Penn USA Energy has developed energy properties for many years and specializes in low risk projects. After concentrating on energy properties in Pennsylvania, Penn USA Energy is focusing on natural gas income properties in the American West, where gas pipeline systems are underutilized and we can assist property owners to increase existing production, which provides immediate cash flow. We continue to manage and maintain our existing projects in PA.
Our first western project is in Baca County, Colorado in a 51-well natural gas field that has been in active production since 1979 and contains 31 miles of pipeline. Efforts during 2016 have resulted in a 100% increase in the last six months of the year, so the project is well under-way. All gas produced is sold to industry where natural gas is in high demand in the area.
ENVEX-BACA
COLORADO INCOME PROGRAM
Envex-Baca, LLC, a Colorado natural gas income program, is upgrading an existing natural gas field in Baca County, Colorado. The program will provide immediate income to partners due to current income and the unique feature of the program is a 70% tax deduction due to upgrading of the equipment on the lease which has already resulted in a 100% increase in production from April to December, 2016. At current sales levels, there is a 3 year pay-out.
INVESTMENT HIGHLIGHTS
This investment opportunity will be extended to qualified investors who understand oil and gas investments. It is an opportunity to participate in 59 producing gas wells located in Baca County Colorado. All wells were drilled to the Topeka formation at a total depth of 3,000 feet or greater.
Gas Production and Contracts
The property has an extensive production history and the Baca gas field has in excess of 31 miles of pipeline Show More...and gathering system. There are several market sales locations and our product is sold to two highly regarded gas utility companies. Badger Midstream is our premium purchaser and Energy Transfer also known as Regency is our secondary purchaser. Both companies have a strong desire in obtaining an ongoing relationship and have expressed a desire for greater volumes of production. ...Show Less
Operations
Operations of the gas field and all related pipelines are a joint venture between Dover Atwood Corporation and Envex Energy.
Dover Atwood Corporation, located in Walsh, CO and Massillon, OH – President John Levengood has developed properties in Ohio, Texas, Colorado and Kansas with major concentration in the Appalachian basin. He began his career as a young man working in the oil patch. His companies include a service company, a drilling contractor and a producer of oil and gas properties.
Envex Energy- CEO George Kelly has extensive experience in many facets of the oil and gas industry. He has engineered and constructed major pipeline transportation facilities, servicing end-users such as Georgia Pacific Paper Company and other industry users from steel mills to automobile engine plant manufactures.
Tax Aspects
This program is an oil and gas income program and should not be compared with oil and gas drilling Show More...or exploration program where intangible and tangible write-offs are considered. Under this program well acquisition costs and pipeline costs have been capitalized and represent approximately 30% of the total investment amount. The balance of 70% has been considered as well and pipeline expense and will be deducted in 2017....Show Less
Transactional Events
In 2016, Dover Atwood and Envex Energy formed a joint-venture to acquire oil and gas properties.
Show More... In April 2016, they purchased 50 wells from Denver- based Sovereign Production Company and in August a second acquisition was executed adding an additional nine wells which were purchased from Cholla Production located in Littleton, Colorado. All wells and pipelines were geographically located in Baca County Colorado with the exception of four wells located across the state line in Kansas. The two fields acquired have been in continuous operation, since 1979, having been drilled by Anadarko Petroleum....Show Less
When considering both acquisitions the consolidation of the two fields made strategic and economic sense. The total field now had approximately 59 wells and 31 miles of pipeline. The strategy behind the acquisition was to concentrate on compression and transportation issues in gas delivery and also reworking neglected wells.
Timing could not have been better, Show More...natural gas prices were at an all-time low. Utility and transportation companies were buying natural gas for less than a $1.10 per MCF. Oil was also plummeting and produces began to curtail production and in some cases shutting it wells. However, over the last six months oil prices have shown signs of recovery and natural gas prices are approaching three dollars per MCF. ...Show Less
Product Pricing and Delivery
The attractive feature of the sophisticated transportation system is that the operator has two avenues to bring product to market. To the southeast, Show More...gas is being purchased by Badger Midstream a Texas based transportation company. To the direct east, gas can be purchased by Regency Transfer. Pricing is a little more attractive with Badger Midstream. Badger midstream has been buying our gas and they have requested greater gas production. Our current price with Badger Midstream is indexed at 87% of their sale price. The most recent sale price received for October’s production was $2.16 per MCF. Pricing for the next six months will continue to increase. It is anticipated February gas sales will bring close to $3 per MCF. ...Show Less
(See summary of production and pricing from April through December)
Pipeline Engineering and Corrections
The operator began to focus on changing compression facilities and relocating sales meters. Our engineering studies showed Show More...that restricted sales were due to fluctuating gas line pressures. We have reengineered two of our sales metering locations and installed updated compression equipment. Our accomplishments have been successful by increased gas volumes delivered. When first acquiring the wells from Sovereign, gas production was less than 400 MCF a day, we are currently delivering twice the volume after instituting changes in delivery points along with regulating pipeline production pressures. Our costs in making these changes and corrections have been in excess of $140,000. The installation of our new compressors will increase our daily production roughly by 150 -200 MCF a day. Our projections for gas delivery after we complete our well work over schedule will increase to 1.250 MCF a day. Our targeted monthly volumes will be 30 million MCF a month....Show Less
Production and Projections
As prices start to move up we are confident that Badger Midstream will purchase our gas at prices greater than $2.75 per MCF and possibly $3.00 per MCF. Our production will continue to increase and the economics of this venture will become appealing. We anticipate that by the end of the first quarter of 2017 the following results will take place.
The following represents our production history under our operations and our projections for 2017.
Production History – Since Acquisition
12,400
16,000
16,000
17,000
19,000
21,000
24,000
16,000
24,000
Production of field at time of purchase
First stage of compression corrections
Shut- in due to pipeline rerouting
Temporary shut Pipeline corrections
Well work over resulted increased production
Delivery and installation of new compressor
New engineering production implemented
Decrease due to Installation #2 Compressor
Est. Production well workover program continues
April
May
June
July
August
September
October
November
December
2017 First Quarter – Production Projections
January 26,000 MCF
February 28,000 MCS
March 30,000 MCF
Participation
All partners will be assigned a participation in well revenue of a net revenue interest of 80% or greater. All wells are subject to a standard 1/8 royalty interest, which calculates to be at 12 ½% of gross revenues to the landowner. Some wells are subject to overriding royalty interest of 1% to 3.125%.
Operator will be assigned a 10% working interest, but it will only be earned on any amounts when distributions are in excess of $20,000. Show More...The first $20,000 of net revenue available for distribution will go to partners until they receive 100 % or a dollar- for- dollar return on investment. After the return on investment of 100% is achieved the operator will receive an additional 10% increasing their total interest to 20% of all net revenues. ...Show Less
