Last summer I published an article lamenting the fact that few companies seemed anxious to invest in re-fracking. It seems the technology is available to support it, and the economics certainly make sense, so why is nobody interested in participating? Perhaps that pendulum has swung now, as BKV Corporation is leading the way, reporting with pride that they have now completed almost 400 re-fracks in the Barnett Shale. The results there have been so good that BKV is now evaluating M&A targets based upon their propensity to respond to restimulation and their proximity to existing leasehold acreage or production.

BKV Corporation (Banpu Kalrin Ventures), based in Denver, describes itself as being a “values-driven company that believes the combination of visionary strategy, focus on execution, and balance in day-to-day life are the keys to creating long-term sustainable value". So far, it sounds little like an exploration company. However, they are quite progressive with their exploration, having introduced what they refer to as Carbon Sequestered Gas (CSG) to the market, a product they claim to be carbon-neutral in nature. Their stated goal is to achieve net-zero carbon emissions “by the 2030’s”. Sounds like a pretty lofty goal to me.

BKV Corp. is the largest natural gas producer in the Barnett Shale. At a recent DUG (Developing Unconventional Gas) convention, Eric Jacobson, its president of upstream operations, had a number of recent comments which were notable in nature, particularly with regard to their commitment to and success with re-fracking.

Jacobson described the company as being an “integrated” gas company. “It’s not just an upstream company. It’s not just midstream. It’s got a lot of components,” he explained. Although they are only about a decade old, BKV went public in September of last year, raising almost $275M in their IPO, providing them with capital and liquidity to pursue their goals. They are always thought of as a Barnett Shale producer, and they do lead the pack there, being the largest producer by a considerable margin, but they also have “nice complimentary upstream assets” in NE Pennsylvania and the Marcellus. Combined, they comprise a nice little “value chain”, as they refer to it, a chain that allows them to deliver product to end customers (midstream) and also a power generation business. In order to “close the loop” as they refer to it, they have been concentrating on carbon capture and the sequestration business.

Their carbon capture and sequestration efforts appear to be profitably capturing carbon dioxide, injecting it into the ground “for all time”. And in doing so, they are generating blockchain certified carbon credits that they “staple” to their gas to create a net carbon neutral or a net zero gas product or even net neutral green electricity when a net neutral gas is burned in one of their power plants. And the resulting product?

They are actually providing a sequestered gas that is cleaner and which can be sold at a premium. For those end users who prioritize a net neutral or a carbon-free product they are about the only game in town, at least for now. This is a “monkey-see, monkey-do” industry though, so the idea and the product being developed are sure to warrant imitation.

As with much of today’s energy news, this has already been linked to data centers, who require a tremendous amount of energy to be both produced and stored. AI is demanding more and more energy for their efforts and anything Green that can be economically used during energy generation or storage is sure to catch on. Some data centers already have internal or regulatory mandates requiring carbon neutrality. More is sure to come.

But why did BKV choose the Barnett for their initial efforts regarding re-fracks? Well, partly because of age. The Barnett was among the first shale plays, and technology has improved exponentially since its inception. It seems these early “pioneer” wells had what is being described as “major meat left on the bone”. How so? Among other things, the spacing between perf clusters has changed significantly. The early wells had 3000-5000 feet between clusters, whereas today we may see as little as 30-50 feet spacing. The result? Swaths of unstimulated rock. BKV is finding some mighty tasty leftovers in the Barnett and there is no reason to believe the process will be less successful elsewhere. Time will tell I suppose, but I’m glad to see someone making inroads into this much-overlooked opportunity.

They claim to have plans to re-stimulate 2500 Barnett shale wells and are doing so quite affordably. Whereas an initial horizontal well, along with its necessary apparatus would cost an absolute minimum of $6.5M, BKV claims to spend only about $500,000 per well with a bullhead design throughout the whole lateral. They re-fracture in a staged approach up the heel and into the curve of almost entirely unstimulated rock. It is also a much quicker process than drilling and fracking a new well. The result? What Jacobson describes as “really strong returns”.

And it's no wonder. No pad to build. A much more manageable rig with which to operate. No cost for leasing or acquisition. Midstream already in place. A proven reservoir that exists. All told, they have been generating some very attractive returns due to these factors. Even a marginal shale well is profitable at a cost of only a half million. I can’t imagine this process not being refined and used throughout the nation in other shale plays as well, although some will definitely be more susceptible to the techniques.

BKV admits looking to merge with or acquire other Barnett producers of similar size (80-120M cu. ft.) whether they be public or private. Their plan is to “put our playbook into action” by consolidating acreage, taking advantage of midstream capacity, lowering costs dramatically, and using their “data-driven and AI approach” to flattening base decline in production and generating returns, and then capitalizing on re-fracking opportunities. Their plans also include generating much longer laterals as well as closer perf clusters. The advantages of re-fracking a well when you already know everything about its geology cannot be understated.

Their approach is absolutely paying off. Last year they generated 15% free cash flow margin in what was admittedly a poor gas price environment. Their margin would have been closet to 20% had they excluded expenses relating to their carbon capture attempts. They have developed a cashflow engine that they believe, should they stick to their playbook, can be profitable in many different shale formations. It will be interesting to see where their next move will be, or whether a legitimate competitor will arise to enter the fray. Of one thing I am confident - re-fracking provides a great opportunity to stimulate and further production and I believe that it will be adopted by the industry and become prevalent in most if not all or our existing shale developments.

My personal opinion is that the Utica is a particularly good prospect for this. Not only is it about fifteen years old now, but it has taken exploration companies over a decade to decipher its oil window (thanks Encino!). It’s a little-known fact that many of the initial wells drilled by Chesapeake were inadvertently “damaged” in the completion process. During drilling and completion of the Buell well in Harrison County, they experienced a minor problem at completion that caused a delay in setting pipe and the like. The result?

Totally by accident CHK discovered that a resting period of a month or so helped dissipate flow-back water and actually improved the well’s performance. Today, the resting period is still being used, adjusted to maximize the particular product(s) being produced, whether they be oil, condensate, NGL’s, dry gas, or any combination of the above. I know my friend Tom Mitchell had six wells drilled on his land, all of which were quite prolific but for only a short period of time. Surely these wells would be a great target to apply this technology.

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Okay folks….that’s about it for this particular subject. I was indeed pleased to find this article reporting BKV to be so successful with their re-fracking efforts. I’ve been asking why there has been no news regarding this and I am pleased to find something newsworthy which should give everyone hope that our existing shale assets can be restimulated and their production either extended and/or increased. It’s an exciting time in the industry, and I believe this will be the biggest trend to emerge in the industry in a decade or more. Stay tuned……