WHY WHEELER RESOURCE RECOVERY?

We are an 86-year-old company with a proven track record of expertise and success. Our founder has put over 29,000,000 barrels of oil in the tank.

WHAT IS SECONDARY OIL RECOVERY?

The bulk of the oil in a field is extracted in the second phase of development at a lower cost and at a much lower risk than primary recovery. We recover up to 50% of the original oil, while sustaining and increasing production by injecting water.

HOW DO YOU EVALUATE AN OIL & GAS PROJECT?

When evaluating an oil & gas project, you’ll want to look at the company’s track record, figure out whether the company has an actual stake in the project, and calculate your return on investment (ROI). Luckily, Wheeler has a proven track record of success with secondary oil recovery and we invest our own money into every project, only making money when our investors do too. Through secondary oil recovery, our projects are also cost efficient, come with unique tax benefits, and have a much lower breakeven price than primary oil recovery.

WHO IS ELIGIBLE TO INVEST?

We have established a field development project where a non-industry investor can participate in the same capacity as an industry insider. As such, we are looking for accredited investors, regardless of industry knowledge, who want to be a part of a low-risk, high-reward investment. We seek out investors that want to partner with us to successfully execute a development project, all while not exposing the investor to the full cost of the cost of the project.

HOW DO I MAKE MONEY INVESTING?

Where other companies in the space make money by raising money, we make money by successfully completing projects. We have a vested interest with our investors, meaning we only make money when you make money.

WHAT ARE MY TAX BENEFITS FOR INVESTING?

Oil investing tax breaks are significant. The Federal Tax Code Section 263 and Section 179 allows our investors to deduct 90% of total invested funds, the year deployed, against all other taxable income, active, passive or portfolio. It is important to note that these are not deductions of a loss subject to the $3,000.00 annual limit, but are treated by the Tax Code as the deduction of an expense and can be taken in full the year incurred regardless of any other loss/gain deduction for the year. Additionally, the Tax Code allows all oil revenue from your oil well to be 15% tax free under the Federal Depletion Allowance. For any questions, contact us here.

Unique 5-Spot Waterflood Recovery Process Furthers Opportunities in Secondary Oil Recovery

Wheeler Resource Recovery, a leader in secondary oil recovery in proven oil fields with over 50 years of experience, shares key insights on the processes behind waterflood recovery and how the right tools and expertise can make secondary oil recovery successful.

As Wheeler Resource Recovery Principals, Kevin Thibeau and J.P. Bolton mention, being successful in this process involves going to where the oil already is and using the best possible water reclamation method to extract the oil.

By Kevin Thibeau and J.P. Bolton

There are many reasons waterflooding is the most popular secondary oil recovery method. With a waterflood recovery process, youcan extract more oil at a lower cost and less risk than primary recovery. Primary production only recovers 5% to 30% of the oil in place. Although the effectiveness of water injection varies according to the formation characteristics, a water-flood can recover anywhere up to 50% of the oil that is remaining in the reservoir, greatly enhancing the productivity and economics of the development. Additionally, water is a plentiful resource, making it easy for drillers to leverage.

But, creating a successful waterflood necessitates more than just incorporating a marginal production increase in an existing well that just happens to be adjacent to a nearby saltwater disposal well. A true waterflood operation is composed of mainly new drills, with systematic placement of an equal number of production and injection wells.

In short, developing a waterflood project involves knowing where to drill and how to develop the field to yield the best possible ROI. It involves going to where the oil already is, then using the best possible water reclamation method to extract that oil.

We feel we’re uniquely positioned to provide advice on how best to create a successful waterflood project because our company, Wheeler Resource Recovery, has been involved in years of successful developments. We started in 2014, but our industry experience goes back several decades. In fact, our work has spanned numerous fields and encompassed over 400 wells. As a result, we feel we have gained some useful experience in

waterflood development and want to share some key insights pertaining to site selection, recovery methods (including our unique 5-spot recovery pattern), expected efficiencies, and production methodologies.

SITE SELECTION

A secondary recovery water flood development has the best opportunity for success in existing oil fields that have previously served as primary recovery wells. Ideally, these wells will have been depleted or experienced declined production levels due to loss of formation pressure. The wells will have extracted a percentage of the oil in place until declining pressure has rendered them non-commercial.

The field must be a solution drive, with the majority of the gas cap expelled as the driving force in the primary production phase. Generally, the gas cap of a solution drive field will have been exhausted during primary production. This will result in a loss of production pressure, rendering the existing wells marginal or non-commercial. However, there is the potential for a vast amount of original oil to remain behind. A systematic engineered waterflood recovery operation can potentially recover much of the remaining oil in place. In essence, an engineered water flood results in an artificial re-establishment of formation pressure.

Once a site has been selected, you should conduct in-depth research analysis on existing data from these primary wells. Data from previous well logs and their production records can be used in a reservoir analysis to determine the potential feasibility and estimated cumulative recovery of remaining oil in place. Three-dimensional seismic analysis should also be done to determine if ground faults or other anomalies are present, as these could thwart a waterflood attempt. The results will indicate a field’s potential candidacy as a water flood development.

When Wheeler begins a waterflood development, we carefully evaluate the aforementioned criteria –and it’s proven to be a map that leads to great success. Since 1974, Wheeler Operating (Wheeler Resource Recovery’s partner in water flood field development projects) has specialized in water flood recovery projects. We have put over 29 million barrels in the tank from this technology. Between 1974 and 2002, we’ve drilled and put into production over400wells. This has generatedover$60,000,000.00 from oil revenue that has been dispersed to the Wheeler Trust. We continue to see the same success today, with a current 54-well field development underway where we are targeting over 17.5 million barrels in recovery extraction.

THE FIVE-SPOT RECOVERY METHOD

Our waterflood project successes showcase our unique five-spot waterflood recovery method. The five-spot method incorporates alternating injection and production wells in a checkerboard pattern, with injection wells pushing water out 360 degrees into the production wells, allowing them to produce oil.

Creating this recovery method can be a trial-and-error process. Before drilling, create pilots for your own five-spot patterns to test their feasibility. As an example: in a 40-acre spacing, a production well is drilled to the target formation in the center of the acreage. Four water injection wells are drilled to the same formation, one on each corner of the 40 acres. Water is injected into these wells, artificially re-establishing pressure, creating closure, and driving much of the remaining oil to the center production well.

Once a result is realized from the pilot pattern, additional production wells can be drilled in the center of the adjacent 40-acre spaces. Two of the original corner injection wells will already be in place for the new production well. Two additional injection wells should be drilled on the far side of the new 40-acre space, effectively giving closure to the new production well with an injector on each corner. Each injection well will ultimately affect four production wells once the 5-spot pattern is reproduced on adjacent 40-acre spaces over the entire field.

Ideally, each production well will have an injector on each corner and each injector well will have a production well on each corner. This results in a synergized engineered extraction with the ability to control production by the level of water injection volumes. Picture a pond, with two people standing on either side. Each person throws a stone into the pond simultaneously. Ripples created by the splashes meet in the middle of the pond, creating waves that expand to the north and the south. Injection wells placed in this pattern perform in a similar fashion when they push out water to their corresponding production wells.

The five-spot method is extremely eco-friendly and efficient. Surface water is reinjected to produce more oil. The water is then recycled, providing continuous access to this reusable and valuable resource.

EFFICIENCIES GAINED

Well run five-spot waterfloods aren’t just environmentally friendly and ideal for oil reclamation. They also provide significant efficiencies related to water and electrical use. At our waterflood development projects, Wheeler is continually performing reservoir analysis to better regulate and control our wells’ production capabilities. This analysis allows us to make necessary adjustments to ensure that our wells are always recovering oil as efficiently as possible. That’s important for both our business and our partners. Our investors aren’t big, national corporations—they’re smaller, non-industry investors who want to make a profit from oil but have no interest in building their own facilities. Therefore, we do everything we can to produce a very efficient and well-run field.

Here are some of the efficiencies we’ve seen by employing a five-spot waterflood method. These key efficiency gains help save time and costs while producing a better field operation.

Reduced Disposal and Transportation Costs

Reuse of water cuts down on one of the biggest costs associated with oil production operations: disposal and transportation. Indeed, water production, disposal and transportation are a large negative cost factors in the majority of oil production operations. But, in a well-orchestrated waterflood project these negatives are turned into financial benefits.

With the five-spot waterflood method, water that is produced from the production well is filtered and piped to the nearest injection well. Therefore, you do not have to buy, transport or dispose of water; it can continuously be recycled as the oil is taken cut.

Even if the waterflood target formation does not have adequate water, there will invariably be several zones in the wells that are nothing but water. That water can be sourced for use in the injection wells. Keep in mind that while water is plentiful, occasionally they will need to drill a few water source wells to keep things constant.

Low Injection Costs

Injection costs are minimal. You only need a small pump to pipe the water from the production separators to the injection wells. The weight of the water column in the injection well allows gravity to create the required PSI for injection. For example, a 10,000 foot well will have a water column whose weight creates over 4500 PSI bottom-hole pressure for injection into the target formation.

In addition, formation water is generally compatible with the flow characteristics of the formation. Tests should be conducted on the formation water to verify compatibility, but the results will usually come out in your favor. Be careful using other water resources, however, as they can result in retarded flow characteristics. In particular, fresh water can cause clay elements in a formation to swell and potentially eliminate permeability.

Less Maintenance to Water Transmission Lines

Finally, consider the infrastructure of water transmission lines that connect the wells. Depending on climate, these can be buried a few feet deep to prevent freezing in cold weather. Avoiding frozen transmission lines can eliminate yet another cost and headache and result in unimpeded flow between wells

TERTIARY PRODUCTION METHODOLOGIES

A well-maintained and efficient waterflood field will produce for multiple decades. In an efficient water flood development you have a degree of control over your production. If you wish to increase production, you inject more water. The typical decline curves in an oil well’s production cycle is offset by injected water pressure. A 10% to 20% oil cut in your produced water is extremely profitable. When this begins to diminish you can inject higher water volumes. When it starts to diminish again you can mix a polymer (for example, soap) in the injected water and gain a large additional percentage of the original oil in place.

WHEELER’S EXPERIENCE

We anticipate our current waterflood development site will be viable for many years and expect the project to generate $610 million in revenue based on a targeted extraction of 17.5 million barrels of cumulative oil.

You can achieve similar levels of success by following the recommendations we have outlined above. Just remember, this is a generalized overview of the basic components and concepts of an engineered waterflood development. The devil is in the details. Many intricacies involving all aspects of these operations can make a marked difference in success vs. mediocre results. For instance, injecting at too high or low of a rate can create problems. Low estimates of porosity or formation thickness can result in more volume of water injection before results are realized.

As a result, our water source selection at Wheeler is the result of years of engineering experience in calculating and analyzing reservoirs and known data. The last point is key: whereas the cost of research is incorporated into the final price of a primary drilling project, secondary waterflood projects are based on already existing information. That cuts down the time and cost it takes to produce oil.

In the same spirit, we hope the insights imparted in this article have provided you with information you can use to efficiently and successfully develop your own waterflood projects.