[SergioHH]

US junior buys Big Muddy field amid plans for CO2 injection

Rancher round-up
By Upstream staff

Rancher Energy has snapped up the Big Muddy field in Wyoming's
Powder River basin as it looks to coax more output from ageing
oilfields in the play.
The Denver-based company, which was formed less than a year ago to
produce the oil other companies left behind, said it plans to use carbon
dioxide injection at Big Muddy, as well as at the Cole Creek South and
South Glenrock B fields to turn the tide on years of declining output.
The company is focusing on CO2-enhanced projects because older fields,
such as those in Wyoming, can be bought cheaply, particularly in the
increasingly competitive US onshore sector.

Rancher Energy paid $25 million for Big Muddy.

More than this, instead of squandering limited cash on high-risk
wildcatting, bottom-line consciouscompanies like Rancher Energy can use
CO2 flooding to squeeze more oil from the fields that primary and
secondary production leaves behind.

"We have been aggressively acquiring properties to focus on enhanced
recovery projects," said John Works, Rancher Energy's boss. "There is no
wildcatting. We know where the oil is finding costs are cheaper."
As for Big Muddy, the wholly-owned 8500-acre field currently pumps
about 60 barrels per day, which is a far cry from the veteran field's
heyday.

Discovered in 1916, the field has produced a total of 52 million barrels of
oil and hit a peak of 10,000 bpd in 1919. A then pre-merger Conoco also
operated the field in the 1950's using water flooding.

With the addition of Big Muddy to its portfolio, Rancher Energy's total
haul now stands at 300 bpd.

While that may seem like a pittance compared with US demand of more
than 21 million bpd, the company is planning a $300 million capital
budget for its Wyoming fields.

That four-year project aims to take production up to 18,000 bpd, said
Works.

While naturally occurring CO2 reservoirs, such as Colorado's McElmo
Dome and Mississippi's Jackson Dome, are scarce in other parts of the
country, Rancher Energy has clinched a 10-year take-or-pay agreement
with Anadarko Petroleum for 25 million cubic feet per day of CO2.

Rancher Energy expects to get an average of about 40 million cubic feet
per day from the company for its enhanced oil projects.

Anadarko is also using CO2 injection at Salt Creek to boost production.
Rancher Energy's boss also said the company hopes to eventually get its
hands on "at least 90 MMcfd for these and other projects the company is
targeting".

In Wyoming, the CO2 used for these newer and existing enhanced oil
projects is derived from ExxonMobil's Shute Creek gas processing plant.
Rancher is not alone in trying to extract the oil lockedin scores of
underground rock formations.

More oil producers are applying enhanced oil projects to extend the lives
of the fields by decades and get every barrel of oil they can from the
reservoirs.

When lumped together, US oil producers are getting 237,000 bpd from
around 80 projects scattered throughout the county. US oil production is
hovering at about 5.4 million bpd.
12 January 2007 00:01 GMT | last updated: 12 January 2007 05:04 GMT