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,
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
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.