Resource World Magazine

THE OIL PATCH REPORT Joe l C hur y NXT Energy Solutions finding oil from the sky O il majors are beginning to take flight, and are taking a bird's eye view of their assets. If you were to look up and see airplanes, seemingly crisscrossing above, you may very well be in the path of a first-stage exploration program in progress. The process is called Stress Field Detection (SFD), and it's quickly becoming widely accepted by industry as the new first step in finding oil. Typically, it's been the norm for companies to begin the exploration process by stringing out seismic lines over vast land positions. Though not replacing seismic, per se, SFD can drastically reduce the amount of line-km of seismic required. The process identifies and ranks highpotential oil reservoir leads using unique airborne surveying technology wired into a small jet. As luxurious as that sounds, it's actually saving companies millions. "SFD can identify the best oil and gas prospects in a tenth of the time, and for one-tenth of the cost of seismic," says George Liszicasz, Chairman and CEO of NXT Energy Solutions Inc. [SFD-TSXV], the exclusive inventors/owners of the SFD technology. What started as a device being driven around in a van between the legs of its inventor, became far more intriguing once it literally took flight. "We put George into an airplane for the first time over 12 years ago, and found it to be a great initial locating device," says Peter Carwadine, former VP of Encal Energy (later Calpine). The Encal team was the first to use SFD to map out areas in Western Canada, long before it hit the international stage. "With the client base that they've secured, it appears that his company is gaining momentum. I think the world is now open for new tools to be used to explore remote areas." Since mastering this technique, NXT's client list has become an admirable roll 72 www.resourceworld.com A company's profitability is directly affected by how smoothly it can identify targets. The longer a company takes to narrow down drilling locations, the more expensive the program. call of big players, including: British Petroleum (BP), Petróleos Mexicanos (PEMEX), Pacific Rubealis, and Pengrowth Energy. Covering massive distances, over difficult terrain, has become NXT's bread and butter. In flatter, easier parts of Alberta, it may not save as much money when compared to seismic, but in hilly terrain of Colombia, seismic can cost $30,000 per line-km. SFD can be performed over the same terrain for $1,400 per line-km. A conservative exploration budget of $3.5 million would net you only 115 linekm with seismic, whereas with SFD, that same money could return 2,500 line-km. This is significant. It is why large stateowned producers such as PEMEX and EcoPetrol (Colombia's state-owned oil company) are working with NXT on their larger underexplored areas. A successful run in Colombia and Guatemala brought the company $3.5 million in revenue, and an ongoing campaign in Mexico is set to wrap-up in Q4 of 2012 for $5.8 million. Those are numbers that will impress the investor. What's more important is what will impress future clients. If the company can consistently repeat its perfomance in Colombia, the industry will be knocking on their door. Between May of 2009 and July of 2012, NXT flew over Colombia and recorded data for their client; SFD identified 11 lead areas that led to drilling. Of those, seven were successful, resulting in four oil pools with an estimated 1.26 billion barrels of oil in place. That's approximately $20 billion worth of recoverable oil all spotted from the skies over a three-year span. It should be noted that eight wells were also drilled, against the recommendation of the NXT data analysis that were within the survey lines mapped out by SFD. All eight of those returned dry holes. If SFD truly becomes the norm, in the future, those dry holes would not have been drilled. A company's profitability is directly affected by how smoothly it can identify targets. The longer a company takes to narrow down drilling locations, the more expensive the program. Hefty exploration costs can mean the difference between receiving operating netbacks of $80 per barrel, and $60 per barrel. The total amount spent on global geophysics in 2010 amounted to $12 billion out of a total $447 billion spent on exploration and production. Just 1% of that sector amounts to $120 million; NXT wants to capture up to 0.33% of that market share by 2014. With each flight, NXT also accrues more data to sell at a later occasion, creating multiple revenue streams. But, the most important factor for NXT's success will be in its acceptance in the industry. Capturing the attention of PEMEX, which is the fourth largest explorer on the planet, does a lot to boost confidence. As it currently stands, the company is debt-free with $4 million in the bank, and ready for expansion. n DECEMBER 2012/JANUARY 2013

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