I just spent the day at a drill rig on the plains of Colorado run by Prairie Operating Co. (PROP). Prairie is a small company (Market cap $107 million) that is starting a fracking operation in the northwest corner of the state in just about the middle of nowhere.
I’ve been to drill sites before, but I’ve never seen them laying pipe like this. PROP is drilling eight bore holes which they will then frack to get the oil and gas out.
Drilling a well is expensive. The derrick alone rents for 30k a day. That is not counting the 30 people who live at the site. Add in the pressure tanks, holding tanks, generators, natural gas, 17000 feet of pipe at $23 a foot, concrete, diamond drill heads, food for thirty beefy men, water, sand, and all the rest of it. The total comes out to about $60k a day.
What I discovered, on this site at least is that oil workers are very focused on safety and the environment.
Owen, the derrick supervisor, was telling me that Colorado had the toughest environmental regulation in the world when it comes to producing hydrocarbons.
He said what you are looking at is a Cadillac, if you want to see Kias you go to Oklahoma.
What struck me was that everyone I talked to wanted to make sure they ran a clean operation and took pride in it to the extent they apologized for needing an extra surge tank just to get started.
When the site is finished and is producing oil it will have a small, quiet footprint with no visible moving parts. Those rusty, old jack-pumps are a thing of the past. What you see is a half-acre on the planes with sand-colored tanks and a rew 15-foot tall flare pipes which are only used as a safety outlet. They don’t flare in Colorado but move excess gas to a combustion chamber which is 99.5% clean.
Here is how you drill an oil well.
First, you make the pad site by scraping off 9 inches of topsoil, creating a berm, and then covering it with hay to prevent erosion. This soil is put back after the drilling is over.
Then you put down some gravel so the trucks won’t get stuck.
After that, you hire a company that sets up a walking drill rig. You also need generators, water, shakers, a pipe wrangler, a giant forklift and a couple of mobile homes, and an office.
If there are any houses around you need to build a 20 ft tall sound wall around the perimeter.
Then you drill down six thousand feet before turning the drill 90 degrees using pneumatic fingers that push out right below the drill head. After the turn, you send your drill two miles out across the plain.
The drill is directed using three plot points which include the exact length of the pipe, and compass-like magnetic sensors. Waste is pushed back up to the wellhead and samples are carefully recorded in the mud logs to verify that everything is going to plan.
Once the drill creates a 12.5-inch hole you pull it out and send down 8 inch pipe which is geared to 3000 psi. Then you line the hole with concrete.
Next, they send down a gun on a string which shoots holes in the pipe according to the drill plan.
Then they pump down sand, water, and mineral oil using pump trucks with two 5000 horsepower pumps. They use six trucks. And do this in sections.
This fracks the rock and pushes sand in the spaces. Then water comes out of the well followed by oil. Then they cap the well, walk the derrick forward two yards, and repeat the procedure another eight times.
And that is about a third of the heavy metal ballet that is a drill site. You still have to separate the oil, gas, and water, clean and pressurize it so you can send it down the pipe to Cushing, OK.
Everything is metered and tracked of course. Management, supervisors, and geologists get updates on everything from an app on their cell phones.
Thanks again to Prairie Operating Co. (PROP) for the tour. I’ll tell you more about the company including the financials next week. Getting on the plane from Denver hoping that the hurricane won’t cause a problem.
All the best,
Christian DeHaemer
Oursider Club
The company:
https://finance.yahoo.com/quote/PROP/
The storm:
https://www.outsiderclub.com/theres-a-storm-comin/
The death of private equity:
https://www.outsiderclub.com/private-equity-the-next-black-swan/
