Meet the Man Using AI To Revive An Oil & Gas Play Supermajors Left For Dead
A North American company is gearing up to drill two of the potentially most important wells for a new phase of European energy.Proven oil and gas resources and successful previously drilled wells had been abandoned by Germany for decades, as the country jumped wholeheartedly on the Russian energy bandwagon. But now the geopolitical situation has changed Germany is being forced to once again look within its own borders.
MCF Energy (TSXV:MCF; OTC:MCFNF) led by CEO James Hill, is planning its first two drills this quarter in Austria and Germany, and they are moving forwards with two discovered gas fields, exploration prospects 3D seismic and new machine-learning and AI techniques identifying significant potential gas bearing structures.
Oilprice.com sat down with Mr Hill, a veteran explorer with both conventional and shale discoveries in the American oil and gas patch and Europe including continued development of one of the largest onshore fields in Europe, in Albania, this week to discuss:
MCF Energy’s recent acquisition of a private German company came along with over a dozen of high-potential prospects at a time when Germany is desperate for its own natural resources;
How the company is preparing to re-enter a huge well drilled by Mobil in the 80s and tested at a flow rate of over 24 MMCFD;
Why Mobil abandoned a well with tons of natural gas;
How MCF acquired 100 square kilometers and millions of dollars of 3D data, and how AI is helping them turn this data into a unique treasure map;
How new technology can unlock oil and gas in Germany and Austria;
What happens when the next drill finds oil and gas.
James Stafford: The media likes to remind us that Europe is still under Putin’s boot in terms of energy. How do you see Europe’s efforts to replace Russian oil and gas? And what does it mean for the energy industry going forward?
James Hill: Imports of Russian gas to the EU are down by about one-third since Russia’s invasion of Ukraine in 2022. In other numbers, right before Russia invaded Ukraine, the EU was importing almost 40% of its gas from Russia. Now, it’s importing around 12%. But Europe has just traded one dependency for another—and in this case, it’s swapping cheap Russian gas for expensive American LNG. What it needs is its own gas. And it’s just there for the taking, especially in Germany.
Stafford: So, for E&P companies, things have changed drastically in Europe since Putin sent troops into Ukraine. From a regulatory perspective, not to mention a price perspective, the situation is more than ideal from where we’re sitting. The EU has declared natural gas a “green” fuel and a key part of the energy transition. What does that mean for MCF Energy?
Hill: That’s exactly what brought me to MCF. I had an intimate knowledge of European geology, and the regulatory environment had been entirely revamped. The situation is so ideal now, that it even lured me out of retirement. Germany and Austria are the keys here because they have been so drunk on Russian gas and oil for decades and decades that they haven’t developed any of their own natural resources. It’s almost just there for the taking.
Stafford: So, what have you landed on there?
Hill: In the beginning we reviewed over 20 projects, and selected two to start, in Austria and Germany.
Stafford: Where will you be drilling first?
Hill: The first drill, which will start this month and take about 40 days, is in Austria, MCF Energy’s Welchau prospect in the Austrian Alps.
Stafford: Can you tell us more about that prospect and what drew you to it?
Hill: The Welchau anticline is huge. It’s a structure you can see from space. It covers over 100 square kilometers. Back in the 1900s, they found oil and gas by drilling surface anticlines, which are like these large bumps in the earths surface, and that’s what we’re going to do in Austria. . This is analogous to large anticline structures discovered in the Kurdistan Region of Iraq and the Italian Apennines, and back in 1989, Austrian OMV drilled a well just five kilometers to the south from us, and they found gas.
Stafford: What does that mean for MCF?
Hill: Well, we have proven hydrocarbons found on the south side of Welchau. From this well we know we have a reservoir that produced gas and condensate. We know we’ve got a trap because we can see it and it has been carefully studied. And we know we have a seal to seal it all in. In other words, the hydrocarbon column that was trapped in that OMV well was extremely thick. So, the seal capacity, which to me is typically the main risk of such prospects, has a phenomenal capacity. So, everything I need for a major gas accumulation is there.
Stafford: Can you tell us a bit about the geology and how big of a resource you think you have here?
Hill: Well, Gaffney Cline, an independent evaluator, on a P50, gave us a potential 580 billion cubic feet of gas on a best-case level, along with 10 million barrels of oil. But if the seal is as good as I think it is, it could be a trillion cubic feet, along with 15-20 million barrels of oil.
Stafford: I wasn’t expecting numbers like that …
Hill: Where else could you go for a TCF target on land, especially at such a low cost of drilling? And there’s a national pipeline only 18 kilometers away. There aren’t many places.
Stafford: And what is this going to cost you to drill?
Hill: The original estimate was 3.8 million euros but because of permitting and access and that sort of thing, we're looking a little bit more, around four to possibly 5 million euros.
Stafford: And are you paying that, or is that split with a partner?
Hill: W e're paying 50% of that to earn 25%.
Stafford: Okay. 50% for 25%, and who's the partner?
Hill: ADX, a company out of Australia with offices in Vienna. They took over a bunch of OMV assets when OMV got out of the exploration game in Austria.
Stafford: What’s next, after Welchau?
Hill: Well, that’s what I’m really excited about. What’s next is Germany … Last year, we acquired a private German company called Genexco and we got four key assets in the deal. These assets have previously drilled wells and two discoveries. To balance the Genexco exploration assets We got Reudnitz, a proven, large-scale natural gas field that also contains a shallow oil exploration target. I am very excited about our Lech concession—a 10-square-kilometer block with three previously drilled wells and two discoveries; on trend to the Lech discoveries we were awarded 100% of the Lech East concession, which is around 100 square kilometers adjacent to Lech. In August we were awarded another block the Erlenwiese concession located in the Rhein Graben which covers about 80 sq km and several well defined prospects.
Stafford: Ok, let’s unpack this a bit … Which one is the most promising for MCF?
Hill: Well, we like all four German concessions, but the next drill in, right after Austria, will be in Germany at Lech, and we’re in the final stage of permitting here and the surface location is secured. We’re doing a re-entry of the previously drilled Kinsau #1 well. Back in 1983, this same well tested at a maximum flow rate of over 24 MMCFD of natural gas.
Stafford: Who drilled the original well that you’re re-entering, and why was it abandoned in the 80s?
Hill: That well was originally drilled by Mobil. They were looking for oil and encountered a primary gas reservoir with associated condensate. They spent about three months testing it; their final flow rate was over 24 MMCFD of gas. It was an absolutely huge well with tons of natural gas. They abandoned it because, back then, it wasn’t economic. Gas wasn’t worth anything and they were exploring for oil, so they drilled another well to a deeper target and got about 180 barrels of oil a day out of it. They didn’t pursue it much further at the time because oil prices were at the bottom of the barrel and this rate was not economic at this depth. Mobil drilled a third well that found the oil-water contact. But for some reason, they shot 3D seismic after they drilled these three wells, which we have then inherited.
Stafford: That 3D must have cost them a mint for a prospect they were abandoning.
Hill: It probably cost them millions because the 3D covered about 120 square kilometers, but it’s a treasure trove for us, and this isn’t the 80s. We are using the new AI and machine learning process on this survey to identify new targets they could not see in the past. This new Europe is desperate to develop its own natural resources after being so heavily dependent on the Russians for so long.
Stafford: How much will it cost to re-enter this well, assuming that timeline sticks?
Hill: MCF has a 20% carried or fully funded interest in this concession through its Genexco acquisition, which means it won’t be paying for any of the cost of drilling, up to 5 million euros.
Stafford: So, what is your view on the likelihood of a hit on this well re-entry?
Hill: You know, I think from a risk perspective, you're not going to miss this one. I think there’s a 99% chance because it’s there. I mean, the gas wouldn’t have gone anywhere, would it? We’ve also got an oil zone that back in ’83 produced almost 200 barrels a day from a vertical well. What happens if we put a horizontal well into that thing? We’re going to go in and recreate the Mobil well and stimulate the zone. We know where the hydrocarbons are. We’ve also got cores of the rock through it.
We’ve spent days going over the cores from the original Mobil wells and sampling them. Those were taken 40 years ago, and completion technology has improved dramatically in that period of time. We’ve got studies going on with Halliburton and Schlumberger right now to determine the best way to improve upon that stimulation that Mobil did.
Stafford: How big do you think it is the field? How much gas are we talking about potentially?
Hill: MCF has internal estimates which more than justify our interest in just the first fault block on Lech. . These estimates could possibly be bigger depending on where the gas water is. Remember, we've got a 3D over this thing. And the infrastructure is a breeze … The pipeline connection is less than two kilometers away. The pipeline company says they'll run us a line for free if we dedicate the gas to them. And there’s another national pipeline just to the south of us, which will take higher capacities.
Stafford: How long have you known about the Lech prospect and all the 3D that was available, and why hasn’t anyone else caught it, especially given Germany’s stance since Russia invaded Ukraine?
Hill: MCF has been a first mover in this space. We’ve had the data for almost a year and about the Mobil wells for longer. We have analyzed the 3D and AI told us more identical prospects could be drilled in the open lands to the north and east. But we kept quiet because we had applied for those areas to the north and east. In August of 2023 we were awarded the 100 sq km Lech East concession adjacent and just to the north and east of the 10 sq km Lech block. We had to wait to talk about this amazing prospect until we got the concession. Lech East directly offsets and on trend with this discovery on the Lech block.
Stafford: Can you take us through the tech side of putting this treasure trove of data to use?
Hill: Actually, that’s one of the most interesting parts of this story: Our team, which includes a geologist who has a machine-learning background and helped develop the technique, is employing all the latest in AI to make the most of this remote sensing data. We take a well that has oil and gas in it and then a well that’s a dry hole and run the data sets through the machine learning program. In the past, before AI, it was all a “visual” look at 3D to identify where to drill, and it reduced our risk, but there is so much more information in the data. Machine learning changes this game. We take the data set of all the wells and 3D information and break it down into over 50 different components called “neurons”. We break out the neurons within a well that produces oil and gas versus one that doesn’t. Then we do a simple subtraction and come up with a unique set of neurons that indicates porosity, permeability, oil, gas, and water. Then we tell the machine to look for those unique set of oil and gas neurons though out the entire data set. These areas are identified, and new targets spotted. And with this type of AI data analysis, our AI-geologist has had an 80% success rate drilling wells in an area that I would never have drilled with my eye.
Stafford: It sounds like an extremely powerful tool. Are you applying that to all 100 square kilometers of 3D?
Hill: Absolutely. We’ve already done that. And it guided us into acquiring the Lech East Concession. We’ve got firm locations on that 100-sq-km block, and if they hit, there’s going to be multiple development locations from each of them. The neurons bloom and highlight these targets using the AI, and they’re identical or very similar to what we found in the successful Mobil wells.
Stafford: So, the first well will cost up to 5 million euros to drill, but you’re getting it for free … how does that leave your current cash position?Hill: In the neighborhood of 5 million Canadian.
Stafford: What are your goals? Let's just say both if these wells hit and they're both spectacular. What are you looking to do? Are you looking to become a producer? Are you looking to flip the company to someone else? What are your thoughts here?
Hill: You know, everything's for sale. Let's face it. But we are positioning ourselves to carry it forward with development.
Stafford: But these aren’t your only prospects, either? Can you tell us anymore about the other three prospects in Germany?
Hill: We were just awarded another concession in the Rhein Graben of Germany called Ellenweise, which has a beautiful, closed anticline with a flat spot. And there's been a recent discovery made just to the south of us. We are currently reviewing the seismic using AI and we are continuing to accumulate other high impact prospects.
There is a possibility, for instance, that we could, if we made a big discovery on that 10 square kilometer block, sell that off to fund the development of all of the wells on the 100 square kilometer block.
I recognize the risk in Austria, but if it hits, it will be big. And Germany is our high-impact assets. When that hits—and we have high confidence that it will—this will take off in a very big way.
Stafford: Why do you think should MCF should be on everyone’s radar right now?
Hill: Well, first of all, we're a first mover in this space. These prospects have been here for decades, but no one else jumped in time after Russia invaded Ukraine. We’ve also got the talent. By acquiring Genexco we've got some of the best people in Europe who know the space and the regulatory environment. They're known by the ministries and the local communities. They've been operators for a long time. And also by acquiring Genexco we acquired 4 active concessions.
Stafford: How do you envision MCF fitting into the energy transition overall?
Hill: The energy transition isn’t going to truly finish unfolding for decades. Wind isn’t going to cut it, nor is the current solar technology without a breakthrough in energy storage. Rebuilding the transmission grid will take many billions of euros. It will likely be something else, such as hydrogen, but natural gas will have to be the transition fuel.
We're well aware of our responsibilities in this transition, and we also plan on supplying a portion of the energy that Europe needs for the decades to come in order to make this transition.
Stafford: Thanks for your time Jim. Good luck with the upcoming drilling campaigns.
Other companies to keep an eye on in the global race for energy:
TotalEnergies (NYSE:TTE) has always been at the forefront of Europe's energy sector. Their emphasis on natural gas is evident in their expansive infrastructure, from pipelines crisscrossing the continent to state-of-the-art LNG facilities. This is part of a deliberate strategy to be a leader in Europe's gas-driven energy future.
Yet, oil remains a significant contributor to TotalEnergies' success. Their global reach in oil exploration and production is immense. Ensuring that these operations are efficient, sustainable, and aligned with global environmental standards is a priority, with investments pouring into cleaner drilling technologies and refining optimizations.
Investors eyeing TotalEnergies can find a blend of progressive natural gas initiatives and a solid foundation in the oil sector, offering both growth and stability in the ever-evolving energy market.
Eni (NYSE:E) has consistently showcased its adaptability in the energy domain. Their push into the natural gas segment, especially in the Mediterranean and North African regions, aligns with Europe's increasing demand for this cleaner energy source.
Parallelly, oil remains a pivotal element of Eni's operations. Their exploration and refining endeavors stretch globally, and the company is continually innovating to ensure these are environmentally sustainable and efficient.
For those considering investments, Eni provides an enticing mix. The company's aggressive stance on natural gas indicates future growth potential, while their deep-rooted expertise in oil offers a sense of stability and reliability.
Equinor (NYSE:EQNR), Norway's energy heavyweight, has been instrumental in shaping Europe's oil and gas narrative. But as the winds of change sweep across the continent, Equinor too has adapted, making noteworthy inroads into hydrogen and other green energies.
Their hydrogen projects, in partnership with other industry leaders, show their commitment to a sustainable energy future. Equinor’s vision extends beyond just hydrogen, with significant investments in offshore wind projects.
BP (NYSE:BP), a stalwart in the oil sector, has for decades influenced Europe's energy landscape. However, in the face of changing energy dynamics, BP has astutely expanded its involvement in the natural gas arena. Recognizing the European shift towards cleaner-burning fuels, their investments in natural gas infrastructure, both in terms of pipelines and liquefied natural gas (LNG) terminals, have grown.
While oil remains a significant part of BP's portfolio and continues to contribute immensely to its revenues, the company acknowledges the global demand shift. They have initiated several projects to ensure sustainable oil exploration, reducing environmental footprints, and optimizing production.
Recognizing the growing importance of this resource in Europe's energy matrix, Shell (NYSE:SHEL) has substantially expanded its ventures. Investments in both traditional gas pipelines and LNG terminals are significant, reflecting a strategy to capitalize on the continent's shifting energy consumption patterns.
At the same time, oil remains a substantial part of Shell's portfolio. Their exploration, production, and refining operations are vast, covering multiple geographies and varying complexities. Shell continues to optimize these operations, integrating technological advancements and ensuring environmental considerations are upheld.
For investors, Shell offers a diversified approach in the energy sector. While the push for natural gas is clear, the stability and robustness provided by their extensive oil operations make it an attractive proposition in the global energy market.
Suncor Energy (TSX:SU, NYSE:SU) stands tall as one of Canada's premier integrated energy companies. Its ventures in the natural gas sector are notable, with considerable assets in Western Canada. Suncor has been tapping into the vast reserves of the region, aiming to cater to North America's growing energy needs.
However, oil sands remain the heart of Suncor's operations. They're among the world's largest operators in this domain, utilizing cutting-edge technologies to ensure efficient extraction. Their commitment to sustainability is evident, with continuous efforts to reduce carbon footprints and mitigate environmental impacts.
For investors, Suncor offers a rich blend. Their position in the oil sands sector ensures steady revenues, while their ventures into natural gas suggest adaptability to shifting market dynamics.
TC Energy (TSX:TRP, NYSE:TRP), primarily known for its pipeline operations, plays a pivotal role in North America's energy infrastructure. Their natural gas pipelines span thousands of kilometers, ensuring efficient distribution across the continent. This vast network highlights TC Energy's strategic intent to be at the heart of North America's gas distribution.
While they're more infrastructure-oriented, their involvement in oil cannot be ignored. Their oil pipelines play a crucial role in connecting major oil sands regions to refineries and markets, ensuring steady flow and distribution.
For investors, TC Energy offers a unique proposition. Their dominance in natural gas and oil infrastructure presents both stability and a continuous growth trajectory in line with North America's energy demands.
Canadian Natural Resources (TSX:CNQ, NYSE:CNQ) boasts a diverse and robust portfolio. Their ventures in the natural gas sector, especially in the Montney and Duvernay regions, reflect a comprehensive strategy to harness Canada's gas potential.
Oil, however, remains a significant contributor to CNRL's success. With assets ranging from oil sands to heavy crude, they've showcased their prowess in managing diverse operations. Their emphasis on sustainable practices and cost efficiencies sets them apart in the industry.
Investors eyeing CNRL are looking at a powerhouse. The combination of their extensive natural gas projects with a solid foundation in oil makes them a top contender in the energy sector.
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
Forward-Looking Statements
This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that large oil and gas companies will continue to focus on offshore natural gas resources; that domestic onshore natural gas assets in Europe will provide a more affordable energy source than offshore resources; that demand for natural gas will continue to increase in Europe and Germany; that Russia will not supply the majority of natural gas in Germany and Europe; that natural gas will continue to be utilized as a main energy source in Germany and other European countries and demand for natural gas, and in particular domestic natural gas, will continue and increase in the future; that MCF Energy Ltd. (the “Company”) can replicate the previous success of its key investors and management in developing and selling valuable energy assets; that the natural gas projects of the Company will be successfully tested and developed; that the Company can develop and supply a safe, domestic source of energy to European countries; that natural gas will be reclassified as sustainable energy which will support the development of the Company’s assets; that imports of liquified natural gas will not be sustainable for Europe and that European countries will need to rely on domestic sources of natural gas; that the Company expects to obtain significant attention due to its upcoming drilling plans combined with Europe desperate for domestic natural gas supply; that the upcoming drilling on the Company’s projects will be successful; that the Company’s projects will contain commercial amounts of natural gas; that the Company can finance ongoing operations and development; that the Company can achieve its business plans and objectives as anticipated. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that large oil and gas companies will start focusing on the development of domestic natural gas resources; that the natural gas resources of competitors will be more successful or obtain a greater share of market supply; that offshore liquified natural gas assets will be favored over domestic resources for various reasons; that alternative technologies will replace natural gas as a mainstream energy source in Europe and elsewhere; that demand for natural gas will not continue to increase as expected for various reasons, including climate change and emerging technologies; that political changes will result in Russia or other countries providing natural gas supplies in future; that the Company may fail to replicate the previous success of its key investors and management in developing and selling valuable energy assets; that the natural gas projects of the Company may fail to be successfully tested and developed; that the Company’s projects may not contain commercial amounts of natural gas; that the Company may be unable to develop and supply a safe, domestic source of energy to European countries; that natural gas may not be reclassified as sustainable energy or may be replaced by other energy sources; that the upcoming drilling on the Company’s projects may be unsuccessful or may be less positive than expected; that the Company’s projects may not contain commercial amounts of natural gas; that the Company may be unable to finance its ongoing operations and development; that the Company can achieve its business plans and objectives as anticipated; that the Company may be unable to finance its ongoing operations and development; that the business of the Company may be unsuccessful for various reasons. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
DISCLAIMERS
This communication is for entertainment purposes only. Never invest purely based on our communication. We have not been compensated by MCF Energy Ltd. for this article. While the opinions expressed in this article are based on information believed to be accurate and reliable, such information in our communications and on our website has not been independently verified and is not guaranteed to be correct. The content of this article is based solely on our opinions which are based on very limited analysis and we are not professional analysts or advisors.
SHARE OWNERSHIP. The owner of Oilprice.com owns shares of MCF Energy Ltd. and therefore has an incentive to see the featured company’s stock perform well. The owner of Oilprice.com will not notify the market when it decides to buy more or sell shares of MCF Energy Ltd. in the market. The owner of Oilprice.com will be buying and selling shares of this issuer for its own profit. Accordingly, our views and opinions in this article are subject to bias, and why we stress that you should conduct your own extensive due diligence regarding the Company as well as seek the advice of your professional financial advisor or a registered broker-dealer before you consider investing in any securities of the Company or otherwise.
NOT AN INVESTMENT ADVISOR. Oilprice.com is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. You should not treat any opinion expressed herein as an inducement to make a particular investment or to follow a particular strategy, but only as an expression of opinion. The opinions expressed herein do not take into account the suitability of any investment with your particular objectives or risk tolerance. Investments or strategies mentioned in this article and on our website may not be suitable for you and are not intended as recommendations.
ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making any investment. This communication should not be used as a basis for making any investment in any securities. Past performance is not indicative of future results.
RISK OF INVESTING. Investing is inherently risky. Do not trade with money you cannot afford to lose. There is a real risk of loss (including total loss of investment) in following any strategy or investment discussed in this article or on our website. This is neither an offer to purchase, nor a solicitation of an offer to sell, subscribe for or buy any securities or the solicitation of any vote in any jurisdiction. No representation is being made as to the future price of securities mentioned herein, or that any stock acquisition will or is likely to achieve profits.
