It may be dogged determination or just exceptional planning with a dash of luck, but some companies seem to be in the right place at the right time. When some pull up stakes in search of richer pastures, others merely watch and laugh as they slog through the dust. Finally, when the winds start blowing from another direction, those who plan and wait find reason to smile.
This is clearly the case with South Texas Oil Company Inc., an oil and natural gas acquisition, development and exploration company working to take advantage of oil and gas properties that others have abandoned for those green pastures. The company only works with proven oil and gas fields, and currently holds leases totaling 25,000+ acres in Texas and Colorado.
As oil and gas prices continue to hover near record prices, the company appears ready to take advantage of its existing properties. A tentative agreement to sell certain drilling equipment assets has been terminated in favor of potential opportunities for the equipment. Additionally, new gas agreements have been put in place that will begin generating new revenues in the second half of 2008. Although both oil and gas show exceptional return potential, the gas component of the company’s holdings may actually be the more near term revenue generator as the company works to ramp existing oil wells left by others.
It seems that the company’s most recent gas agreement, with no minimums and initial transmission shipments of 150 thousand/cfd, will be an integral portion of the company’s future growth plans. Its transmission and infrastructure agreement for this project calls for infrastructure improvements as capacity shipments increase – after an initial improvement phase – so a longer term future does appear likely.
Oil opportunities, however, are expected to be no small contributor to the company’s anticipated near term revenue growth. The State of Texas has recently revised its drilling regulations to double the concentration of potential wells on existing leases. In the past, a company could drill only one well per 20 acres, but now it may drill one well per 10 acres.
In-fill drilling, as South Texas Oil Company calls it, will provide the largest growth opportunity for the company on its Texas leases. In a certain sense, one might say that this regulation change has effectively doubled the company’s holdings in Texas. Indeed, the company appears to have been in the right place, at the right time, with leases in hand and equipment ready to produce.
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