Start Scientific is a development stage oil and gas E&P with a portfolio of projects across Mississippi, North Dakota, Texas and West Virginia, which is helmed by founder and CEO, Norris R. Harris, an industry veteran with over five decades of experience exploring, founding, operating and restructuring oil and gas companies. Current focus for STSC is on expanding their leasehold footprint in opportunities that can attract financial partners, JV potential and long-term investment from sector players who are looking to escape low-return drilling programs with higher all-in sustaining production costs amid sub $60/bbl prices.
With WTI intermediate for March delivery dropping below $47/bbl (Brent was just over $48/bbl) in late January 2015, as the European Central Bank announces they are expanding their asset purchase program even further (now buying government bonds for the first time), boosting an already strong U.S. dollar, the EIA’s much-anticipated report on crude supply indicates stockpiles have risen slightly to just under 400 million barrels. Recently, the IMF report on global growth further reinforced the oil price trend lines with an 0.3% forecast cut to 3.5%, as China is reporting a 24-year growth rate low of 7.4% and has subsequently projected a GDP growth target of 7% for 2015. Iraq also announced record production figures, even as the Iranian oil minister argued their production sector could withstand $25/bbl.
At the same time, word out of the World Economic Forum in Davos from OPEC Secretary-General, Abdalla El-Badri, indicating that oil prices will likely see a reversal soon to the downward trend begun in June of 2014, couples well with the latest EIA guidance on U.S. gasoline demand rising through 2015, with projections of a 60k bbls/day uptick to 9 million bbls/day (after having projected a modest decrease to 8.8M bbls/day back in December). El-Badri argued that the oil price would not fall to the sub $30/bbl range amid the current surplus, noting an underlying necessity among producers to compensate for falling revenues with more production leading to greased skids in other areas of the markets governed by energy costs, and the fact that the sector has seen this all before, including the sharp drop in price followed by a gradual rebound.
Consumption attitudes may be working their way into the system already given the EIA forecast for gasoline consumption and the Bank of Canada’s move to cut their overnight loan rate, which influences car loans and other lending rates, by a quarter point to 0.75%, surprised many analysts. Given that Canada is the biggest exporter of oil to the U.S. though, this move to reinforce oil prices should really come as no surprise, despite Canada’s central bank being the first of the Group of Seven to take this action in response to falling oil prices. Refinery capacity is already up markedly this year in the U.S., with the EIA indicating a 1% growth over last year’s figures for the same interval, to 91% of capacity for the week ending January 9, with refineries churning out some 9.1 million bbls/day.
This oil price slump is a prime opportunity for investors to load up on companies that have the right mindset and approach to development, making the recent announcement by Start Scientific about expansion of their footprint in Jefferson County, Mississippi’s Fayette Field via a farmout agreement with Durban Energy, of particular interest. This latest announcement by the company is further evidence of the tight-knight relationships established by STSC’s management with key industry entities and the extensive base of contacts the company has access to throughout the oil and gas industry, being one of many projects in Mississippi STSC has the opportunity to acquire with low front-end costs. A post-payout 52.5% net revenue for Start Scientific on this project is a good deal and the company intends to drill a new well on the farmout acreage targeting the Lower Tuscaloosa Massive Sand in the 2.5k-acre Fayette structure. Originally discovered back in the 40’s and pioneered with a 2k pound flowing pressure, 229 BOPD well that eventually did over 630k bbls and 2.3 BCF, there is considerable potential here for STSC to generate revenues and the company will be able to treat each well separately for payout calculation.
Superb permeability (up to 460 millidarcies) and an average porosity of 28% translates into solid development economics and should remind investors of the company’s focus on the Chalk section of the Selma Gas Rock Formation (Anderson Sand) at the Flora Field over in Madison County, Mississippi. The company announced in early January that they signed a farmout agreement with BPS Operating Services for a post-payout 60% working interest in key Flora Field acreage with multiple, highly economical drilling opportunities. With some 33 old wells that could be re-entered and recompleted, and all the logistical accoutrements like production facilities and salt water disposal systems already in place, the Flora Field is another example of the kind of choice permeability target geology and premium operational cost metrics STSC is working on in Mississippi.
The company has also recently announced an option to purchase some 1.5k acres in Matagorda County, Texas where they intend to offset previous successful production (Harold Hunt 1well, 1984, 700k BOE total) at round 12k feet down to secure the lease from the city of Palacios (the Airport Lease), after which they intend to go after the over-pressured Frio Sand down around 16k feet, where modern drilling techniques can unlock potentially major gas and condensate returns. Applying modern recovery techniques to proven targets and developing optimal cost projects in already high-permeability targets, are the kinds of strategic objectives required to survive and thrive these days. Investors will want to take a closer look at Start Scientific’s growth strategy and rapidly developing project portfolio to get a clearer sense of where this development stage E&P is heading.
To learn more about Start Scientific, visit www.startscientificoil.com
Let us hear your thoughts: Start Scientific, Inc. Message Board
