very attractive acreage in Poland, basically overnight making us one of the largest players in Spain and has given us applications in France that in my opinion will become very valuable.”

Mr. Buggenhagen reported that the company currently had 14 concessions with two pending applications in Poland, making San Leon the largest net acreage holder in Poland behind the national oil company, PGNiG.

“That acreage position is across three separate basins. Within each basin we’ve further diversified, so for example in the Baltic basin we’re one of the largest net acreage holders; we’ve spread our concessions throughout the entire geologic province, from shallow to deep, from low maturity to higher maturity and all the various geologic parameters, because this is a pure exploration play – we’re trying to figure out where the sweet spot in the play is, and we believe that we’re best positioned to be part of one if not two of those sweet spots as we’ll see going forward, based on current drilling.”

San Leon also had a very large position in the Carboniferous play, as well as some conventional assets.

He provided a run-through of Poland’s shale basins.

“In the Baltic basin, we have a very thick shale package in the Silurian; the Ordovician and the Cambrian also being very perspective. We know that the shales are hydrocarbon bearing – recent drilling has proven that. There is no associated production, however we know the source rock is there and very key is we have a very simple tectonic setting, which makes it very easy to drill horizontals and fracc wells,” said Buggenhagen, who added that San Leon’s other play in the Carboniferous basin was quite different.

He explained: “The difference is, it is the known source rock for more than 8 TCF of discovered and producing gas in Poland. Much of that gas is being produced in Permian aged reservoirs, overlying reservoirs. The complex tectonic history is a bit of a positive and a negative; that’s something we’re trying to sort out. The positive is the natural fracturing associated with that is creating a tight gas play that’s never even been considered before.”

According to him, San Leon had pioneered that play by drilling the very first well there earlier this year.

“Our recent well was a twin of the Siciny-1 well, which has very good TOC, it’s clearly in the gas window and the reservoir porosity parameters are very strongly related to working analogues in North America.” 

He continued, “We drilled our well to 3,500 meters, seeing another 500 meter section that had never been seen before and what we found was more potential pay. The well that we drilled encountered more than four potential pay zones, including two shale zones and two tight gas zones.”

Buggenhagen added that the shales and the sands were embedded within each other.

“Now the next step is to continue drilling and evaluate the potential of the play going forward.”

With its partner Talisman Energy, he said that San Leon had drilled two wells.

The first he mentioned was the Lewino-IG1 well, drilled to a depth of 3,600 meters, where 380 meters of continuous core samples were taken. “In that well, through the Silurian, Ordovician and Cambrian sections, we had more than 1,000 meters of high quality gas shows.”

The second well was called Rogity-1.

Mr. Buggenhagen recalled, “The industry had basically said that this well was too far outside what was reasonable for maturity parameters, that it was too immature. Instead, what we’ve found was a very continuous liquid-rich gas section throughout the Silurian-Ordovician section, as well as the Cambrian.

“We’re currently drilling our third well with Talisman,” he continued. “The Szymkowo-1 well, which is estimated to TD at around 4,200 meters.” 

He reported that San Leon was planning a vertical testing program with Talisman later this year, which would be followed by the drilling of horizontals later this year and into next.

In the Carboniferous basin, San Leon had drilled in the Siciny-2 well and was continuing to analyze the core samples and logs towards building a model to further test the well with a formation integrity test and a vertical fracc in preparation for further fraccs down the road.

“The key, though, is we’re not going to let the market drive what we do,” insisted Mr. Buggenhagen. “We’re going to do what the rocks tell us to do. We’ve taken core, up to 400 meters in each well. We’re comparing that to the existing petrophysical data that we have and we’re building a model that will put together a series of testing programs designed for success, not designed for positive news flow.”

He contended that the media misinforming the market as to how Poland’s shale gas development was occurring, citing a “new” reserve estimate in the country was based on well data from decades earlier.

“The media is feeding you that ‘Poland is not working,’” he said. “The companies there have said very little.

“We’re still trying to understand how we’re going to extract the significant amount of gas that we’re getting from the rock, and what we need are dozens if not hundreds of wells before we can estimate the true potential of the play. I can tell you these shales are very thick, are very gas saturated and have huge upside potential,” said John Buggenhagen.