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How Richfield Oil & Gas Creates a Unique Value Proposition

Richfield Oil & Gas Co. (ROIL) seems to be in a rare sweet spot in the oil exploration and development industry. Along with its steady production from its Kansas properties, which in of itself

Richfield Oil & Gas Co. (ROIL) seems to be in a rare sweet spot in the oil exploration and development industry. Along with its steady production from its Kansas properties, which in of itself is a rare find, the company also is positioned to hit a major home run with its very promising properties in Utah.

Along with those assets, Richfield Oil & Gas also has built a team of experienced experts that have been successful in finding major payloads before. To get a better idea of where the company currently stands and the prospects for growth, we spoke with Douglas Hewitt, Chairman and CEO of Richfield Oil & Gas.

EQ: Can you start off by giving us a brief overview of Richfield Oil & Gas?

Hewitt: Richfield Oil & Gas is a Salt Lake City based oil and gas company. We are involved in both exploration and general production of lower-risk types of reserves. We were incorporated in Nevada in April 2011, and have about 10 projects operating in a number of properties in Kansas, Oklahoma, Utah, and a small property inside of Wyoming, through two wholly-owned subsidiaries, which are all licensed, bonded, and insured.

The primary focus of the company is to develop the low-risk opportunities that we’ve identified inside of Kansas. I actually began my career there in 1985 with the acquisition of over 100 wells, and I have stayed actively involved in the mid-continent during that whole period of time. Our focus has been the mid-continent areas of Kansas and primarily right now in Oklahoma in a number of different fields. Our higher risk operations would be our Utah properties where we had a recent discovery and a number of major multi-billion barrel type targets that fit into a portfolio of both downside protection and upside possibilities.

EQ: Can you tell us more about your current projects and the company’s properties?

Hewitt: Kansas is basically broken into basically two sets of different properties. It would not be fair to talk about Kansas without saying that we’re currently looking at some acquisitions and are moving to agreements on both of those. We have approximately two fields inside the central Kansas uplift, one in Gorham and a smaller project inside the Trapp field. We have a number of wells and we’ve begun doing some work on those but still have a tremendous amount of work yet to do. There are a number of objectives there with a number of opportunities for increased production. Of course, we also have our other properties, some of which are currently under development right now. We have tremendous amounts of Mississippian production around us, and it has some Simpson and Arbuckle formations. We’re currently pursuing a plan to develop the Arbuckle zone with what is called hydrostatic reduction. It’s a temporary reduction of the hydrostatic head of the water that’s in these systems. We’re actually developers of that methodology.

Hewitt Energy Group was a developer of that technology since 1991, and since that time it’s been a technology that has created a lot of success for a lot of companies. You pump a lot of water and produce, and then you dewater the zones, and sometimes you only dewater these zones temporarily, but what you do is you create a hydrostatic drop around the reservoir system and then you begin to put it into production. Your oil cut generally comes up in a year or two years.

So we have those projects running currently inside three fields: Perth, South Haven, and Koelsch. We expect to have ongoing results with those over the course of the next quarter.

EQ: Can you tell us about the potential of Richfield’s Utah project?

Hewitt: In regards to Utah, we had a discovery inside what we call Liberty #1. Approximately 1,000 feet has been evaluated as possibly pay. It is a complex environment and it is extremely fractured. The oil that’s in the system is Mississippian oil and it’s in pristine condition. It’s also moved in what we believe is kind of both gas and oil and it’s been kind of tricky to produce, almost like a retro-condensate. We’ve established it in the original well as well as in the sidetrack that we did. We believe the potential is 60 million to 100 million barrels. With that discovery, we also believe it is the tip of a major iceberg. We plan to do another drilling inside of that field to get down to the actual Mississippi reservoir structure down there.

In order to understand the potential of the Utah project, you have to understand our premise and how we put it together. During the Mississippian time period, the shale known as the Mississippian Chainman formed and it stretches from the eastern desert of Nevada to the western deserts of Utah. Inside of that, the United States Geological Survey has estimated between one trillion to three trillion barrels of oil was generated during that time. Those are very significant numbers. I don’t know one major oil company that hasn’t come to Utah to search and find where the oil has moved through. There’s approximately 65 billion barrels of oil that has showed up in Eastern Utah from this Mississippi time period. Doing simple math, you can figure out that we’re all missing a lot of oil.

So it wasn’t until Richfield drilled our well inside Liberty #1 that actual pristine, native Mississippian oil was found. We found it as high as 3,000 feet from surface and Mississippian is structurally higher at about 9,000 feet. It actually moves to the east, and from this Liberty project, we move 16 miles east and have about 15,000 acres over in what we call the Freedom play. It’s by a little town called Freedom in Utah. We’ve conducted extensive seismic and geological research to try and find these plays without drilling. So with the extensive amount of seismic that we have done, we’ve identified three major structures that are buried somewhere between 6,000-13,000 feet. The Mississippian is at about 16,000 feet. So the geocam results that has surfaced is actually unbelievable.

What everyone wonders about these massive structures when you find them on seismic is whether or not they’re filled with any oil. So with us having identified the migration of Mississippian oil in its current migration, which has moved through the Liberty and has show up in central Utah, that qualifies as a highly probably drilling location. We also have several thousand acres near that area, and they’re positioned on top of a highly fractured shale. So we have followed that trend for a ways and we have come up outside of that trend area with a major project, which we have recently done with a very well known oil and gas group that has yet to be disclosed. We have withheld the information, but the size of the project will be in the hundreds of millions. We own a piece of that and more information will be forthcoming within the first quarter of the next year.

EQ: You’ve categorized Richfield’s value proposition as low-risk oil and gas development. Can you tell us more about that?

Hewitt: Our oil and gas development opportunities are primarily inside of Kansas. We anticipate with the next $4.5 million, we will generate about 700 to 800 barrels a day of production. That is mostly from drilling and developing existing engineered assets inside of our oil and gas properties inside of Kansas.

EQ: That, combined with the potential of your Utah projects, positions the company as a stable operation with the possibility of higher rewards. Is that a fair characterization?

Hewitt: When you look at our company and you understand who we are, we represent a lot of experience inside of Kansas. Our team is made up of people who have been in the oil business their whole lives. When you look at our Kansas operation, we’re very comfortable in our environment there because we’ve been working around those areas for over 20 years.

As for Utah, the team that had a tremendous amount of success in the 1970s and 1980s was part of a company by the name of Chevron (CVX). This Chevron team, which included Paul Lamerson, Frank Royse, and Monty Hoffman as well as other individuals, discovered well over two billion barrels of oil. This same team now works with us. They represent our exploration team inside the state of Utah. Most of these guys leave the major oil companies and say they missed the best stuff. Well, right now we’re currently leasing up all of the old Chevron’s “best stuff.”

EQ: The company is in the process of going public. Any comments on that?

Hewitt: We’re currently in somewhat of a quiet period before we go public, but everything we have filed is already public. We anticipate we will be trading very soon. We’ve received the no comment letter from the Securities and Exchange Commission. We waited for a time period and we filed our other request with FINRA so we are currently in the waiting process to go ahead and give us our trading symbol. We’re anticipating that at this point any day, and we will trade very shortly after that on the OTCQB for two days, and then move to the OTCQX Premiere. That status means we’re vetted alongside other companies that are fully reporting and have billion dollars of value. Being an OTCQX Premiere company denotes a well-established status.

EQ: What does the company plan to do with the proceeds from going public?

Hewitt: We have a certain amount of assets that we can spinout to capitalize ourselves but it’s our decision at this point that the best thing for us to do is to raise capital. We have not disclosed who our investment banking partner is just yet. That will be forthcoming because it has tremendous implications for this company and the future value of this company. We’re currently working on putting together a $50 million package, which we have not yet signed but have already began working on appropriate forms with the SEC in preparation for a completion of our agreements with this investment banking group.

EQ: What are some major milestones or upcoming goals that you’d like to highlight?

Hewitt: We are currently starting some production activities in a couple of our fields, but because we’re minimally financed at this time, we don’t expect any major announcements. However, we do expect some announcements on some conditional acquisitions and conditional financings as earlier discussed. Also, there will be some releases in regards to field operations that is currently underway.

EQ: Any closing comments?

Hewitt: Most people, when they look at this company, are going to look at what our downside protection is and what our upside opportunity is. They’re going to try to read our management and prospects to see how real it is. I want to reiterate that the people we have here working in both our infield and simple production activities inside of Kansas, as well as our larger opportunities that are occurring in Utah, the groups that are doing this are the same people that found billions of barrels of oil for Chevron. I just want everyone to understand and know that this is a company that believes we have identified billions of barrels. We anticipate through the next several years of proofing them up through development of the projects that we have and the projects that we’re currently acquiring. So we’ll continually inform our shareholders and the investment community of these accomplishments in their various stages of development.

As the markets put the debt ceiling debacle in the rearview mirror, more than a few issues remain open.