Jordan Exploration Company, LLC

A white knuckle ride┬áAndrew Pelis invites you to experience the emotional highs and lows that are part of the battle to secure land and prospect for the deepest oil and gas reserves in North America.  Jordan Exploration Company of Traverse City, Michigan, is a privately owned exploration and development firm founded in 1996. The following year saw Ben Brower, now vice president and project manager (on their exciting new biomass renewable energy plant venture) join the company; ÔÇ£We are primarily a production and development company,ÔÇØ he states.┬áÔÇ£We work with geologists and geophysicists to look for a viable oil and gas prospect; we then develop a project by doing land and engineering work. This is very much a rollercoaster business, and you have to be able to handle the downturnsÔÇöand there are manyÔÇöin order to enjoy the upturns.ÔÇØCertainly with oil and gas prices dropping, the last few months have proved challenging for a company that has seen revenues fall 75 percent since last year. Add to that new government legislation to significantly tax the industry, and it quickly becomes apparent that fewer wells are likely to be drilled to make a profit.┬á At present Jordan operates close to 400 wells in North America, with a large focus on Michigan, which has proved most profitable. ÔÇ£Most of our gas is shipped to Michigan Consolidated Gas Company via gas lines, and they refine gas from there to make it suitable for residential and/or commercial use,ÔÇØ says Brower. ÔÇ£Typically when we put together a prospect, we use a network of people who have invested with us before and will put together a wholesale-style cost-plus deal with them.ÔÇØ One of the partners that has worked closely with Jordan in the gas market has been Auburn Hills-based Guardian Industries, which uses natural gas in production of glass and has been able to significantly reduce costs by partnering with Jordan.Once oil has been discovered, it is stored in outsourced tankers and transported to various refineries. While the percentage of sites producing sufficient oil is low, the return is significant if commercial quantities of oil are found, as Brower explains. ÔÇ£With the shallow gas fields known as the Antrim Shale the percentage of success is near 90 percent, but the payoff on oil fields such as the Niagaran Reef is usually much better. We look for rates of return over 15 percent, but itÔÇÖs typically very difficult to forecast our revenue. It may take us four to five years to get a return on our money on a 20-year shallow gas well project, whereas on a successful oil site such as the Niagaran Reef, this can happen in maybe 30 days. ItÔÇÖs just that we find such a lucrative well in maybe only one in ten sites.ÔÇØLong before getting to that stage, a number of significant steps will have already taken place, as Brower describes. ÔÇ£The geologist will develop a prospect. WeÔÇÖll review the project, and if it has merit, weÔÇÖll contract with a landman brokerage company who finds out if the minerals are currently leased. If they are not, he will then knock on doors to see if they can be leased. Once this has all been secured, weÔÇÖll pick a location to start drilling but must first acquire the necessary permits to do so and get funding for the project. Our engineer then looks at the prospect and works on a drilling design scheme and has to determine the most efficient and cost effective way to drill the well.ÔÇØFor a shallow gas well, success may arrive in just two days; however, for the deeper oil wells it can take up to 40 days to determine if oil is there. ÔÇ£If weÔÇÖre successful, we will then test the sample, and if it meets our requirements we can then construct for a facility,ÔÇØ Brower continues. ÔÇ£Once weÔÇÖre in full production, weÔÇÖll receive a monthly check from the gas/oil buyer and send out as many as 10,000 monthly royalty checks to the mineral owners for their share of the revenue.ÔÇØHe cites failure as a real factor in the exploration business. ÔÇ£Many times we find a prospect that we really like that fails to produce. ItÔÇÖs important to stay positive. Certainly 3D seismic technology has played a huge role in developing fields in recent years, and for shale gas it is now more a case of being able to drill cheaply enough, because we know the gas is there. Technological advances have made parts of this business much more cost-driven than exploration-driven.ÔÇØJordan has adopted a policy of building longstanding relationships with suppliers like Halliburton, and Brower feels that this develops a sense of loyalty and trust. Many of the suppliers used are local to Michigan and can be relied upon in emergency scenarios.The company is now embarking on a significant new project to produce a 36-megawatt carbon-neutral power plant that will burn wood chips. ÔÇ£WeÔÇÖre very conscious of the carbon impact of what we do,ÔÇØ asserts Brower. ÔÇ£We have over 50,000 acres of land leased that we can operate wind power on in the future. Additionally, we decided to build a wood-chip-burning biomass power plant to create power for Northern Michigan. In Northern Michigan there are enormous resources of wood, and we can take the CO2 effluent from the stack, compress it and sequester it beneath the surface of the earth to help further extract oil from oil reefs. The state is encouraging greater biomass energy production, and electric utility companies will soon have to use at least 10 percent renewable energy as part of their supplies. This will offer us a new source of income, supply up to 30,000 homes with power and create up to 300 jobs in northern Michigan.ÔÇØThis project has been heralded as a good example of environmental initiative by local bodies. Furthermore, while fluctuating oil and gas prices remain the biggest threat to Jordan, the Trenton oil field project continues to prove successful, and the company hopes to increase its involvement in the Marcellus Shale located farther east in Pennsylvania and West Virginia.Overall, Brower feels there are many reasons to be cheerful. ÔÇ£We consider ourselves very good implementers, though we rely heavily on outside geologists in exploration, and we feel that if there is a big ÔÇÿplay,ÔÇÖ weÔÇÖre able to move quickly to put deals together. We have very good internal communications, operate a small shop and have a wonderful owner, not afraid to take risks. WeÔÇÖre also fortunate to have stable funding partners, outstanding land, accounting and engineering staff. WeÔÇÖve figured out our niche and we try to stick with it.ÔÇØ ÔÇô Editorial research by Sam Howard┬á