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With oil prices nearing the century mark, it’s no surprise producers are again looking to capture oil missed during original E&P activities in sometimes century-old fields. Previously, these fields were not worth the expense of costly enhanced oil-recovery projects, but improved economics and EOR technologies are changing that.

The largest oil producer in the Basin, Rex Energy Corp., is one example. It has its eyes on Lawrence Field, one of the largest fields in the basin with original oil in place (OOIP) estimated at approximately 1 billion barrels.

The field is believed to have produced more than 400 million barrels since its discovery in 1906. Rex estimates the remaining net potential recovery could be up to 84 million barrels of oil equivalent (BOE).

Rex Energy is based in State College, Pennsylvania, but entered the Illinois Basin in 2004 and now has a regional office in Bridgeport, Illinois. Indeed, it has its largest concentration of assets in the basin, where, as of the end of third-quarter 2007, it produced an average net 2,104 BOE per day.

“We entered the Illinois Basin with an acquisition in 2004 due to what we perceived as the opportunity to move into an area which was ‘off the beaten path,’ and where we felt we could assemble a leading position in an area we didn’t feel was as competitive at the time as other basins were in the U.S.,” says Benjamin Hulburt, chief executive officer.

Now, Rex plans an EOR project using alkali-surfactant-polymer (ASP) flooding.

In the 1980s, Marathon Oil Corp. conducted two EOR pilot projects in the field, consisting of two surfactant-only polymer tests that were able to successfully recover an additional 15% to 21% of the OOIP.

Those activities were stopped largely because the chemical costs per incremental barrel were too high to justify the continued efforts, considering that the high concentrations of surfactant made the process very expensive—and oil prices had plunged below $15 per barrel. The ASP process has since been developed, drastically reducing the amount of surfactant needed to produce similar recoveries at much reduced costs, says Hulburt.

Flooding has long been an effective means of maintaining reservoir pressure and driving oil towards a wellbore. Water has been the dominant fluid for this method, known as secondary recovery. However, when water saturation increases, oil is trapped, blocking the movement of oil. Surfactants, which act like soap, along with the alkali, reduce the interfacial tension between the oil and water to reduce capillary forces and free the trapped oil.

In the ASP process, a very low concentration of the surfactant combined with an alkali is used. The lower interfacial tension allows the injection fluid to penetrate deeply into the formation and contact the trapped oil. The polymer is used to increase the viscosity of the injection fluid, improving the sweep efficiency of the flood. Water-flooding resumes after chemical injection to produce oil released by the injected chemicals, Hulburt explains.

Rex plans to spend 40% of its 2008 capital budget on its Lawrence Field ASP flood project, making it its largest project. Total capex of $78 million is a 95% increase from its 2007 capex.

The increase is largely because the company plans to speed up its ASP project in 2008, instead of waiting to begin it in 2009, as had been planned, Hulburt says. Injections in pilot tests are expected to begin during second-quarter 2008.

Lawrence Field In Lawrence County, Illinois, Rex owns and operates 21.2 square miles (approximately 13,500 net acres). Its properties account for approximately 85% of the current total gross production from the field, Hulburt says. “The geology of Lawrence Field makes it attractive for the ASP process. ASP has been found to work best in relatively shallow sandstone reservoirs with good permeability and a sweet crude.”

The Cypress (Mississippian) and Bridgeport (Pennsylvanian) sandstones are the major producing horizons, although the field includes 23 horizons.

In the 1960s, 1970s and 1980s, EOR projects using surfactant polymer floods were implemented in several fields in the Illinois Basin by Marathon, Texaco and Exxon, Hulburt says. “These test projects throughout the basin reportedly were able to recover incremental oil reserves of 15% to 30% of the original oil in place.”

Marathon’s project was introduced at a time of low oil prices and the technology of combining alkali and surfactant with polymer, which significantly reduces costs of recovery compares with previous surfactant polymer floods, had not been fully developed, Hulburt says.

Despite the high costs of the surfactant polymer flooding employed by Marathon and the low oil prices, the project produced an estimated 459,000 incremental barrels, or an estimated 21% of the OOIP from the 25-acre lease in the middle of the 13,500-acre field. Rex now owns that lease.

“Marathon’s total cost for its surfactant-polymer test on the Robbins lease in our field was $37 per incremental barrel of oil. This extremely high lifting cost was for the most part due to the very high concentration of surfactant used.

“With the ASP process, we can reduce the amount of surfactant by about 90%. Surfactant is a byproduct of petroleum refining, so it’s very expensive and the price tends to move up or down with the price of petroleum. The alkali, a soda ash, (sodium carbonate or sodium hydroxide) is relatively cheap.”

He estimates that finding and development costs in this ASP project will be approximately $10 to $12 per barrel. “The goal of our Lawrence Field ASP flood project is to duplicate the oil-recovery performance of the surfactant polymer floods conducted in the 1980s, but at a significantly lower cost. We expect this cost reduction to be accomplished by utilizing new technologies to optimize the synergistic performance of the three chemicals. Using alkali in the formula will allow us to significantly lower concentration of the more costly surfactant,” Hulburt says.

DOE study In 2000, PennTex Illinois, a Rex subsidiary and then known as Plains Illinois Inc., and the U.S. Department of Energy conducted a study on the potential of an ASP project in Lawrence Field. Consulting services were provided by Golden, Colorado-based Surtek Inc., an engineering firm specializing in design and implementation of chemical oil-recovery systems. Based on modeling of the reservoir characteristics and laboratory tests with cores taken in the field, the study found oil recovery could be increased significantly by installing an ASP flood, Hulburt says.

In 2006, Rex hired Surtek to review and update the evaluation. As a result, Surtek recommended two pilot areas to evaluate the ASP process in the Bridgeport and Cypress sandstones.

Based on Surtek’s recommendations, Rex Energy drilled and cored the central producing well in each of the two proposed pilot test areas. Using these cores, Surtek has conducted linear and radial core tests, which have been able to demonstrate ASP oil recoveries of up to 21% of the OOIP in the Cypress sandstone, and up to 24% in the Bridgeport sandstone, Hulburt says.

Rex was reorganized in 2007 as the successor of companies operating as Rex Energy LLC and Rex Energy Operating Corp., other Rex partnerships, two Douglas Oil & Gas partnerships, and two Penntex Resources partnerships that began to operate under the Rex Energy banner in 2001.

The combined partnerships created a publicly traded company whose IPO closed last July 30 at $11 per share. Proceeds of the offering totaled $89.2 million.

Hulburt co-founded the first Rex Energy partnership and all affiliated companies since then. Other senior officers include Thomas Shields, president, who was the former CEO of Douglas Oil & Gas; and William Ottaviani, chief operating officer, who joined the company in 2007 as senior vice president of reservoir engineering, after having spent 25 years in various management positions with Chevron.

Last September, Rex established a $200-million senior secured, revolving credit facility, with an initial borrowing base of $75 million. This replaced the company’s $40-million credit agreement. It borrowed $18 million under a new credit facility to pay debt from its previous agreement. The new facility is led by KeyBank, BNP Paribas, Manufacturers and Traders Trust Co., Sovereign Bank and Allied Irish Banks.

Revenue for the first nine months of 2007 climbed 58% to $41.5 million, compared with $26.3 million for the same period in 2006. Hulbert says the company will double its drilling and recompletion activities in 2008, compared with 2007, and he expects to end 2008 with daily production of 3,500 to 3,900 BOE.

Excluding the ASP project in Lawrence Field, whose reserves are booked right now only as “potential,” the company has 14.5 million BOE proved in the Appalachian Basin and Permian Basin, and other assets in the Marcellus shale in Pennsylvania and New Albany shale in southern Indiana.

Hulburt hopes for more. “We anticipate using ASP elsewhere in our fields in the Illinois Basin. We also look to replicate this process in other fields we may look to acquire,” he says.