Reworking Wells, a Profitable Endeavor

   In a Forbes article from January of this year on the reworking of old oil wells and the success of Energy XXI (EXXI), it highlights how even a long producing well can be discarded by one of the giant oil producers like Exxon Mobil (XOM) and reworked for a profit. Energy XXI is not alone, several other oil and gas exploration companies, like Lucas Energy (LEI) and AER Energy Resources (PINKSHEETS: AERN) are using this model.

The article highlights how a tract of old wells, some producing upwards of 50 years were discarded by Exxon and reworked, resurveyed and are now producing 1500 barrels of oil per day. With oil prices still at or above $100 per barrel, this is becoming an increasingly lucrative way of exploring and extracting oil.

As the Washington Post article from yesterday highlights, "The U.S. remains the world's biggest oil consumer, but government data show that demand is growing the most overseas in developing countries like China." This, along with tensions in oil producing countries like Iran, could make the model of reworking older wells a more common practice among smaller exploration companies.

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