Picture source: Ryder Scott
Today, MGX Minerals Inc. reported results of the independent assessment by Ryder Scott Company LP for MGX´s Paradox Basin Petrolithium Project in Utah, USA. This is what we have been waiting for. And it´s bigger than I could have seriously imagined. Founded in 1937, Ryder Scott independently estimates oil and gas reserves, future production profiles and cashflow economics. The firm is one of the largest, oldest and most respected reservoir-evaluation consulting firms in the industry. It is headquartered in Houston, Texas, with branch offices in Calgary, Canada, and Denver, Colorado.
The most important results to look at are the Oil in Place numbers (Gas in Place is not nearly as significant here). This represents the upside potential. There are a total of 21 zones/clastics (plus Leadville) in below table and each one of these clastics show how much oil there is estimated to be in place, and there are 3 categories:
P90: There should be at least a 90% probability that the quantities actually recovered will equal or exceed the low estimate.
P50: This is the "median" number most people look at.
P10: This ist the most optimistic estimate.
The best known zone is CB21 (Cane Creek) with an estimated 736 million barrels of oil in place. Assuming a 10% recovery factor, this zone alone would still add up to around 74 million barrels of oil. Even if deducting a 20% royalty plus tax, this zone alone has the potential to be a multi-billion-dollar pay zone at $50 USD/barrel of oil. If you add up all the other zones as well, it becomes clear that MGX sits on very large unconvential oil pools.
The key to understand is that the "discovery" has already been made. There is certainty that there is oil. What makes this play so unique is that there are so many potential pay zones and that there is sophisticated knowledge about these zones based on many well logs. It´s just not developed yet and considered an unconvential shale play. The zones showing a big number are derived because there is confidence as these are known zones and/or (past) producing zones in the Paradox Basin or nearby.
As the pressure gradients are so high, there is no need for fracking. Basically, you just drill down to your target pay zone, make strong casings, and let it flow. Depending on flow rates from a vertical well, you may later decide to go horizontally.
There are a lot of companies looking at this area but MGX has secured some of the most prospective properties. Question: Why has not someone gone there, and done that, before? Answer: No unitization. Despite a lot of owners still being involved, MGX has retained effective control of the property thanks to successful unitization, which was not the case before. So the key to understand is that before there were many leases and now its simply one lease, enabling MGX to have effective control with 75%.
According to today´s news:
"Management estimates the total cost required to achieve commercial production from the Project to be $8 million based on the expectation of completion of 3D seismic survey and one horizontal well being drilled. The timeline of the Project is five years, with the estimated first date of commercial production being 18 months from the commencement of drilling using vertical and horizontal drilling techniques along with proprietary patented water handling technology as the Project was conceived."
So while there is a lot of oil on MGX´s property according to Ryder Scott, there is also lithium and other minerals (not evaluated by Ryder Scott). Historic lithium brine content has been reported as high as 730 ppm lithium (Superior Oil 88-21P) at Lisbon Valley. Recently on August 1, MGX announced that together with its technology partner, PurLucid, they have now fully integrated their respective technologies and that their first pilot plant has been completed in Calgary, Alberta. Operation testing has commenced. The pilot plant aims to demonstrate to be capable of economically separating impurities from oil and gas wastewater, allowing for lithium and magnesium extraction as well as reuse and repurpose of industrial water and brine. For more details, see Report #23.
About Ryder Scott
According to Bloomberg: "Ryder Scott Company, L.P. provides reservoir-evaluation consulting services to oil and gas industry in the United States and internationally. It offers integrated field studies, drilling and development program studies, equity determinations/redeterminations, and well completion and workover recommendation services, as well as certification of oil, gas, condensate, and plant product reserves; prospect analyses, exploration portfolio analysis, reservoir description, petrophysical analysis, geostatistical modeling, reservoir characterization, and 2D and 3D interpretation services; and recovery studies and feasibility reports, design of fluid injection projects, unitization studies, horizontal drilling studies, and thermal recovery evaluation services. The company’s services also include gas deliverability determinations, coal seam gas recovery, and evaluation of low permeability reservoirs, as well as selection, design, evaluation, and monitoring of gas storage projects; and integrated field studies, black oil and compositional formulations, detailed geological models for complex fault systems, geostatistically derived petrophysical descriptions, and reserves determination processes. In addition, it provides appraisal of oil and gas properties, fair market value determination, investment and management counseling, and software development services; and expert witness testimony, arbitration services, and litigation support services. Further, the company provides consulting services to financial institutions, attorneys, and government agencies. The company was founded in 1937 and is headquartered in Houston, Texas with branch offices in Calgary, Canada; and Denver, Colorado."
MGX Minerals Inc.
#303 - 1080 Howe Street
Vancouver, BC, Canada V6C 2T1
Phone: +1 604 681 7735
Shares Issued & Outstanding: 68,116,018
Canadian Symbol (CSE): XMG
Current Price: $1.06 CAD (08/08/2017)
Market Capitalization: $72 Million CAD
German Symbol / WKN (Frankfurt): 1MG / A12E3P
Current Price: €0.71 EUR (08/09/2017)
Market Capitalization: €48 Million EUR
Report #23 “MGX starts Petrolithium pilot plant to deliver hard facts for strategic partners“
Report #22 “Time to bet: Sprott takes a position in MGX“
Report #21 “Petrolithium: First Come First Served“
Report #20 “Successful Independent Verification of the MGX Lithium Extraction Technology“
Report #19 “MGX to Drill the World‘s First PetroLithium Well in Utah“
Report #18 “MGX Reports Upgrading of Lithium Brine from 67 to 1600 ppm Lithium“
Report #17 “MGX technology nominated for prestigious Katerva Award, the Nobel Prize of Sustainability“
Report #16 “Unconventional oil play legend Marc Bruner to take MGX and PetroLithium to the next level“
Report #15 “Total Conviction: MGX forms PetroLithium Corp. to expand into the US oilfield brine markets“
Report #14: “MGX Extracts Lithium from Oil Wastewater - Begins Monumental Integration with Big Oil“
Report #13 "MGX Partners with Oil Major on Lithium Brine, New Energy Industry Facing Fundamental Shift“
Report #12 "Game Changing Potential: MGX Minerals‘ Pilot Plant for Rapid Production of Lithium Nears Completion“
Report #11 "MGX assays 34 g/t gold from surface sampling in British Columbia“
Report #10 “Official: MGX owns magnesium worth multi-billions of dollars and starts pilot plant shortly“
Report #9 “One of the world‘s largest lithium resources on the horizon?“
Report #8 “Ready for significant lithium brine work in Alberta“
Report #7 “At the forefront of Alberta‘s lithium brine riches“
Report #6 “Pioneering Lithium in Alberta: MGX Minerals Teams Up“
Report #5 “Time to Put a Lithium Production Process in Place“
Report #4 “MGX Minerals Taps Into Canada‘s Potentially Largest High-Grade Lithium Resources“
Report #3 “MGX Minerals Receives Mining Lease for 20 years (in British Columbia!)“
Report #2 “MGX Minerals Accelerates Towards Production“
Report #1 “MGX Minerals Plans To Enter The Magnesium Market“
Disclaimer: Please read the full disclaimer within the full research report as a PDF (here) as fundamental risks and conflicts of interest exist. The author hold a long position in MGX Minerals Inc. and is being paid a monthly retainer from Zimtu Capital Corp., which company also holds a long position in MGX Minerals Inc.