eCORP CEO Provides Details of MOU with STEP in Tioga County, New York
HOUSTON, April 2, 2012 /PRNewswire/ — eCORP International, LLC (“eCORP”) and Southern Tier Energy Partners, LLC (“STEP”) recently announced that they have executed a Memorandum of Understanding (“MOU”) to develop up to 135,000 acres of Marcellus and Utica shale and to utilize environmentally responsible oil and gas development technologies in the Southern Tier of New York State.
John F. Thrash, Chairman and CEO of eCORP, states “eCORP is deeply gratified to have been approached by STEP and given the opportunity to return to Tioga County to demonstrate that we can develop the oil and gas potential residing in the county with the high “best practices” standards, we applied during our implementation of the Stagecoach Natural Gas Storage Facility from early 2000 through 2005.”
Basic Deal Structure – The prospect of current and protracted low gas prices make gas shale development marginally economic under the terms used by most energy companies, so eCORP created a business structure that gives the participating landowners a financial stake in any success through ownership in the company developing their minerals. To accomplish this structure, eCORP asks landowners to accept lower royalty and no bonus payments in return for a majority share of delayed, but expected superior future upside in value. See Transaction Specifics provided below.
Environmental Care and Concern – Application of “Best Practices” Technologies and Methods – The landowners of New York expect more than just an economic return from their mineral interests; they also insist that companies protect the environment from abuse and detriment. We are fully confident of meeting, even exceeding in many instances, these expectations using state-of-the-art technologies and environmentally compatible work methods. For example, subject to New York laws, we plan to use multi-unit pad drilling during development where as much as 3200 subsurface acres would be drilled and produced from a 3-5 acre surface plot. We envision continued use of view shed protection practices such as those which we employed at the Stagecoach Natural Gas Storage Facility and beyond given newly developed intervening technologies.
Propane Fracking Regulation – Relative to stimulating production, we wish to use the most effective and environmentally safe methods and materials (fluids, in particular) for treating the reservoir rock. Although we are eager to start work in the field, we will first engage the stakeholders, as we have done in the past, to be certain we understand and adhere to not only the letter of the law, but the spirit of established public policy as well. We will only proceed with such operations when it has been unequivocally demonstrated that the drilling and stimulation techniques we hope to use have been fully and completely sanctioned and permitted.
Specifically, we understand that there has been speculation, perhaps even indication, that the NYS DEC might apply the 1992 GEIS in evaluating a formal application for the use of propane as a fracking agent in a shale setting, most likely in conjunction with requiring additional studies and research as to impacts and safety, among other prudent analyses. While we applaud what may be a developing receptivity to propane stimulation, eCORP would (A) seek out and expressly follow DEC guidance and instruction regarding obtaining permission to use propane stimulation in NYS, and (B) assure that use of propane fracking meets with the express approval of all other relevant stakeholders.
We did not choose propane as a fracking agent in order to accelerate development or by-pass established public policy…we chose it based upon the merits of its minimal environmental impacts and greater expected ultimate recovery of the natural resource.
Propane Fracking Technology – eCORP, in the normal course of business, has examined proven, as well as emerging, technologies for enhancing flow capacity of shale strata. Liquefied Petroleum Gas (“LPG”) treatments using propane or propane/butane mix, as have been commercially deployed by GASFRAC Energy Services Inc. (“GASFRAC”), have demonstrated their efficacy in over 1,200 treatments spread across a number of basins in Canada and the US. eCORP has extensive experience using gaseous propane and butane in enhanced oil recovery operations in conventional reservoirs in South Texas in the 1980′s with very positive results, minimal environmental impacts, and a perfect safety record. These gases have been used routinely around the world in low-tech environments demonstrating they can be transported, stored and used safely. Because the hydraulic fluid is liquid propane (and/or butane) and no water is injected, potentially harmful salts indigenous to the formation are not dissolved and produced to the surface as with water fracks. Because much less volume is required to fracture with this system, lighter and fewer truckloads are required in the operations.
At present, GASFRAC’s technology appears to be the best choice for eCORP’s anticipated operations in Tioga County. The Company continues to monitor this and related areas of technology development in hopes of finding further improvements as they become available.
Tioga landowners became familiar with GASFRAC Energy Services Inc. independently of eCORP and, like eCORP, are eager to deploy it in their properties when and if permitted.
Transaction Specifics – As mentioned, in this era of low gas prices with little upside envisioned in the foreseeable future, the traditional business arrangement between operating company and landowner yields marginal economic benefits to the company risking the capital to undertake the project. eCORP has formulated a proposal believed to be potentially appealing to landowners while also attractive to eCORP.
In the traditional arrangement between operating company and landowner, the landowner grants a lease for a fixed period to allow the operator to carry out exploration drilling and, in the event of success, an extended period to develop and produce the discovery. Under such traditional arrangement, the landowner receives a bonus payment of X $/acre and, if production is established, Y % of revenues, but has no further economic benefit from the arrangement.
eCORP plans to organize the County into a number of contiguous 25,000 acre (nominally) areas comprised of owners whose acreage is expected to perform similarly. Each of these 25,000 acre areas would be held by a newly formed sharing company majority owned by the landowners who contribute their acreage to the new company. A landowner’s initial ownership in the company would be proportionate to his ownership in the acreage he contributed divided by the total acreage contributed to that company.
The companies organized, for example, for the northwestern corner of the County would be independent of the companies situated in the opposite corner. Each landowner would also receive a 12.5% royalty payment for production attributable to his original acreage. eCORP would own a minority interest in each of these companies and would carry out the traditional operational obligations of an operating company on behalf of the jointly-owned company.
Each jointly-owned company is expected to grow in value as its acreage holdings are evaluated and production is established.
As a result of ownership in a producing company, each landowner shares in growth of valuation of his company. Each landowner, therefore, shares in the “upside” normally reserved, under the traditional lease/bonus business arrangement, to the lessee. In the eCORP-proposed arrangement, the landowner is both lessor and lessee, and therefore he benefits from both positions.
About eCORP International, LLC – eCORP and its predecessor companies, founded in 1978, have extensive oil and gas experience including underground natural gas storage, natural gas transportation, enhanced oil recovery in conventional reservoirs using propane and butane, exploration for and production of conventional and unconventional reservoirs, electric power generation and marketing of electricity and gas. The company was an early mover in the Marcellus play in Pennsylvania and New York, USA and recognized its potential while developing its highly acclaimed Stagecoach Storage project in New York. The company acquired European prospective acreage after farming out holdings in the Marcellus. The company’s world class management team expects to apply its broad background in Europe as well as the US to develop oil and gas fields, gas storage and power generation.
About Southern Tier Energy Partners, LLC – STEP represents landowners in the Southern Tier in Tioga County who banded together as Tioga County Landowners Group (“TCLG”) to seek out a responsible, environmentally sensitive operating company who would develop prospective Marcellus and Utica shale they believe underlies their surface holdings. TCGL is an all-volunteer organization of landowners working together to benefit their community. The organization was formed in 2008 and has grown to 2000 families which own 135,000 acres in Tioga County. Since the press release four days ago, interest in the coalition has heightened dramatically with the addition of 70 new families and 2,000 additional acres. The group’s principal mission has been education and communications with landowners.
Contacts:
eCORP International, LLC Tioga County Landowners Group
Mr. G. S. (Steve) Clifton Mr. Nick Schoonover
Director of Business Development Chairman
(713) 416-0280 (607) 222-6892
mouinfo@ecorpintl.com
SOURCE eCORP International, LLC
