SunTerra Oil and Gas Strategy
SunTerra’s primary strategy for value creation is to convert “possible and probable reserves” to “proven developed and undeveloped reserves” by using underbalanced open-hole completion techniques to produce oil and gas from vertical wellbores and horizontal laterals. Nearly all existing oil and gas fields drilled over the last 100 years have encountered zones that do not respond favorably to conventional (over-balanced) completion practices. Underbalanced drilling is a relatively new completion method that eliminates the need for perforating, acidizing and fracing. It has a 15+ year track record of producing hydrocarbons from “thought to be depleted” and “thought to be non-producible” reservoirs.
Early on SunTerra’s management team recognized and experienced the potential of UBHD. Drilling technology has evolved to the point where drilling and producing are no longer mutually exclusive. This has not always been the case. By comparison, in the early 20th century, “cable tool drilling”, the original underbalanced drilling and completion technique, had a short life in part because surface equipment to produce while drilling was not available. In addition, most of these early wells were true “wildcats”, meaning reservoir information such as bottom-hole pressures and formation tops were unknown in most basins. Prior to drilling, having knowledge of reservoir characteristics such as the subsea top of the targeted formation so that the UB vertical or horizontal completion method can be applied at the appropriate depth is critical to our success. Today, nearly all formation tops in the US have been determined from previous penetrations. Fifty years ago, this was not the case, and so wells were drilled with over-balanced mud systems to provide a means to control a well when unexpected pressures were encountered. This well control mentality is still prevalent today, making it difficult for most conventional drillers to accept a new approach that controls pressure at the surface. Through years of research and evidence, we now know controlling pressure downhole with overbalanced mud systems severely damages the permeability of a formation, especially in an unconventional reservoir. After all, this is the reason hydraulic fracturing was developed, to frac by the damage caused by drilling mud.
SunTerra has positioned itself to be able to evaluate the true potential of an existing field from a different perspective because it has a new completion tool in its tool box. Unfortunately, there is no single service company in the world capable of providing the complete suite of services and equipment that are required to implement this completion method on a reliable, cost efficient basis. What is needed is a company that is motivated to improve productivity by employing non-damaging reservoir drilling techniques as part of the well plan and who also owns a fully integrated package of drilling equipment and technology designed solely to protect the reservoir while drilling. SunTerra has come to grips with this issue and recognizes that it will need to have its own internal service company that will specialize in the under balanced technique to insure a well stays underbalanced 100% of the time, even when running a pre-perforated liner and rigging down, let alone while controlling costs.