Investor Alert: In This ‘Drill, Drill, Drill’ World, Don’t Forget Enhanced Oil Recovery Firms Like Wavefront, Denbury

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With John McCain, Republicans in Congress and their acolytes on TV screaming daily about the need for more offshore oil drilling, it may not be long before the phrase “enhanced oil recovery” (EOR) enters the political mainstream.

EOR refers to the recovery of “stranded” oil left behind in old wells, primarily via injection of carbon dioxide gas, which forces the oil to the surface. The U.S.’s energy department has estimated that state-of-the-art CO2-EOR recovery techniques make it technically possible to recover an estimated 89 billion barrels of stranded oil in the U.S.

Yeah, that’s a lot, though the catch is that it takes a lot of energy to do the job. Still, with oil prices presently hovering around $120 a barrel even after having fallen close to 20%, investors may want to anticipate greater general interest in EOR, especially since EOR isn’t just a way to increase oil supplies. It’s also expected to be a key market for all that CO2 that coal-fired power plants will increasingly be required to capture under toughening government regulations.

While there are a number of companies involved in EOR, two in particular that may be worth a closer look are Wavefront Energy & Environmental Services, which trades on the TSX Venture Exchange, and Denbury Resources, which trades on the New York Stock Exchange.

Normally, a Big Board-traded firm would warrant the first look, but oil industry insiders took special note of a recent article in Canada’s Edmonton Journal newspaper about how Wavefront’s patented EOR technology “has attracted some impressive financial backers.” The article cautioned that Wavefront is still a small company and that, after much field testing, its technology is “finally” being rolled out on a “limited” commercial basis. But “if” it’s successful, the article went on, then “it promises to enable energy producers to boost oil flows from mature reservoirs, where billions of barrels of crude lie stranded.”

While Denbury’s stock price has fallen along with the recent drop in crude, its EOR production keeps growing year-over-year. Moreover, the company reportedly has a decade-long game plan for further raising EOR output from it various fields under management. If oil prices stay high – and every indication is that they will – Denbury may do quite nicely.




big oil Says:

January 5th, 2009 at 6:39 pmWell, oil dropped, but i still believe that EOR is the best route while it’s around.

Oil Recovery Says:

February 12th, 2009 at 1:10 pmI agree with big oil……..I think EOR is the best route around.



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