The North American Energy business has had a massive resurgence thanks to the implementation of horizontal wells combined with multi-stage fracturing. These techniques were first applied to successfully produce shale gas and have through trial and error subsequently been used to liberate oil trapped in shale and tight rocks.
North America is now almost a decade into this horizontal revolution, yet these practices have not really created any sort of impact outside of North America.
Why is that?
The answer is that everything about North America made it a perfect fit for horizontal oil and gas development.
Developing a horizontal play involves drilling hundreds if not thousands of wells that come on strong and then have sharp production declines. This is different from conventional oil and gas wells which decline at much slower rates and don't require as many wells.
The following attributes have made North America a perfect fit for horizontal development and are attributes that are generally not all present internationally:
An International Play With Horizontal Potential
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I've become very leery about investing in junior oil and gas companies that believe they have the "next big" horizontal play, especially when that play is internationally located. Until I've seen oil or gas wells that produce at rates that offer a profitable return on the cost of drilling them, I'm inclined to view new unproven plays with a very skeptical eye.
Alvopetro (ALV.TSX, ALVOF.OTC) is an international horizontal player that I find more tempting. The management group backing this company has a significant amount of horizontal oil experience and a successful track record of "cracking the code" on new plays.
Alvopetro was spun out of Colombian focused oil producer Petrominerales when it was acquired by Pacific Rubiales (PRE) at the end of 2013. The management team at Alvopetro is closely tied (the companies share a Chairman) to Canadian horizontal pure play Lightstream Resources (LTS.TSX) which has drilled more horizontal oil wells than almost any company in Canada.
The focus for Alvopetro is a potential horizontal oil play in Brazil. I figure that this group would not be wasting their time on a horizontal opportunity unless they felt very confident about its potential. That perks my interest.
Source of image: August 2014 Alvopetro Presentation
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Alvopetro is focused on the Reconcavo Basin in Brazil where the company has assembled 148,000 net acres. The zone of interest on that land is called the "Gomo" formation which Alvopetro believes exposes the company to 1.2 billion barrels of oil in place.