HardAssetsInvestor

Mike Norman, Hard Assets Investor (Norman): Hello everybody, and welcome to HardAssetsInvestor.com. I’m Mike Norman, your host. Today my guest is Chris Faulkner, CEO of Breitling Oil and Gas. Chris, thanks very much for coming on the show.

Chris Faulkner, CEO, Breitling Oil and Gas (Faulkner): You bet. Thank you.

Norman: Well, nothing less than a revolution occurring right now in the oil & gas industry, with new technologies, fracking and so forth. You are directly involved in that. Can you give us a little bit of an overview of what’s happening there, this revolution?

Faulkner: You bet. Well, Breitling Oil and Gas is an independent exploration and production company. We target the United States in the various basins throughout the United States, in what now are known as “unconventional resources.” And they are unconventional by their geology, by their characteristics that once they’d been thought to never be producible. These were the source beds for the conventional reservoirs that have powered this country for the last century. And we thought these things were way too tight, they're never going to be able to be unlocked.

Norman: So they knew about them.

Faulkner: Always knew about them, yes.

Norman: They knew they were there. It was just the idea that we couldn’t get to them. But now we can.

Faulkner: Now we can. So everyone understands what we’re talking about when we say “tight,” they have the same porosity and permeability as concrete. So go out and pour liquid on concrete: It’s not going to go through it. It’s going to lay on top of it, or it's going to run off. But we’ve had the onset of two technologies. One is drilling sideways through the rock, to expose the well bore to a huge amount of pay zone. Because when you drill sideways, now, we’re going two miles sideways into these zones. So at 10,000 feet, we’re exposing the well bore to the pay zone. But that pay zone is still too tough to produce.

So with fracking—or hydraulic fracturing stimulation, which is injecting a lot of water, a lot of sand, a little bit of chemical to act as a lubricant into that formation—when it hits it, it cracks it open like an egg …

Norman: It opens it up?

Faulkner: Cracks and little fissures in there. So, like a hardboiled egg, drop it off your counter: It doesn’t explode, it cracks open. All those little fissures now allow for the trapped hydrocarbon, the oil and the gas to flow into the well bore, and to the surface. That has allowed us, now, to reach a tremendous amount of new oil and gas in this country. And we’re on the road to energy independence for the first time since 1953.

Norman: All very exciting. We know about North Dakota, the Bakken field. They're in Texas. Where else?

Faulkner: We’ve got the Permian basin there in Texas, the Eagle Ford Shale down in South Texas, the Utica and the Marcellus in Pennsylvania and Ohio. And now a new play emerging in Kansas and Oklahoma, called the Horizontal Mississippi Plate. And the Mississippi has been a formation we drilled back in the ’50s, but vertically; again, going back and taking that dynamic duo—fracking and horizontal drilling—and unlocking some tremendous reserves in that area.

But to give you an idea, the estimates from the Bakken alone, just one area in North Dakota, and a little bit of area in Montana, and now we’ve found some in Canada: 24 billion barrels of new oil.

Norman: That’s enormous. How about the major players? When you talk about the Exxon Mobils, the Chevrons—are they involved in this?

Faulkner: What’s interesting about it is a lot of folks think that big oil are the ones that pioneer these new basins and these new discoveries. They really don’t. Who drives this are independents, like us and other companies out there, the small guy who’s a risk-taker. He’s a wildcatter, he’s going to go try different things that an Exxon isn't going to waste their time with. Because it might not work, and they don’t have time to sit out there and try new things, because they're working for a stock price, and they have shareholders and want to see returns in that stock going up.

Well, an independent will go out there and take a risk. And then if it does work, what happens is he proves up the play. Then an Exxon will come in, write him a check, and take his company. Because now they know that it works. And there was a great example of that with Brigham, a great company in the Bakken Shale, was just bought by Total, a French company, for about $4.5 billion, because Brigham had some great results in the Bakken was some great acreage. And now Total says, “Thank you. We’ll take that, and all the expertise. And we’ll use it.”