Educational

America's Energy Revolution

There has never been a better time to invest in oil and gas exploration in the history of our nation.  Since the 1990's, the use of 3-D seismic technology makes the success rate of exploration odds go exponentially upward, making the objectives easier to target and the outcomes better for investors and royalty interest owners, as well as the small exploration companies like Intrepid Drilling.  And with our United States Government committed to being serious about developing our domestic energy infrastructure, our investors can benefit in many different areas.

From a tax perspective, participation in an independent oil and gas project can give investors the tax breaks they are looking for.  Many major tax benefits are available that are found nowhere else in the tax code.  These include intangible drilling costs, which generally constitute 65-80% of the total cost of drilling a well and are 100% deductible in the year incurred, as long as operation commences by March 31st of the following year.  These intangible drilling costs include labor, chemicals, drilling fluids, fuel and other items necessary for drilling.  Then there are tangible drilling costs which include the actual cost of the surface facilities, such as oil storage tanks, water storage tanks, separators, and other equipment.  These expenses are 100% deductible but are depreciated typically over five to seven years.  Also, the current U.S. tax code specifies that a working interest in an oil and gas well benefits by determining that all net losses are active income and can be offset against other forms of income, such as wages, interest and capital gains.

The most enticing tax benefit for small producers and investors alike is what is known as the depletion allowance. This incentive excludes 15% of all gross income from oil and gas wells, and is limited to small companies and investors, and there are no income or net worth limitations of any kind, so Intrepid Drilling may be a perfect choice for your oil and gas investment!

Letter from Bill Simmons, Manager

America's Energy Revolution started in 1998 in the Barnett Shale near Ft. Worth, Texas when George Mitchell figured out how to frac and achieve production from shale...something that had never been achieved in the history of the oil industry.  And, I might add, he was an independent from Corpus Christi, Texas, not a major oil company.  Since the success in the Barnett Shale, many shale, or resource plays have been developed across America.  As many of you know, production has been achieved in the Bakken Shale in North Dakota, the Eagleford Shale in South Texas, the Haynesville Shale in North Louisiana, the Utica Shale in Ohio, the Marcellus Shale in Pennsylvania, the Wolfecamp Shale in West Texas, the Tuscaloosa Marine Shale in Mississippi, the Woodford Shale in Oklahoma, as well as many other shale plays across America.  The net result of these shale or resource plays has been great for America.  Today, America is importing only 32% of its oil consumption.  Just a few years ago, 60% of America's oil consumption was from imported oil.  By the year 2020, America should be the largest oil producer in the world.  That sounds almost too good to be true, but it is true, thanks to men like George Mitchell who pioneered horizontal drilling and fracking.  Another bright spot within America's Energy Revolution is the export of Natural Gas.  This is being done by lowering the temperature of Natural Gas to minus 259 degrees fahrenheit, loading the liquified Natural Gas onto a customized ship and exporting it to places like Europe, Japan and South Korea.  Another bright spot is the refineries that convert methanol into olefins (plastic pellets).  The bottom line is that millions of new jobs have been created since 1990 and billions of dollars have been deployed to develop those resource plays.  America is nearing Energy Independence!  

I believe there is a way to find and produce oil for between 10 and 20 dollars a barrel.  The way Intrepid Drilling has been able to do that has been by not following the pack, and by conventionally drilling proven reserviors based on well control, coupled with 3-D seismic technology.  Many wells were drilled from 1960 to 1990 that found production; however, they were not drilled in the optimum geological position within the reservior.  Today, with modern 3-D seismic we can better image a reservior and drill wells to achieve production at very low risk and at a low cost. If you want the greatest return on your investment in Energy, I encourage you to not follow the pack, rather to consider conventional drilling into proven reserviors.  I invite you to come drill with us!

Bill Simmons

Environmental, Health and Safety Principles

Intrepid Drilling maintains the commitment to operating in an environmentally sensitive manner everywhere we drill. We are aware of and follow the laws and regulations set forth by every state and country in which we are privileged to explore, and hope to reduce our “footprint” wherever possible.

The safety of our employees is a priority and will not be compromised by any of our employees or the employees of any service company with which we contract. Our employees and contractors will be provided with training and the tools necessary to complete their jobs safely.

Our commitment is also to the prevention of any on-site accidents through training, strict rules and guidelines of drug-free workplace initiatives and will do random drug screening if necessary. We will respond quickly and efficiently to any incidents and cooperate with state, local and federal authorities whenever necessary as may be required. We will promptly report any incidents and performance issues to responsible company personnel.

Glossary of Terms

A

abandonment- converting a drilled well to a condition that can be left indefinitely without further attention and will not damage freshwater supplies, potential petroleum reservoirs or the environment.
abiogenic theory - a theory that maintains petroleum originated from hydrocarbons that were trapped inside the Earth during the planet's formation and are slowly moving upwards.
acidizing- the injection of acids under pressure into the rock formation to create channels that allow the hydrocarbons to flow more easily into the wellbore.
air drilling- the use of compressed air instead of mud as a drilling fluid to remove the cuttings; air drilling increases penetration rates but offers no control over water in the subsurface formations or downhole gas pressure.
annulus - the space between two concentric lengths of pipe or between pipe and the hole in which it is located.
associated gas - gas that is produced from the same reservoir along with crude oil, either as free gas or in solution.

B

benzene- a volatile organic compound that occurs naturally in petroleum and is also produced by the combustion of petroleum products.
biogenic theory - the most widely accepted theory explaining the origins of petroleum: as organic materials become deeply buried over time, heat and pressure transform them into hydrocarbons.
bitumen- petroleum that exists in the semisolid or solid phase in natural deposits
blowout- an uncontrolled flow of gas, oil or other fluids from a well.

C

carbon dioxide (CO2) - a non-toxic gas produced from decaying materials, respiration of plant and animal life, and combustion of organic matter, including fossil fuels; carbon dioxide is the most common greenhouse gas produced by human activities.
carbonate - rock formed from the hard parts of marine organisms mainly consisting of calcite, aragonite and dolomite.
casing-head gasoline (naphtha) - a highly volatile liquid which is separated from natural gas at the wellhead and was once used as unrefined gasoline.
cat cracking (catalytic cracking) - a refinery process that uses catalysts in addition to pressure and heat to convert heavier fuel oil into lighter products such as gasoline and diesel fuel.
catalysts - materials that assist chemical reactions.
cathodic protection- a technique for preventing corrosion in metal pipelines and tanks that uses weak electric currents to offset the current associated with metal corrosion.
centrifugal pump- a rotating pump, commonly used for large-volume oil and natural gas pipelines, that takes in fluids near the centre and accelerates them as they move to the outlet on the outer rim.
clastic- made up of pieces (clasts) of older rock; rock derived from mechanical process; generally sandstone, siltstone or shale.
coal bed methane (CBM)- natural gas generated and trapped in coal seams.
coal gas- a mixture of hydrogen, carbon monoxide and methane, produced by distilling coal, that was once used for heating and lighting.
co-generation - the production of steam to drive turbines producing electrical energy for plant use or sale and for the provision of heat for buildings and industrial processes.
coiled tubing- a continuous, jointless hollow steel cylinder that is stored on a reel and can be uncoiled or coiled repeatedly as required; coiled tubing is increasingly being used in well completion and servicing instead of traditional tubing, which is made up of joined sections of pipe.
coke- solid carbon that remains in the refining process after cracking of hydrocarbons.
coking - a process used to break down heavy oil molecules into lighter ones by removing the carbon which remains as a coke residue.
common depth point method- a method of recording and processing seismic signals so that signals belonging to the same subsurface point are brought together
completion - the process of finishing a well so that it is ready to produce oil or gas.
compressor- a machine used to boost natural gas pressure to move it through pipelines or other facilities.
condensate - hydrocarbons, usually produced with natural gas, that are liquid at normal pressure and temperature.
conventional crude oil - petroleum found in liquid form, flowing naturally or capable of being pumped without further processing or dilution.
core - a continuous cylinder of rock, usually from five to 10 centimetres in diameter, cut from the bottom of a wellbore as a sample of an underground formation.
cracking - a refining process for increasing the yield of gasoline from crude oil; cracking involves breaking down the larger, heavier and more complex hydrocarbon molecules into simpler and lighter molecules through the use of heat and pressure, and sometimes a catalyst.
critical sour gas wells - a sour gas well that has the potential to release unsafe levels of hydrogen sulphide, which might affect nearby residents.
critical zone - the zone in a well where sour gas will likely be encountered
Crown rights - government-owned surface or mineral rights.
cuttings- chips and small fragments of rock cut by the drill bit and brought to the surface by the flow of drilling mud.

D

density - the heaviness of crude oil, indicating the proportion of large, carbon-rich molecules, generally measured in kilograms per cubic metre (kg/M3) or degrees on the American Petroleum Institute (API) gravity scale; in Western Canada oil up to 900 kg/m3 is considered light to medium crude - oil above this density is deemed as heavy oil or bitumen.
development well - a well drilled in or adjacent to a proven part of a pool to optimize petroleum production
dolomite - calcium carbonate-rich sedimentary rock in which oil or gas reservoirs are often found
downstream - the refining and marketing sector of the petroleum industry.
drilling mud - fluid circulated down the drill pipe and up the annulus during drilling to remove cuttings, cool and lubricate the bit, and maintain desired pressure in the well
dry gas - natural gas from the well that is free of liquid hydrocarbons, or gas that has been treated to remove all liquids; pipeline gas
dry hole - an unsuccessful well; a well not capable of producing commercial quantities of oil or gas

E

enhanced recovery - the increased recovery from a pool achieved by artificial means, including injection of fluids, chemicals or heat.
established reserves - those reserves recoverable under current technology and present and anticipated economic conditions.

F

field - the geographical area encompassing a group of one or more underground petroleum pools sharing the same or related infrastructure.
field price - the amount received by petroleum producers after deducting transportation and distribution costs.
formation - a designated subsurface layer that is composed throughout of substantially the same kind of rock or rock types.
fracturing (or fracing) - the practice of pumping special fluids down the well under high pressure; fracturing causes the formation to crack open, creating passages for the reservoir fluids to more easily flow into the wellbore.

G

gas transmission systems - pipelines that carry natural gas at high pressure from producing areas to consuming areas.
gathering lines - pipelines that move raw petroleum from wellheads to processing plants and transmission facilities.
geochemistry - the science of chemistry applied to rocks and minerals; geochemists analyze the contents of subsurface rocks for the presence of organic matter associated with oil deposits.
geophones (or jugs) - sensitive vibration-detecting instruments used in conducting seismic surveys; marine versions are known as hydrophones.
geophysics - the science that deals with the relations between the physical features of the Earth and forces that produce them; geophysics includes the study of seismology and magnetism.
greenhouse effect - the warming of the Earth's surface caused by the presence of carbon dioxide and other gases in the atmosphere that trap the heat of the sun.
greenhouse gases - a wide variety of gases that trap heat near the Earth's surface, preventing its escape into space; greenhouse gases, such as carbon dioxide, methane, nitrous oxide and water vapour, occur naturally or result from human activities such as the burning of fossil fuels ground-level ozone - see volatile organic compounds.
gusher - a well that comes in with such great pressure that the oil or gas blows out of the wellhead like a geyser; gushers are rare today because of improved drilling technology, especially the use of drilling mud to control downhole pressure.

H

heavy oil - dense, viscous oil, with a high proportion of bitumen, that is difficult to extract with conventional techniques and is more costly to refine.
horizontal drilling - drilling a well which deviates from the vertical and travels horizontally through a producing layer.
horizontal laterals - a series of drainage wells branching off from a horizontal wellbore.
hydrocarbons - a large class of liquid, solid or gaseous organic compounds, containing only carbon and hydrogen, that are the basis of almost all petroleum products.
hydrocracking - a refining process which adds hydrogen to the carbon rich molecules of heavier oil, in the presence of a catalyst, to produce high-octane gasoline.
hydrogen sulphide (H2S) - a naturally occurring, highly toxic gas with the odor of rotten eggs.
hydro-transport - a process that uses hot water to transport oil sand through a pipeline to a processing plant.
hydrotreating- the process of adding hydrogen to heavy oil or bitumen molecules during the upgrading process.

I

infill drilling - wells drilled between established producing wells on a lease in order to increase production from the reservoir.
injection well - a well used for injecting air, steam or fluids into an underground formation

J

jarmout - an agreement between oil companies whereby the owner of a lease who is not interested in drilling at the time agrees to assign the lease or a portion of it to another company that will earn a share of production by under-taking exploration.

K

kerosene - a mixture of hydrocarbons produced by distilling petroleum, that is used as a lamp oil or jet fuel.
kick - when fluids with a higher pressure than that exerted by the drilling mud enter the wellbore; this creates the potential for a well to blow out of control.

L

landman - a member of the exploration team whose primary duties are formulating and carrying out exploration strategies and managing an oil company's relations with its landowners and partners, including securing and administering oil and gas leases and other agreements.
light crude oil - liquid petroleum which has freely at room temperature.
limestone -- calcium carbonate-rich sedimentary rocks in which oil or gas reservoirs are often found.
liquefled natural gas (LNG) - supercooled natural gas that is maintained as a liquid at - 160' Celsius; LNG occupies 1/640th of its original volume and is therefore easier to transport if pipelines cannot be used.
logs - detailed depth-related records of certain significant details of an oil or gas well; usually obtained by lowering measurement instruments into a well.

M

measurement-while-drilling (MWD) tool - technology that transmits information from downhole measuring devices to the surface while drilling is ongoing.
medium crude oil - liquid petroleum with a density between that of light and heavy crude oil.
methane (CH4) - the simplest hydrocarbon and the main component of natural gas; methane is also produced when organic matter decomposes.
midstream - the processing, storage and transportation sector of the petroleum industry.
mineral rights - the rights to explore for and produce the resources below the surface.
miscible flooding - an oil-recovery process in which a fluid, capable of mixing completely with the oil it contacts, is injected into an oil reservoir to increase recovery.
mousehole - a hole drilled to the side of the wellbore to hold the next joint of drill pipe to be used; when this joint is pulled out and screwed onto the drill string, another joint of pipe is readied and slipped into the mousehole to await its turn
mud motor - a downhole drilling motor that is powered by the force of the drilling mud pushed through the motor by the mud pumps at the surface.
multiple entry - a technique for drilling several horizontal wells from a single vertical, directional or horizontal wellbore naphtha - a light fraction of crude oil used to make gasoline.

N

natural gas liquids (NGLs) - liquids obtained during natural gas production and processing; they include ethane, propane, butane and condensate.
nitrous oxide N20) - a very potent greenhouse gas which has a large number of natural sources and is a secondary product of the burning of organic material and fossil fuels.

O

octane - a performance rating of gasoline; the higher the octane number, the greater the anti-knock quality of the gasoline.
oil sands- a deposit of sand saturated with bitumen.
operator - the company or individual responsible for managing an exploration, development or production operation.

P

PVT - Pit Volume Totalizer - equipment used to measure the volume of drilling mud in the mud tanks/pits.
packer- an expanding plug used in a well to seal off certain sections of the tubing or casing when cementing and acidizing or when a production formation is to be isolated
perforate - make holes through the casing opposite the producing formation to allow the oil or gas to flow into the well.
perforating gun- a special tool used downhole for shooting holes in the well's casing opposite the producing formation.
permeability - the capacity of a reservoir rock to transmit fluids; how easily fluids can pass through rock.
petrochemicals - chemicals derived from petroleum that are used as feedstocks for the manufacture of a variety of plastics and other products such as synthetic rubber.
petroleum - a naturally occurring mixture composed predominantly of hydrocarbons in the gaseous, liquid or solid phase.
pig - a cylindrical device inserted into a pipeline to inspect the pipe or to sweep the line clean of water, rust or other foreign matter; pipeline inspection and cleaning devices are called pigs because early models squealed as they moved through the pipe.
pinnacle reef - a conical formation, higher than it is wide, usually composed of limestone, in which hydrocarbons might be trapped.
pool - a natural underground reservoir containing an accumulation of petroleum.
porosity - the volume of spaces within rock that might contain oil and gas (like the amount of water a sponge can hold); the open or void space within rock
Precambrian - formed prior to the Cambrian era approximately 600 million years ago.
primary recovery - the production of oil and gas from reservoirs using the natural energy available in the reservoirs and pumping techniques.
probable reserves - hydrocarbon deposits believed to exist with reasonable certainty on the basis of geological information
production casing- the last string of casing set in a well; production casing is tubular steel pipe connected by threads and couplings that lines the total length of the wellbore to ensure safe control of production, prevent water from entering the wellbore and keep rock formations from "sloughing" into the wellbore.
production tubing - steel pipe inside the casing used to flow the petroleum from the producing zone to the surface.
productive capacity - the estimated maximum volume which can be produced from known reserves based on reservoir characteristics, economic considerations, regulatory limitations and the feasibility of infill drilling or additional production facilities; also known as available supply.
proved reserves - hydrocarbons in known reservoirs that can be recovered with a great degree of certainty under existing technological and economic conditions.
public consultation - the process of involving all affected parties in the design, planning and operation of a seismic program, an oil and gas well, pipeline, processing plant or other facility.

R

rathole - a slanted hole drilled near the wellbore to hold the kelly joint when not in use; the kelly is unscrewed from the drill string and lowered into the rathole.
recoverable resources - hydrocarbon reserves that can be produced with current technology including those not economical to produce at present.
reservoir (pool) - a porous and permeable underground rock formation containing a natural accumulation of crude oil or natural gas that is confined by impermeable rock or water barriers, and is separate from other reservoirs.
residuum - a heavy, black, tar-like substance that remains after crude oil has been fully refined to distil all usable fractions or components.
rod string - a string of steel rods used to provide up and down motion for a bottom-hole pump to lift oil to the surface.
rotary rig - a modern drilling unit capable of drilling a well with a bit attached to a rotating column of steel pipe.
rotary table - a heavy, circular casting mounted on a steel platform just above the rig floor which rotates the drill string and thus turns the bit

S

sandstone - a compacted sedimentary rock composed mainly of quartz or feldspar; a common rock in which oil, natural gas and/or water accumulate
secondary recovery - the extraction of additional crude oil, natural gas and related substances from reservoirs through pressure maintenance techniques such as water flooding and gas injection.
sedimentary rocks - rocks formed by the accumulation of sediment or organic materials and therefore likely to contain hydrocarbons.
seismic surveys - refers to studies done to gather and record patterns of induced shock wave reflections from underground layers of rock which are used to create detailed models of the underlying geological structure.
service rig - a truck-mounted rig, usually smaller than a drilling rig, that is brought in to complete a well or to perform maintenance, replace equipment or improve production
shale - rock formed from clay.
shale shaker - a vibrating screen for sifting out rock cuttings from drilling mud.
sidetrack - a section of a well drilled on a curve to bypass debris or other obstructions
smart pig - sophisticated instrument packages sent through pipelines to test for corrosion and buckling.
sour gas - natural gas containing hydrogen sulphide in measurable concentrations.
sour oil - crude oil containing free sulphur, hydrogen sulphide or other sulphur compounds
steam injection - an improved recovery technique in which steam is injected into a reservoir to reduce the viscosity of the crude oil
steam-assisted gravity drainage (SAGD) - a recovery technique for extraction of heavy oil or bitumen that involves drilling a pair of horizontal wells one above the other, one well is used for steam injection and the other for production
stimulating the formation - a technique for improving production from a reservoir; stimulation may involve acidizing, fracturing or simply cleaning out sand.
straddle extraction plant - a gas processing plant located on or near a gas transmission line that removes natural gas liquids from the gas and returns it to the line
sulphur - a yellow mineral extracted from petroleum for making fertilizers, pharmaceuticals and other products.
sulphur dioxide (S02) - a poisonous gas formed by burning hydrogen sulphide.
surface casing - the first string of casing put into a well; it is cemented into place and serves to shut out shallow water formations and as a foundation for well control.
surface rights - the rights to work on the surface of the land.
sustainable development - development that meets the needs of the present without compromising the ability of future generations to meet their own needs (as defined by United Nations World Commission on Environment and Development).
sweeten - remove hydrogen sulphide and carbon dioxide from sour gas to make it marketable
synthetic crude oil - a mixture of hydrocarbons, similar to crude oil, derived by upgrading bitumen from oil sands

T

tertiary recovery - the third major phase of crude oil recovery which involves using more sophisticated techniques, such as steam flooding or injection of chemicals, to increase recovery
top drive - hydraulic or electric motors that are suspended in the derrick above the rig floor to rotate the drill string and bit.
traps - a mass of porous, permeable rock - sealed on top and both sides by non-porous, impermeable rock that halts the migration of oil and gas, causing them to accumulate.
tripping - the process of removing the drill string from the hole to change the bit and running the drill string and new bit back into the hole
trunk lines - large-diameter pipelines that transport crude oil, natural gas liquids and refined petroleum products to refineries and petrochemical plants; some trunk lines also transport refined products to consuming areas

U

underbalanced drilling - using mud lightened by the addition of nitrogen or other gas to minimize damage to the producing reservoir by drilling fluids.
unitization - process whereby owners of adjoining properties pool reserves into a single unit operated by one of the owners , production is divided among the owners according to the unitization agreement.
upgrading - the process of converting heavy oil or bitumen into synthetic crude oil.
upstream - the exploration and production sector of the petroleum industry.

V

vibroseis - the process of producing seismic shock waves with "thumpers" or vibrator vehicles
W
wellbore - a hole drilled or bored into the earth, usually cased with metal pipe, for the production of gas or oil.
wellhead - the equipment used to maintain surface control of a well
well-logging instruments - instruments lowered into a well to provide specific information on the condition of the well
wireline logging tools - special tools or equipment, such as logging tools, packers or measuring devices, designed to be lowered into the well on a wireline (small-diameter steel cable)