Evolution Petroleum Corporation

Mississippi Lime

The Mississippian Lime Play

The Mississippian Lime play targets a limestone (carbonate) formation that extends from central Oklahoma to the west and northwest up into the northwestern corner of Kansas. This formation, ranging from shallow to mid-depths was extensively developed historically with vertical wells and conventional completions. The advent of horizontal drilling combined with multistage hydraulic fracturing opened this play to redevelopment as a prospective resource play, and we elected to participate in a cautious manner by participating in a joint venture with a local operator. The attractions of this play are the oily content at a fairly shallow depth and low well cost.

The Mississippian Lime becomes somewhat shallower and oilier to the east side of the play. A major geologic feature, the Nemaha Ridge, separates the play between the oily east side and the more extensively developed and gassier west side. Prominent operators on the west side include Sandridge and Chesapeake, and Range Resources and Devon are the prominent operators on the east side. Historically, both sides of the Ridge have experienced considerable vertical well development.

The Evolution/Orion Joint Venture

In 2012, Evolution entered into a joint venture with private equity backed Orion Exploration, a private company based in Tulsa focused on originating and operating development projects in central Oklahoma. The joint venture acquired 11,887 net acres across 38 sections in central Kay County, just north of Ponca City. Initially, we owned a 45% interest in the joint venture, but elected in 2013 to reduce our interest to 34% by selling a portion back to Orion at our original purchase price per acre.
In our general area, we believe the Mississippian Limestone is a highly layered, fractured carbonate, typically with the fractures containing salt water and the matrix porosity containing hydrocarbons. In addition, the upper portion of the formation includes a “Chert” section of varying thickness that typically has high porosity and permeability.

We utilized Pinnacle Energy Services as our independent reservoir engineer based on their experience, extensive data and focus on the Mississippian Lime. Pinnacle evaluated our leasehold based on vertical well and horizontal well results in the area compared with data describing the formation in our leasehold. Pinnacle initially assigned 114 gross drilling locations to the 38 sections in which our joint venture owns leases.

Drilling Results
Our joint venture initially drilled a salt water disposal well, followed by the first two Mississippian Lime wells - the Sneath and Hendrickson. Both wells were horizontally drilled in the upper half of the formation approximately 100 feet below the Chert zone. The Sneath was completed in late October 2012 with a ~3,100’ lateral section, and the Hendrickson was completed in late November 2012 with a ~4,000’ lateral section. Both wells were completed with 10-12 stages of hydraulic fracturing each. Evolution owns a 45% working interest in the Sneath well and a 36% working interest in the Hendrickson well.

The Sneath and Hendrickson wells produced water, as expected, at rates of  up to 7,000 barrels per day. After depressurizing the reservoir to the desired levels, oil and gas production was not sufficient to warrant continued production. We subsequently tested the Hendrickson well high in zone with the lateral plugged off without positive results. We further tested the Sneath well by plugging off the first two thirds of the lateral and producing only from the end of the lateral that was structurally high, again without positive results. Consequently, we have elected to seek strategic alternatives for this asset.