US Oil & Gas: The Small Company With Big Ambitions in Nevada

US Oil & Gas (PLUS:USOP) is a PLUS listed junior with big ambitions. 

But it has taken on quite a challenge in trying to unlock the secrets of the geologically complex Sevier fold and thrust belt of Nevada.

The Silver State is known for the bright lights of Las Vegas, its largest city, and the inhospitable scrublands of the Mojave Desert.

However its name isn’t exactly synonymous with big oil and gas finds.

This is rather odd as Nevada sits right on the Rockies cordillera, which runs from Alaska down into the Andes in South America. And hydrocarbons have been found all along its length. 

While the state has produced oil, discovering new targets is frustrating and difficult given the geological irregularity of the area. 

Only recently has it been discovered it is covered in a blanket of Oligocene volcanic rocks and detritus. 

This has buried and sealed oil seeps in the area of most interest, the Great Basin on which eastern Nevada and western Utah sit.  

And this pall of debris has rendered conventional 2D and 3D seismic surveys almost useless.

However, a major oil strike has stoked up a lot of interest in the region.

Privately owned Wolverine Gas & Oil discovered the 1.2 billion barrel Covenant Field just over the border in Utah, but within the 400 square mile thrust belt. 

This was a game changer for those scouting in the region and it led to something of a land-grab.

US Oil & Gas was already looking in the area and quickly snapped up 5,600 acres in Hot Creek Valley.

It is situated in the south-western corner of the potential oil hot spot, but opposite the crude producing Railroad Valley fields. 

Management led by chief executive Brian McDonnell knows that the Hot Creek chainman shale source rock is richer than the world class Covenant Field, that it is thermally mature and porous and permeable.

The trick is finding the oil, given the conventional 2D and 3D seismic has such a poor strike rate.

To overcome the problems of the geology US Oil, is deploying something called Infrasonic Passive Differential Spectroscopy Technology, also known as passive seismic.

Developed in 1995, it is routinely used in the Middle East to identify oil and gas deposits.

The technology detects the “noise” made by oil using ultra-sensitive seismometers.

And because it directly indicates the presence of oil it drastically reduces the chances of drilling a dry well.

Using this passive seismic in harness with detailed geochemical surveys, and re-working some of the old seismic data, the company has been able to home in very precisely to where it plans to sink its first drill. 

The geochemical was interesting because it was done on a 100 metre pitch rather than the usual four kilometres.

It was carried out on such a microscopic scale because of the constantly changing geology of the area, which can alter in a matter of metres.

However the work was rewarded when the geochemistry on the Eblana phase 1 section II north of Hot Creek confirmed hydro-carbon seepage in three separate anomalies.

The passive seismic, meanwhile, uncovered at least one “classical structural trap with a substantial oil column in place”. That was found on Eblana Phase 1, section 2 of the project area which registered an IPDS measurement of 0.96 out of 1 – the highest reading it is possible to have.

At the same time the IPDS has pinpointed “multiple other opportunities from different geological structures”.

“In five years time you are going to be talking about every oil project using passive seismic,” said McDonnell. 

“We found three separate structural leakages of oil and the geologists said we are looking at a classic trap of oil.

“This is crucial. We are not wildcatting we are looking for a very precise source of oil.

“There are the geochemical results, which sit perfectly with what the gravity said and the magnetic (surveys) said.

“Then we had the IPDS (reading) of 0.96, which is all about the probability of finding oil. So there is a fairly good chance of finding oil here.”

US Oil has the longitude and latitude co-ordinates for the exact point in the ground where this bumper reading was made and has staked to drill its first well here.

The USO&G is now undertaking the required archaeological survey and working from “a well engineering point of view the best way down”.

McDonnell revealed the company may “go horizontal” with its first well instead of sinking a second as the two initial targets are so closed together.

“There is less than a thousand metres between the two,” he said. “It makes perfect sense and you have two geologically different structures because they have two different geochemical signatures. We also know that the oil is sitting at 3,800 feet.”

The company expects to be drilling its first well in the next six weeks, but McDonnell warns: “If Christmas gets in our way what I will say is we will have definitely drilled by the end of the first quarter of 2011.”

And what does he expect to find when the first hole is completed? 

“We might just be in the right place at the right time with the right technology,” says a very optimistic McDonnell.

“We are certainly sitting over (enough) oil to establish a cluster of producers. 

“Some might produce 100, 200 barrels a day, others 1,000 or 5,000 barrels a day and that is the way it might end up in five years. 

“You might just see a cluster of wells taking the oil out of the ground.”