The combined cash flow and tax savings in year one is a critical component of Encore’s business model and return on investment to investors.” “At Encore, each qualified accredited director investor can deduct 100 percent of their investment against all forms of income, which results in a first year cash-out-of-pocket estimated tax savings of about 40 to 54 percent of their total investment. “Although larger operators can utilize the 100 percent intangible drilling costs tax deduction from their drilling operations, these larger companies cannot pass on these tax benefits directly to their shareholders,” Stengell says. Horizontal Berea wells undergo extensive multi-stage frac treatment that typically result in higher first-year production and higher cash flows in year one. The horizontal Berea attracted Encore because of the lower well cost associated with producing at a shallower depth. Joseph Hooper, Encore executive vice president and director, adds: " The application of nonconventional methods to a conventional oil reservoir better mitigates many of the risks associated with oil and gas investments." “We understand the Bluegrass is beautiful and our non-conventional methodology is more friendly to the environment and leaves a much smaller footprint per dollar invested in the ground,” Stengell explains. “Every single well drilled utilizes what was learned on the previous location, so you have an ever-changing and improving well technology in the Berea.”Īs the company begins to drill the horizontal well, minimizing its environmental impact will be key. “It’s a learn-as-you-go technology,” Stengell continues. “It allows us to better penetrate the formation with propping agents and better create channels of permeability back to the well board. “The plug-and-perf well completion multi-stage frac technology allows us to better frac the well and better enhance production and reserves,” Stengell explains. The Encore Adkins Bud #H1 horizontal Berea is considered a “tier I” horizontal well using state-of-the-industry technology.
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“The Berea is where horizontal, non-conventional methods meet a beautiful, conventional reservoir.” “Shales are big blanketed 200- to 300-foot reservoirs that are lower quality, thick and unpredictable,” Stengell says. The oil play began to mature about the time oil prices tanked a few years ago, Stengell says, at which time Encore began looking for lease opportunities. The Berea Oil Sandstone is attractive to Encore Energy because using non-conventional methods on a conventional reservoir produces higher-quality oil and better results than the shale plays. “Encore is acquiring assets, drilling multiple well projects to prove-up acreage and creating a platform to bring in investment from larger E&P companies in the future.” “Encore has drilled more than 30 vertical oil wells and is the most active well operator in south-central Kentucky,” Stengell adds. In 2013, Encore Energy started acquiring leases in south-central Kentucky and drilling conventional oil wells. He also has experience in drilling in Oklahoma and Texas, the latter in horizontal drilling as well.Įncore Energy began as a lease acquisition and brokerage company that worked with large E&P companies in the Utica Shale to acquire horizontal lease projects. In 2011, Stengell founded Bowling Green, Ky.-based Encore Energy after serving as president and CEO of a publicly traded E&P company. He holds an MBA from Western Kentucky University and has graduate certification in reserves and valuation from the Harold Vance Department of Petroleum Engineering at Texas A&M University. Stengell previously served as the well operator for a successful horizontal Woodbine oil discovery in Texas.
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“This is my first well in the Berea, but not my first time drilling horizontal.”
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“We have been reviewing the Berea for the last several years and just in the last year we started making plans, deals and acquisitions in planning the horizontal well project,” Stengell explains.
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In June, the company announced its well permit approval and began moving equipment onsite in the first week of July to begin drilling the Encore Adkins Bud #H1 horizontal Berea oil well. Founder, President and CEO Steve Stengell says the Kentucky Geological Survey reports the area as being the best shallow oil play in the state and the Kentucky Oil and Gas Association has referred to the Berea as a “game changer.” recently began drilling its first non-conventional horizontal well using state-of-the-industry technology in eastern Kentucky’s Berea Oil Sandstone. Encore Energy has high expectations for the Berea Oil Sandstone in KentuckyĪnd plans to drill multiple horizontal wells over the next few years.Įncore Energy Inc.