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DHI's Value Proposition |
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DHI's approach follows a disciplined and new
water management philosophy. DHI will acquire the best natural
gas properties that are Down Hole Gas and Water Separation
(DGWS) candidates and employ DGWS technology to develop hidden
upsides. DHI will use the DGWS technology and innovative solutions
to create a major advantage in unlocking unlimited opportunities.
As a result, gas production will grow, reserves will grow,
and the value of DHI will explode while at the same time water
production will disappear and lease-operating expenses will
decrease.
DHI will acquire properties located in the major producing
areas of the United States and Canada. These properties typically
have been productive for many years and often have been owned
by major oil companies. Most importantly, the properties are
expected to produce gas for many years to come (referred to
as "long-lived" properties) which makes them low-risk
by nature. However, the introduction of higher water production
rates coupled with an inadequate water disposal infrastructure,
environmental concerns, climate, regulatory issues and relatively
high water treating/disposing costs contribute to acquiring
these properties at a relatively low cost. These assets exhibit
a common set of characteristics:
- Proven gas and water production history and performance
with corresponding production decline rates.
- Relatively low acquisition and work-over costs
that maximize profit margins.
- Geologically complex reservoirs that offer up
additional potential - reservoir factors.
- Development opportunities and extensive upsides
that promise to increase reserves.
- Fits a stringent DGWS candidate well profile.
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The advantage of acquiring properties of this type is that
they have established production histories which makes it
much easier to forecast future production.
The chart below illustrates the natural decline in production
that one would expect from a typical well. Note that in the
early life of a well production is at its highest, but the
rate of decline is very steep and difficult to estimate. The
intersection represents the point in a well's life at which
DHI would normally acquire it. Note that the future expected
rate of decline is much more gradual. Through this combination
of acquiring mature gas properties in well-established areas
from quality operators, DHI will have a very stable, predictable
base of production that should be economically advantageous
for many years to come.
DHI seeks to increase production and reserves through low-risk
means including the reduction of lease operating costs, the
elimination of surface water treatment and disposal costs
and the lessening of recompilations and development drilling.
By increasing production or lowering the rate of production
decline by eliminating the dilemma caused by produced water,
DHI is able to generate cash flow that is over and above the
forecast used to acquire the reserves.
In addition, after pay out, future field development can become
a tax shelter, including depletion allowances and other tangible
tax incentives.
From the inception of DHI's DGWS technology in 1995, DHI's
strategy has been successfully proven in many wells. DHI is
now ready to exploit its technology and build a successful
Development and Production Company with Water Management.
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