Paradox Basin Project
The Paradox Basin Project
The Paradox Basin, located primarily in southeast Utah and southwest Colorado, is a significant petroleum and natural gas producing basin in the continental United States. Well-known large fields in the Paradox Basin include, among others, the Greater Aneth, Andy's Mesa and Lisbon. The majority of historical exploration and production from the basin has involved oil production from algal mounds. New exploration models, based primarily on the commingling of multiple, previously bypassed, gas zones were applied to the basin on a larger scale beginning in 2004. More recently, exploitation of gas bearing zones through horizontal wells has begun.
Recognizing the potential in the south central area of the Paradox Basin, Lynden and its Texas-based partner and operator began significant leasing in late 2005. The leasing has been carried out in two large prospect areas, or areas of mutual interest, and allow knowledge obtained during the course of operations to be jointly leveraged across the prospect areas in the future.
The Paradox Basin Project now includes two contiguous oil and gas prospect areas totaling 1,525,000 acres. The 900,000 acre Northern Prospect Area includes leases covering approximately 100,000 acres, where Lynden has a 55% before payout working interest (41.25% after payout working interest) in an 80% net revenue interest. The contiguous 625,000 acre Southern Prospect Area includes leases covering approximately 10,000 acres, where Lynden has a 25% before payout working interest (23.75% after payout working interest) in an 85% to 87% net revenue interest.
Shales
Over the past five years, through numerous re-entry and new wells, we have tested the potential of both the Gothic and Hovenweep shales and demonstrated the presence of producible shale gas from these zones. The shallow (5,500 to 6,500 feet) Gothic and Hovenweep shales are believed to be widespread and present throughout much of our over 110,000 gross acre position. The widespread and shallow nature of these zones suggests the potential for a regionally extensive shale gas resource play where significant economies of scale can be realized.
The Gothic and Hovenweep shales have the potential to be exploited either through horizontal wells or through the commingling of shale gas with other uphole conventional Paradox Formation Reservoirs in vertical wells. The potential of these shale zones is supported by tests of the Gothic shale in both vertical and horizontal wells reported by Bill Barrett Corporation, a senior Rocky Mountain producer operating nearby. Based on the results reported by Bill Barrett, it is anticipated that the next step in the evaluation of the Gothic and Hovenweep shales on the Paradox Basin Project is to test their productive potential in horizontal test wells.
Conventional Zones
The operator's exploitation program to date has been based on commingling production from multiple zones of the Paradox Formation stratigraphic sequence, a practice successfully pursued by other operators in the Basin. Through numerous completions in many re-entry and new wells, several gas-bearing zones have been identified and tested uphole above the Gothic and Hovenweep shales.
Infrastructure
Primary transportation alternatives in the Paradox Basin Project areas are the Encana and Northwest pipelines. We have completed a 21.5 mile Northern Prospect Area Pipeline and a four mile Southern Prospect Area pipeline, both of which connect with the Encana pipeline. Our pipeline assets are held in a Utah-based natural gas transmission company, Abajo Gas Transmission Company, LL C. These assets provide an important strategic advantage in the area and have been laid out as central trunk lines such that tie-ins to new wells could be easily accomplished. Through its 47.99% interest in Abajo, Lynden is entitled to an effective 55% interest in the Northern Prospect Area gathering system and a 25% effective interest in the Southern Prospect Area gathering system.