Photo credit: Anadarko

Three years ago we thought that the oil locked deep beneath the Gulf of Mexico would need to just stay there. With the Macando well spewing unstoppable amounts of oil into the Gulf, many questioned whether accessing that oil was worth the risks. With the leak now plugged and the drilling moratorium long since lifted, the Gulf's oil industry has not only fully recovered but is about to shift into overdrive. While oil companies like Anadarko (APC) and Chevron (CVX 0.18%) will get most of the press for leading this move, both need help to get the oil out. This is where two oil-field technology companies are quietly solving some of the main challenges to unlocking the Gulf's oil riches.

Oil companies are drilling to incredible depths to access Gulf oil. For example, Anadarko and Chevron, which are partners on the Coronado discovery in the Lower Tertiary drilled that well to a depth of 31,866 feet in 6,127 feet of water. When a well is drilled that deep it encounters ultra-high pressures and temperatures that make extracting the oil a real technical challenge. Without help to optimize these wells less than 10% of the oil that is there will be produced. That is a far cry from the global average of 35% of the oil being recoverable.  

That's key for two reasons. It means that when Chevron goes to book the reserves from the Coronado discovery it can only book its share of the resources based on a 10% ultimate recovery. Not only that but when Anadarko is making investment decisions on how to develop Coronado, it would be forced to run those numbers under the assumption that only about 10% of the oil that's there would be recoverable. 

This is where oil-field technology companies like Core Labs (CLB) and CARBO Ceramics (CRR) are stepping in to deliver solutions. The products and services the two have developed are designed to help oil companies maximize the recovery of oil from these reservoirs. This has the potential to add incredible value for the Gulf's producers because as recovery improves so do returns.

CARBO's innovation is a new ceramic proppant designed to withstand the pressure that's found in these deep wells. As the slide below indicates, because of its strength it is the only proppant that can handle the job.

Source: CARBO Ceramics Investor Presentation

The key here is that these proppants don't crush under pressure. That enables them to stay a uniform shape so that oil can flow through without its flow being restricted by the pressure crushing the proppants closer together. That both enhances the estimated ultimate recovery from the well in addition to enabling higher initial production. Both of those factors unlock more value for producers. 

Meanwhile, Core is attacking the problem of understanding the reservoir in order to manage it for maximum production and recovery. This can include recommending well placement and suggesting that natural gas be injected into the reservoir to maintain pressure so more oil flows out. By managing the reservoir, Core is able to help oil companies get more oil out of it. Chevron, for example, sees injecting natural gas for enhanced oil recovery, when combined with other technologies, increasing its oil recovery to more than 20%. That means that Chevron and Anadarko can book twice the reserves and earn an even better return for its investors.  

The days of easy oil are over. Technological solutions like those provided by CARBO and Core are what will really drive incremental oil production. With oil priced in excess of $100, every additional barrel produced means more profits for oil companies. So, while both Core and CARBO are relative unknowns to investors, both could be very important companies as the world begins to extract increasingly challenging supplies of oil in places like the deepwater Gulf of Mexico.

The Days of $100 Oil are Here to Stay