Gear Energy

Cherry-picking a team of winning players and assets, Gear Energy appears to have set itself up for success. The company focuses on heavy oil exploration and production.

“We’re very much in a growth mode,” says Ingram Gillmore, president and CEO. “By pursuing a two-tier strategy of strategic acquisition and oil exploitation, we plan on increasing from our current rate of 3,100 Boe/d [barrel of oil equivalent per day] to greater than 3,700 Boe/d by the end of 2012.”

“Our team makes a big difference,” Gillmore boasts. “We have the leadership experience of Peyto Energy Trust combined with senior technical staff from ARC Energy Trust, which are two large and very successful Canadian energy companies.”

He adds that this collective pool of knowledge and experience will help Gear Energy in the long run. Its board of directors includes Don Gray and Rick Braund, co-founders of Peyto, as well as Herb Pinder, of ARC. This is a board that is familiar with what it takes to provide long-term growth.

Growing Strong
The company’s oil and gas reserves span from western Saskatchewan to northeast British Columbia. However, the core oil-producing asset is in Wildmere, Alberta. The company currently extracts 90 percent of its total oil output from this region alone.

At the end of 2010, Gear Energy proved up the concept of horizontally developing oil production from Wildmere with the drilling of three successful wells. At the end of 2011, the company completed an additional 25 horizontal wells, and by year-end 2012, the company plans to increase the number of Wildmere horizontal wells by another 34. At the beginning of 2012, Gear had defined a low-risk inventory of more than 100 horizontal locations to draw from in the Wildmere area. “We are continuing to be aggressive in our step-out and exploratory drilling in order to further expand on our strong inventory of future opportunities,” Gillmore says.

Gear Energy is also looking to new assets and acquisitions to increase its growth. In January 2010, the company acquired Black Mountain Energy Corp. This expanded Gear Energy’s interests to include additional projects in northeast British Columbia and the Peace River Arch regions in Canada. Subsequent to that, Gear acquired assets in July 2010 that included the new core area of Wildmere. More recently, the company acquired Lift Resources Inc., a small oil producing company with heavy oil assets in central Alberta and Saskatchewan.

“We will continue to target assets that we believe can provide sustainable growth and upside,” Gillmore claims. “The first step is making the acquisition, the second step is to dig in and apply our expertise to unlock the value.”

Drilling Well
The company conservatively uses its equipment to get the best return on investment. One method Gear Energy uses to achieve this is horizontal drilling. This method involves drilling a vertical well just above a target oil reservoir, also referred to as the kickoff point. From this point, the well is deviated from boring vertically to curve so the well angle is nearly horizontal. This allows the well to remain within the existing horizontally layered reservoir until the desired depth is reached. Typically, most oil reservoirs are more extensive across a horizontal strata. Because of this, horizontal drilling reportedly produces 2.5 to 7 times the rate and reserves of vertical wells.

“Although horizontal drilling is more costly, it offers several benefits over vertical drilling,” Gillmore claims. “These wells increase our ability to handle sand, which we don’t have to clean out as often. They also offer increased physical access to the oil reservoir.”

He adds that although horizontal wells cost up to twice as much to drill, they yield five to six times the productivity of vertical wells.

“Environmentally, it also allows us to minimize the surface impact on the land,” Gillmore says. “We can drill up to four horizontal wells from one pad and each single well replaces the need for multiple vertical locations.”

“We’re doing everything we can to maximize the recovery of oil by targeting resources that are large and contiguous,” Gillmore says. The company is also proposing enhanced recovery methods at both new and existing wells. “We want to implement technologies we know will work,” he notes. One technology the company is looking to adapt is polymer flooding. This method involves injecting water-soluble polymers into a well which then improves the displacement of the oil from the reservoir rock.

“The injected polymer pushes the incremental oil from the injector to the producer,” Gillmore says. “This technology has been known to increase oil recoveries to more than 25 percent in some heavy oil applications.” The company plans to begin using this technology at the end of 2012.

“Gear Energy will continue to grow conventionally through 2014 with the current low-risk inventory of more than 100 wells. It also will rely on further inventory expansion and the application of enhanced oil recovery to drive further growth into the future,” Gillmore asserts. In addition, the company is evaluating opportunities to enter the public market, which could happen as early as 2012. “This will provide the company additional access to capital markets to support our long-term growth model.” EMI