Fuel and Energy & Environment and Oil

CountryMark acquires oil wells in southern Indiana

May 12, 2010

Indianapolis-based CountryMark, a co-op that provides fuel to farmers, has acquired 600 oil wells and other assets in the Illinois basin in a strategy to vertically integrate its operations.

CountryMark bought the wells and rights to explore other areas of the basin from Evansville-based Core Minerals Operating Co Inc. CountryMark CEO Charlie Smith would not disclose the purchase price, but he did say he expects the purchase to add as much as $15 million in profit to CountyMark’s operations next year.

CountryMark has annual revenue of about $1 billion per year from refining, transporting and selling more than 9 million barrels of oil products annually.

“Combining the advantages of the resources available within the Illinois Basin with the technological and commercial infrastructure and expertise of CountryMark makes for a strong, integrated business model that I believe will yield positive returns for all CountryMark stakeholders,” Smith said in a prepared statement.

CountryMark will hire 50 employees—most of Core Minerals’ staff—as part of the deal. Core Minerals was managed by Houston-based private equity firm EnCap Investments L.P.

CountryMark already employs 350 workers, mostly at its Mount Vernon refinery. The company has about 20 workers at its Indianapolis headquarters at 225 S. East St.

CountryMark tried to get into oil exploration and drilling in 2008 but has so far been a financial partner with other firms. Exploration in the Illinois basin picked up in recent years as the price of oil made it profitable again for exploration while advances in technology made it less expensive to re-investigate untapped areas for the existence of oil pockets.

Smith’s strategy is to use seismic technology to search for oil deposits that might have been missed by previous companies exploring the 90,000 acres it now has rights to in Illinois, Indiana and Kentucky. He also hopes to use horizontal drilling in oil fields that are played out to find “missed pockets” of oil. Thirdly, Smith thinks CountryMark can apply methods to wring every last drop of oil out of the wells it just acquired.

“We’ve gone from a minor footprint to a major footprint,” Smith said. “Now, we’re a full-blown player.”

CountryMark’s wells are now producing 950 barrels of crude oil per day. Overall, the Illinois basin produces 35,000 barrels of crude oil per day.

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