History of Uinta Oil & Gas

A Brief History of Uinta Oil & Gas, Inc.

Uinta Oil & Gas, Inc. (UOG) is an independent oil and gas producing company organized and chartered in December 1990 in the Uintah Basin, Utah. UOG was organized for the purpose of acquisition and development of petroleum leases which were undervalued by their current ownership.

UOG identifies leases that have an existing wells which has zones of interest that have not been explored to their full potential, due to errors made during initial drilling or a misunderstanding of potential by the owner. When it comes to exploration, drilling and production, The Rocky Mountain Region is a whole different breed of pup. The Uintah Basin, which is UOG's base of operations, has many leases that meet these requirements. A secondary in field drilling program int he Green River Formation is a hot spot in the United States drilling arena.

The oil boom during the late '70's and early '80's was an interesting game and provided UOG opportunities in the early and mid '90's. Many companies that drilled oil and gas wells during the boom, plugged and abandoned them because they didn't produce enough of what they wanted. A million cubic feet of gas a day wasn't enough, or a 4 foot zone of yellow crude wasn't tantalizing for their investors, but UOG would find these to be a good prospect. Sometimes this information requires extensive research, but can be acquired. The best source of information many times, is word of mouth and if you pretty much know everyone in the patch here, you have an advantage as you also do if you were here during the boom and saw it all.

When a lease becomes available, a detailed study of production, history, drilling and completion records are done to determine suitability and potential. Undeveloped acreage is a significant factor. Those leases deemed suitable are acquired for minimal cost by taking over the liabilities of the lease. Use of the UOG equipment to hold the lease, if necessary, will be done until a rework can be performed.

Some leases with potential are wells with un-perforated zones of interest, high water cut wells where water is produced separately from the oil, wells with formation damage from drilling or completion and wells with high initial production and an unusually sharp decline rate.

UOG began with only two oil wells and grew to include 22 oil and gas leases, wells and properties by 1996, cover approximately 13,000 acres. In 1995 UOG acquired over 10 Tribal leases by assuming low liabilities and providing detailed production and sales audit information to the Ute Indian Tribe going back 10 years, to their satisfaction and the hard work of our research staff.

The majority of leases have 40 acre spacing, that is a well can be drilled every forty acres. If you found that a Section (640 acres) had profitable reserves and zones throughout, you could drill 16 wells. UOG's philosophy is not to over produce a well. It is better to pump a little every day and let the zone recover at an even pace so as not to loose it's formation pressure and to better guarantee the longevity of income, than to pump it dry which leaves you with nothing but a hole in the ground. Although, as pointed out above, the water injection in the Green River Formation is a very exciting project that is extremely successful and has been implemented by a number of large and small oil companies in the Uintah Basin.

The Uintah Basin has many opportunities for oil and gas production. UOG progresses as funding permits, in acquiring new properties and developing their current ones. UOG has also implement a program by which they operate properties for others as an additional sources of income. Uinta will continue seeking opportunities.

UOG was the implementation of one man's dream, Craig K. Phillips, President and CEO. Craig has over 28 years of oilfield experience, from exploration, production, service and reclamation. Craig is a lifetime Uinta Basin resident. Educated at local schools and USU extension service and the best education of all, the patch. He has worked in drilling, workovers, logging, wireline and service businesses from 1970 to 1990, at which time he formed Uinta Oil & Gas, Inc. to acquire oil and gas properties from experience and has been very successful in doing so. He also consults with parties that are interested in getting a foot hold in the Uintah Basin and other fields. He is very qualified and knowledgeable when it come to finding out the history of a lease and or well and has been instrumental in a number of parties acquisitions.

UOG's policy of daily cost effectiveness was achieved in 1993 when it formed its own oilfield service company, Envirotech Well Service, Inc. This company was primarily formed to perform services for UOG to keep the costs of daily operations to a minimum and occasional had the opportunity to performed services for other companies. Through the owning and operating of it's own equipment, UOG could greatly reduce the costs of it's lease hold operations. Many leases, specifically those under the jurisdiction of the Ute Indian Tribe and some Federal, may be held by production. In other words, the well needs to produce saleable quantities of oil within a time period specified in the lease. Many acquisitions are obtained for a very low costs because they might not have all of it's completion equipment. But UOG has solved that glitch by having it's own swabbing equipment. Thereby enabling UOG to produce the wells and sell oil and gas products.

Crude Oil

There are two types of oil produced in Duchesne and Uintah Counties, black wax and yellow wax. Due to the high quality of the wax contained within the yellow crude the price is generally $1.50 to $5.00 higher than the black wax. Fuels produced here are desirable because they contain no air-pollution-causing sulfur and is even above the strictest California fuels. There is also a greater demand for the yellow crude. The closure of the Pennzoil Refinery in 1994, which was located in Roosevelt, Utah, caused transportation costs to increase since all crude had to be shipped to Salt Lake City refineries 150 miles away and dipped slightly into ours and other companies profit margins. With the advent of the purchase of the old refinery by Inland Resources that will change drastically. Inland is planning on investing $130 million to upgrade the present refinery. It should be able to handle 15,000 bo/d of Uintah Basin Black Wax Crude Oil. Since companies that have the means to refine this crude are limited in the Salt Lake area, this would be a boost to the majority of producers in this area. The refinery is expected to be in full operation by later part of 2000. Inland is also planning on constructing a new pipeline which would greatly reduce the tanker traffic on local highways from Roosevelt to Salt Lake City. This is a benefit to all Eastern Utah residents. It is estimated that over a large portion of the products produced at the new refinery will be used within a 100-mile radius of Roosevelt. Of course, many products will go to Salt Lake, but it has been stated that we won't be bearing the cost of producing the crude here, sending it to Salt Lake and paying for the costs to get it back. Our current gasoline prices are about $1.10 at the pump.

Natural Gas

The demand for natural gas nationwide has been slightly lower over the last year or so, due to the mid winters on the east coast, although it can't stay that way forever. New pipelines being laid in the Uinta Basin means a greater access to markets for many wells which had no market in the past.
Gary Energy Corporation, which purchases the bulk of UOG's current natural gas production, pays a little above the general market price. Most short term gas production have been sold into this system.

New gathering systems have become available in the recent years, which will enable UOG to market gas from wells that are now vented. With a stabilized production of natural gas will come the ability to negotiate for a better price.

Since the majority of UOG's wells are produced primarily for oil with gas being a by product of that production, UOG's associated costs on the gas produced in minimal and mostly profit.