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Pulse Oil is a promising way to play the oil patch as there’s upside for investors at Bigoray

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The company has a special weapon in two TAG Oil alums — crack exploration geologist Drew Cadenhead and finance wizard Garth Johnson

Pulse Oil Corp - Pulse Oil is a promising way to play the oil patch as there’s upside for investors at Bigoray

Quick facts: Pulse Oil Corp

Price: 0.045 CAD

TSX-V:PUL
Market: TSX-V
Market Cap: $6.82 m
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  • Pulse is employing modern recovery methods to try to unlock oil trapped in two Nisku reefs in its flagship Bigoray asset
  • It's second oil-producing asset is in the Queenstown area of southern Alberta
  • The experienced management team has skin in the game and strong street cred built over decades in the oil industry

What Pulse Oil does:

Pulse Oil Corp (CVE:PUL) is focused on unlocking a fount of oil from a low-risk, high-upside oil patch in Alberta using modern oil recovery methods that don’t require pricey drilling.

Started in late 2017, the Calgary-based oil and natural gas producer’s most prized asset spans 10,000 acres of oil-rich land in the Bigoray area of west-central Alberta. Bigoray is home to at least four different geological formations, which are a wellspring of oil, including two Nisku oil pinnacle reefs, both expected to be the game-changer for the company.

Pulse's assets consist of the Cardium oil pools, the Mannville gas pools, the Pekisko oil pool and Nisku oil pools. Pulse brought back production that had been shut off during historical low commodity prices in 2014.

The company’s second oil-producing asset is in the Queenstown area of southern Alberta, in Canada and initial production results are promising.

Pulse Oil has a special weapon in two TAG Oil alums — finance wizard Garth Johnson, who is CEO, and top exploration geologist Drew Cadenhead, who is president and chief operating officer.

That dream team has street cred built over decades in the oil industry. With Pulse Oil, the duo is hoping to repeat the success they had with TAG Oil, which they built to a near C$700 million market cap firm from a financially distressed C$2 million low point. They have skin in the game having personally invested C$1.3 million into Pulse.

How is it doing:

In May, Pulse unveiled plans for a private placing to raise up to C$30.9 million to accelerate its enhanced oil recovery (EOR) project at its flagship Bigoray asset in Alberta. 

Each unit of the financing will be priced at C$25.75 and consist of one share of subsidiary Pulse Oil Operating Corp (OpCo), and 25 Pulse Oil shares. The junior oiler said it will see the issue of up to 1.2 million preferred shares of OpCo at C$25 a throw and 30 million Pulse shares at $0.03 each. The company said gaining access to funds in the pandemic world where raising capital is difficult would allow Pulse to expedite its EOR project when the biggest expense associated with the project, the natural gas liquid injection solvent, is at historically low prices. 

Pulse Oil recently shared positive results from its enhanced oil recovery (EOR) study at Bigoray relating only to the Nisku D and Nisku E reef pools. It roped in oil-field giant Schlumberger Canada Ltd to complete all three phases of the petrotechnical modelling of the two Nisku oil reefs. In the first phase, Pulse and Schlumberger used computer models of historical production to create over 200 iterations before beginning the solvent flood forecast.

Pulse ultimately decided on a simulation that puts a peak estimated production rate at Niksu D of around 2,000 barrels of oil per day, shooting up to 5,000 when Niksu E is included in the model. In this scenario, Nisku D would begin production and generate cash flow, while the E-pool would follow three years later. Subject to sufficient capital, Pulse has the option to accelerate the EOR program at Nisku E to coincide with development at the D pool.

Significantly, the Nisku pools alone are estimated to contain around 30 million barrels of petroleum initially in place under water-flood, according to independent modelling.

Although Pulse’s acquired lands include proven reserves from different geological formations, the main reason it bought these assets was to tap into the oil still trapped and easily recoverable from one of the zones: the Devonian-aged Nisku Pinnacle reefs, which is a series of over 50 small, but profuse oil pools centered on Pulse’s land at Bigoray. These reservoirs were formed over 400 million years ago, according to the company’s geologist Drew Cadenhead.

Each of the 50 pinnacle reefs in the Bigoray oil fairway contain 10 million to 50 million barrels of sweet light crude, according to the junior oil company. Pulse says 10% of that oil will gush out simply through drilling a well. But the real money lies in Pulse’s plan to employ enhanced oil recovery techniques using what’s called a “miscible” flood to recover the remaining oil.

For the layman, sophisticated EOR techniques using “miscible flooding” involve pumping in a solvent followed by a gas, which loosens up all the remaining oil in the reefs, so it can be sucked out from the bottom of the reservoir.

Pertinently, the company said it will tap its own gas supplies for the enhanced oil recovery program. The Bigoray oil patch comprises at least three gas producing wells.

Pulse Oil’s other asset is in Queenstown and requires shallow drilling. Bigoray dominates the conversation when you are talking about upside, but the Queenstown assets spanning 30,000 acres of land between a proven Canadian sedimentary basin has swung into production from day one. There are five producing wells, and Pulse Oil is banking on the cash flow from the Queenstown assets to partly fund the Bigoray development. The first two wells at Queenstown are now on permanent production, with stabilized output rates, and have initial combined test rates of over 1,350 barrels of oil equivalent (boe) per day.

Inflection points:

  • The Manville assets have near-term production growth potential through low-risk well reactivations, well re-completions and development drilling
  • There’s massive upside potential from the miscible flood EOR project at the two Nisku Pinnacle Reefs at Bigoray, which provide Pulse with a significant cash flow ramp and low risk reserves
  • A detailed 3-D simulation puts a peak estimated production rate at Niksu D of around 2,000 barrels of oil per day, and it shoots up to 5,000 when Niksu E is included in the model
  • Initial testing at Pulse’s two new wells at Bigoray showed strong and stabilizing production rates from the D and E Nisku Pools 
  • On a long-term basis, the Bigoray wells will be used as solvent injectors for Pulse's enhanced oil recovery project 
  • Forecast production will peak within two years of EOR implementation at Bigoray at the Nisku reefs and continue for nearly 10 years, with a cool down period estimated to continue for another 10 to 20 years afterwards
  • There's thought to be over 30 million barrels at the Bigoray project, and Pulse Oil hopes to get nearly 10 million barrels of oil out with its miscible flood enhanced oil recovery project

What the CEO says:

In an interview with Proactive, Pulse Oil CEO Garth Johnson said: “By bringing immediate cash flow from restarting existing behind pipe production, we are funding our EOR plan in the Nisku D and E pools, a low-risk operation with tremendous upside.”

He added: “If our pools achieve the average 80% recovery rate that the other pools surrounding us did, we should recover an additional 10 million to 12 million barrels of oil.”

What the broker says:

Mackie Research repeated a Speculative Buy rating on Pulse Oil after it revealed positive results from its EOR study, and a $0.50 target price (current share price is at around $0.18).

“The results of the geological modeling combined with the encouraging results of the two recently drilled Bigoray wells increases our confidence of the large potential production and cash flow potential that could be generated from the successful implementation of the EOR program,” said Mackie analyst Bill Newman.

“We reiterate our ‘Speculative Buy’ recommendation C$0.50 target price on the near-term production potential from the current drilling programs, and the massive upside potential from the miscible flood EOR project at Bigoray,” he added.

Contact the author Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

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Pulse Oil planning for an enhanced recovery program at flagship Bigoray

Pulse Oil (CVE:PUL) President Drew Cadenhead and CEO Garth Johnson sat down with Steve Darling from Proactive Investors to talk about the work that was done this winter on their projects including their flagship Bigoray and how this set up the big works schedule for this summer. Cadenhead...

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