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Los Angeles Oil Editor’s Note: Today we have an article that you wouldn’t normally find in Penny Sleuth. Energy expert Byron King brings a unique look at how old oil meets new technology in one of the last places you’d expect to find it. This article originally ran in our sister publication, The Rude Awakening. We hope you like it, because there will soon be some big news from Byron in the small-cap world. More on that later… Oil of L.A.
The famous and geologically fascinating La Brea Tar Pits of Los Angeles have been bogging down, trapping and preserving unwary animals since Pleistocene times. On one wall of the museum at La Brea, there is a display holding the skulls of 1,600 dire wolves, the remains of predators from long ago who thought that they spotted an easy meal trapped in the tar. But the predators quickly found themselves stuck in the goop and fast departing the gene pool as well. Nature had laid an oily trap for the complacent alphas at the top of the food chain, a message that probably has some contemporary meaning. And within the archaeological past, the record is that for something over 10,000 years previous to our modern era, the ancestral Native Americans of SoCal collected oil from seeps. These proto-Californians did this in much the same way as did the Seneca tribes of what later became Pennsylvania. The Indians used the tarry oil to waterproof baskets and preserve rope and fishing lines. *********************************** The 100% Profits Pledge Since August 2004, one analyst has been right on every single pick. Not in a little way either… His readers averaged gains of 103% on his weekly picks. So here’s the pledge: If at least 12 of his recommendations don’t gain 100% or more in your first year, we’ll refund your entire subscription cost. Believe me, this service pays for itself in just a matter of weeks if not days. So, check it all out here if you’re interested in gains of 472%, 528%, and even 740%. *********************************** The first "modern" oil well in the Golden State was drilled in Northern California in 1861, a mere two years after Col. Drake pounded down his hole at Titusville, Penn. Things slowed down during the Civil War, but by 1866, oil was being produced in commercial quantities in Humboldt County, north of San Francisco. Speculators bought leases, tore down houses, erected derricks, and began to produce the oil from shallow rock formations. Parts of Los Angeles began to resemble a forest of derricks that rivaled any oil boomtown from back East. The coastline, along what would become the Pacific Coast Highway, was in many areas a line of oil derricks. California was on the oil prospector's map. Oil exploration in the early days of the 20th century pretty much consisted of prospectors following the shows and seeps and drilling the obvious structural features, particularly the folded rock sections called "anticlines." Fortunately for the early prospectors, the Los Angeles sedimentary basin is among the richest oil provinces on the planet, and is filled with shows, seeps and anticlines. Because of the thousands of geological entrapments, there are hundreds of lifetimes worth of geologic and other scientific studies just in the Los Angeles Basin alone. And there is a small army of geologists, engineers, and other researchers who do exactly that to earn their daily bread. So Los Angeles is not all just movie stars and fancy divorce lawyers. It is a scientific treasure house. With many people following in the oily footsteps of Doheny, by the 1920s and 1930s, there were numerous oil and gas discoveries in Los Angeles that were, by any standards, simply immense:
The Signal Hill oil field, for example, east of Long Beach, was discovered in 1921. The original reserve volumes are estimated at more than one billion barrels, and the number will never really be known, due to poor record keeping over many decades up until the 1950s. Early in its development, the locals called it "Pin Cushion Hill," due to the literally thousands of wells that went down to produce oil. The place had more wood on it than many mountains of the Sierra Nevada; the trees of the Sierra Nevada were cut down and used to erect derricks and pumping facilities. Today, the oil operations are still being carried out by a company called, appropriately enough, Signal Hill Petroleum Inc. Oil wells are located side by side with $1 million homes, and peoples' backyards have easements crossing them for gathering pipelines and water injection lines. Unlike in the past, however, the modern operations are pumping large volumes of water to obtain the relatively smaller volumes of oil. Still, this pays for itself, and overall produces quite a bit of petroleum. *********************************** Bloody New "Backlash" Set to Rocket Oil Past $150...and Send Gas Soaring to Over $6 per Gallon And when it comes to oil, gas, energy, war and politics, I think I can politely tell you — I know what I'm talking about, and things are bad… But its not all gloom and doom for a select few. My Outstanding Investments readers have been able to make a killing: 320% so far on Tesoro Petroleum...530% so far on Suncor Energy...and another 562% and climbing on Valero... I just introduced my readers to another opportunity that could be even bigger… To get your cut of the profits before this new backlash breaks out, check this out… *********************************** The Wilmington Oil Field, for another example, discovered in 1936, is utterly gigantic. It stretches from Torrance in the northwest to offshore Long Beach and farther to the southeast. It is 16 miles long and four miles wide, with original reserves of over 1.4 billion barrels onshore and 1.2 billion barrels offshore, for a total of 2.6 billion barrels. Oil-producing beds have been located at depths between 2,000-10,000 feet, and there are probably additional oil-producing zones that have not been accessed. The field may extend to the southwest, under Pacific Palisades, but we cannot say for certain, because there has been little drilling in that pricey locale over the years. The homeowners in the area have kept the drillers out. Again, much of the original oil has been removed, but there is still a lot left to recover. There are other oil fields in places that are well known to many people familiar with Los Angeles, but the locales are not exactly known for their oil production in the public perception. There are oil fields beneath such high-end locales as Huntington Beach, Newport Beach, El Segundo, downtown Los Angeles, Century City, Cheviot Hills and even Beverly Hills. Beverly Hills High School has oil wells right next to the football field. One drill site with more than 60 wells, drilled directionally to as far as a mile from the surface entry and casing, is located in what looks like a 10-story office building, all of two blocks from the Beverly Hills city line. All in all, there are 55 known oil fields in the Los Angeles area, with something over 30,000 producing wells and an equal number of older, plugged, and abandoned wells. (There may be far more than 30,000 wells, but the number is not known, due to poor record keeping in the good old days.) Something like nine billion barrels of oil has been extracted from the rocks over the past century or so. Much of the contemporary oil production involves pumping "oil-stained water," but as I noted above, it adds up to quite a bit of extraction per day. There are probably more oil fields that could be found beneath the streets of L.A., because almost all of the past exploration in the urban part of the basin was performed before the mid-1960s. By the late 1960s, the public perception of the oil industry had turned negative, and even the likes of the well-connected Armand Hammer and his Los Angeles-based company Occidental Petroleum could not get drilling permits in most parts of the Los Angeles region. So the past 40 years have been a time of oil companies extracting product from existing wells, maintaining what wells they have, and very occasionally extending or redrilling an aging well. There is virtually no "modern" seismic work going on, and very little drilling. Even redrilling old wells takes a lengthy permitting process, and there is quite a bit of political opposition from people who don't think twice about turning the keys and starting the engines of their nice cars. *********************************** "The Biggest Resource Breakthrough Since the 'Beaumont Miracle' of 1901" 64 publicly traded companies are already deeply invested... Insiders are already raking in as much as $205,421 per day... But only one of these cutting-edge companies offers you a "secret wealth advantage." I reveal it right here… *********************************** The potential for new oil discovery is there, though. There is really no way that the early oil exploration found all of it. The hydrocarbon traps are far too subtle and stacked, deeply buried, and truncated by extensive faulting and permeability pinch-outs. So the older forms of exploration found only the obvious deposits, not the more clandestine deposits. In the modern oil industry, advances in the field of sequence stratigraphy, structural modeling and seismic methodology, coupled with directional drilling and what is called "extended reach drilling," have made it possible to find and extract such deposits. And it would be quite possible, from a technical standpoint, to drill the oil deposits even in a built-up urban area such as Los Angeles. But these oil deposits will probably never be drilled, due to modern city development, coupled with NIMBY attitudes and political opposition…at least not until the price of crude oil soars to levels that very few investors can imagine… Until we meet again... P.S.: In two days, Agora Financial and I will be launching a brand new service for the elite investors only. This new service, Energy & Scarcity Investor, will cover every type of energy investment and mainly consist of small, hidden companies. In fact, everyone that signs up during the next few weeks will receive a special report that includes at least seven penny-stock picks all trading for under $10 with the potential to be the next Exxon Mobils … So, be sure to keep an eye out for a special report describing it all with much more detail. As always, we’ll keep you informed… |
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| Byron King practiced law for many years in Pittsburgh, Pennsylvania, where his efforts were focused on litigation, bankruptcy and other oft-contentious matters involving people and money. Byron seldom writes a letter to the editor of any newspaper, because “some newsroom intern might screw up and print it.” But in a moment of weakness Byron once sent a note to Bill Bonner, publisher of the Daily Reckoning. Things happened. Fate intervened. Byron is now a co-editor of Outstanding Investments. |
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