Apache Canyon Prospect

The Apache Canyon Prospect is a play with a potential of 10 to 30 oil fields from the Bliss Sandstone, the Ellenburger Dolomite, the Fusselman Dolomite, and the Devonian Formation. The prospect area is located 180 miles west of Midland and 30 miles north of Van Horn. County and ranch roads provide access to the area.

The highlights of this prospect are:

1. Its tectonic history is very similar to that of the prolific oil producing Central Basin Platform.
   
   

   There is a large, faulted surface anticline with 700 feet of closure in the Permian strata covering about 22,000 acres.
   
   

   It is located on the flank of one of the world's greatest oil producing provinces.
   
   

   Maximum potential reserves are estimated at 300 to 400 MMEEB's.
   
   

   Detailed surface geology is available in a USGS publication authored by one of the most respected West Texas field geologists, Philip B. King.
   
   

   Shallow drill depths (about 3000') assure low drilling costs.
   
   

   Surface gas seeps exceed those in the Salt Flat to the east by a factor of 1000 to 10,000, and
   
   

   The Partner's Energy-Apache Canyon #1 well drilled in Apache Canyon provides valuable information on subsurface stratigraphy, oil shows, and water salinities.

GEOLOGY
The prospect area is situated on the Sierra Diablo Platform sometimes called the "Sierra Diablo". This platform is a sister platform to the Central Basin Platform of the Permian Basin that has produced such prolific quantities of hydrocarbons. The USGS publiched Geology of the Sierra Diablo Region, Texas, Geological Survey Professional Paper 480, by P. B. King in 1965. This paper, field work conducted by the writer, and the results of the Apache Canyon #1 well provide the basis for identifying this prospect. The Sierra Diablo Platform (SDP) as the Central Basin Platform (CBP) is characterized by large structures and reef trends in the Permian strata, a significant Permo-Penn unconformity, and numerous fault block structures in the early Paleozoic section which often serve as a nucleus for the Permian age shelf margins. The most important difference between the SDP and the CBLP is that the former was epierogenically uplifted much higher in elevation during the Laramide Orogeny that the latter. The consequence was some Tertiary age faulting and removal by erosion of most of the Permian Ochoan and Guadalupian sections exposing the Leonard and Wolfcamp age sections at the surface. This, naturally, resulted in the breaching of all the Permian reservoirs. The Pre-Permian section, however, was not breached everywhere. One of these areas lies in Apache Canyon and vicinity.

Partner's Energy's interest was drawn to Apache Canyon for the following reasons:

1. P.B. King's work showed there to be a large surface anticline in the Permian section which in turn indicates the presence of large Pre-Permian age structures.
   
   
2. Surface geochemical surveys prove that gas seepage is occurring along fault lines mapped by King in relatively large quantities, and
   
   
3. An analysis of the gas showed that it was thermogenic in origin, not biogenic.

The large surface anticline can best be defined by mapping on the base of the Bone Spring Reef which is exposed on the surface in the canyon walls of Apache Canyon and along the eastern escarpment face of the SDP. Such mapping showed the crest of the anticline to be over Apache Canyon itself so Partmer's Energy drilled its well in the canyon in Section 13. The well was a dry hole but had significant sample shows in the Devonian Formation and the Bliss Sandstone. Based on King's study, the Montoya Dolomite was expected to be the formation in the subcrop at the unconformity, but it turned out to be the Devonian Formation. What a surprise! The well was drilled in a local graben. Subsequent investigation showed that King's mapping did not reveal a major fault going through Apache Canyon. This fault is concealed by valley fill but is nonetheless present.

RESERVES

Pre-Permian structures usually display much more closure and throw on faults than the mappable structure in the overlying Permian strata. This is true for the simple reasons that erosion has worn down the features in some instances and in others, the Wolfcamp sedimentation has filled in low areas masking the former relief. The primary reservoir objectives consist of the Bliss Sandstone, the Ellenburger Dolomite, the Fusselman Dolomite, and the Devonian Formation. There are two types of traps here, stratigraphic and structural. The strat traps occur at the unconformity. The structural traps are fault bounded. Faults in the corresponding section on the CBP are sealing faults and trap oil. One the SDP due to the Laramide uplift, some of these Pre-Permian faults have been reactivated. If the reactivated faults are sealing faults, then the structural traps will not be breached. If the reactivated faults are leaking faults, then the structural traps will be drained, and only the strat traps at the unconformity and the faulted traps which were not reactivated will be intact. The estimated ultimate reserves for the strat trap are 65,000,000 EEB (BOE). Reserves can reach 300 to 400,000,000 EEB if the structural traps have not been breached by leaking faults.

Chloride content of water from the Fusselman and Bliss in the Apache Canyon well provide strong evidence to support the hypothesis that the faults are sealing faults. Free communication along leaking faults should produce relative equilibrium of the chloride content up and down the section, but this is not the case in Apache Canyon.

TRADE

This project is being offered with the intent that at least two test wells be drilled, the first of which is to be located in Section 18 on the south rim of Apache Canyon. The second location will depend on the results of the first well and any seismic that may be subsequently shot.

An Area of Mutual Interest is outlined on the AMI Map along with the 18 sections which Lewis has an exclusive right to lease. These sections are Mineral Classified Lands and are therefore subject to State of Texas approval at the time of leasing. The terms of the trade are:

1. $24/acre for the 18 sections when leased,
   
   
2. Deliver a 77% NRI to operator, and
   
   
3. Receive a 2% ORRI and a $2/acre bonus on the noncontrolled acreage within the AMI when it is leased.
   
   
4. Subject to prior sale.

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