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Oil, gas investment firm targets downstate potential

Chris O'Malley
August 24, 2010
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A former CountryMark executive has launched a company investing in oil and gas projects downstate and in southern Illinois.

William D. Herrick, former director of business development at oil refiner and retailer CountryMark, is president of Indianapolis-based Midwest Energy Partners LLC.

Midwest Energy Partners has raised about $10 million from investors, with about $6 million already employed in two dozen wells in the Illinois Basin. Oil production in the basin peaked in the 1950s, but interest has returned in recent years due to rising oil prices, a falling U.S. dollar and new drilling technologies that could tap previously unrecoverable deposits.

Also driving the oil trend is a fall in steel prices, which factor into the price of new wells. The cost of a horizontal well has dropped to about $800,000 from $1 million, according to Midwest.

Herrick’s company has struck working agreements with Evansville-based Core Minerals and with Pioneer Oil Co., of Lawrenceville, Ill.

The companies are two of just a handful in the region using more modern production techniques such as horizontal drilling, which can snake above water deposits that can flood a vertical well, to recover oil that was previously elusive.  Not so elusive are records on how much oil has been removed since the early 1900s, making it easier to predict which areas are ripe for rediscovery.

“There’s as much as 70 percent of the original oil that still exists,” said Herrick.

Vertical wells can cost $200,000 to put in action, but the cost of horizontal drilling puts the technique beyond the reach of the many “mom and pop” producers that dominate the Illinois Basin today.

The minimum investment for qualified investors in Midwest is $200,000. Herrick said his strategy has been to encourage investors to buy a stake in all or part of multiple wells, to spread the financial risk.

So far investment has come from a venture capital fund and from wealthy individuals. His firm is working with Indianapolis-based law firm Ice Miller, which creates a limited liability corporation for investor groups. Each investor receives a pro-rata share of oil-production income.  

However, Herrick’s firm is in discussions with investment banks about the possibility of creating a fund for smaller investors. “We are just in the very preliminary stages,” he said.

Oil investments tend to be the province of wealthier investors, some attracted by generous tax-write offs that can mitigate the risk.

Midwest's primary role is to funnel investor cash to the production companies. “Pioneer and Core can spend significantly less time searching for and meeting with individual investors and concentrate on what they do best,” which is locating oil and gas, said Herrick.

Herrick left Indianapolis-based CountryMark in December. He was responsible for the oil production strategy of the company, which has an Indiana oil refinery in Mount Vernon.

Midwest also is targeting natural gas opportunities, although prices have been low relative to oil in recent years.

Most of the oil production in southern Indiana is focused in Gibson and Posey Counties. However companies such as Indianapolis-based Citizens Energy Group have been tapping oil in Greene County–closer to Indianapolis–since the late 1960s. The Plummer oil field has generated more than $40 million for Citizens over that time.

Oil and gas production in Indiana began in the late 1880s in the so-called Trenton field in east-central Indiana. At one point, oil wells were even drilled under what is now Broad Ripple Village in Marion County. In total, an estimated 105 million barrels flowed from some 24,000 wells poked into the Trenton, although records from the day are spotty.

Today, the Trenton field, which some dubbed “American’s first giant oil field,”  is all but exhausted. Farmers and small producers still retrieve token amounts each year.

 By 1910, oil derricks had moved to southwestern Indiana, where production peaked at 12.6 million barrels in the mid-1950s, according to the Indiana Department of Natural Resources.

 About 1.8 million barrels of oil were recovered in Indiana last year.

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  • not exhausted just underpressured
    Regarding "Today, the Trenton field, which some dubbed â??Americanâ??s first giant oil field,â?? is all but exhausted."

    The oil is not "exhausted" most of the oil resource is still in-place but the Trenton reservoir is under-pressured as a result of 10s of thousands of wells installed during the boom years. These wells were not properly abandoned and the net result has been loss of formation pressure and a fortune in oil not recovered. The financial future of Indiana's oil & gas industry might have been quite a bit different if development of the Trenton field had been better managed. If the price of oil continues to escalate, horizontal wells will someday probably be supplanted by oil quarrying operations given the technical feasibility of reaching the relatively shallow Trenton reservoir at a depth of around 1000 feet below the ground surface at many locations.

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  1. So much for Eric Holder's conversation about race. If white people have got something to say, they get sued over it. Bottom line: white people have un-freer speech than others as a consequence of the misnamed "Civil rights laws."

  2. I agree, having seen three shows, that I was less than wowed. Disappointing!!

  3. Start drilling, start fracking, and start using our own energy. Other states have enriched their citizens and nearly elminated unemployment by using these resources that are on private land. If you are against the 'low prices' of discount stores, the best way to allow shoppers more choice is to empower them with better earnings. NOT through manipulated gov mandated min wage hikes, but better jobs and higher competitive pay. This would be direct result of using our own energy resources, yet Obama knows that Americans who arent dependent of gov welfare are much less likely to vote Dem, so he looks for ways to ensure America's decline and keep its citizens dependent of gov.

  4. Say It Loud, I'm Black and Ashamed: It's too bad that with certain "black" entertainment events, it seems violence and thuggery follows and the collateral damage that it leaves behinds continues to be a strain on the city in terms of people getting hurt, killed or becoming victims of crimes and/or stretching city resources. I remember shopping in the Meadows area years ago until violence and crime ended make most of the business pack you and leave as did with Lafayette Square and Washington Square. Over the past 10 to 12 years, I remember going to the Indiana Black Expo Soul Picnic in Washington Park. Violence, gang fights and homicides ended that. My great grandmother still bears the scares on her leg from when she was trampled by a group of thugs running from gun fire from a rival gang. With hundreds of police offices downtown still multiple shootings, people getting shot downtown during Black Expo. A number of people getting shots or murdered at black clubs around the city like Club Six on the west side, The Industry downtown, Jamal Tinsley's shot out in front of the Conrad, multiple fights and shootings at the skating rinks, shootings at Circle Center Mall and shooting and robberies and car jackings at Lafayette Mall. Shootings and gang violence and the State Fair. I can go on and on and on. Now Broad Ripple. (Shaking head side to side) Say It Loud, I'm Black and I'm Ashamed.

  5. Ballard Administration. Too funny. This is the least fiscally responsive administration I have ever seen. One thing this article failed to mention, is that the Hoosier State line delivers rail cars to the Amtrak Beech Grove maintenance facility for refurbishment. That's an economic development issue. And the jobs there are high-paying. That alone is worth the City's investment.

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