Missouri’s own oil patch
You may have seen the stripper wells pumping oil out of neighboring Illinois, Kansas and Oklahoma, but did you know Missouri now has an oil industry of its very own? A Canadian company called MegaWest Energy is drilling into a sandstone formation under Vernon County in southwest Missouri. A Springfield TV station recently reported that the county has seen 135 oil and gas lease filings since December. The KY3 report includes this incredible-sounding, if unattributed, number:
There are reports and estimates, however, that Vernon County may have up to one billion barrels of oil in the area along the Missouri-Kansas border.
The company doing the drilling isn’t exactly Shell or Exxon Mobil. It’s a Calgary-based exploration firm whose shares sold for 73.25 cents today on the OTC Bulletin Board. What’s more, the Missouri project hasn’t exactly made shareholders rich: MegaWest’s shares were trading for more than $2 when it bought into the property last April.
According to MegaWest’s latest SEC filing, the company paid $925,000 in cash and issued 4.75 million shares to acquire the Missouri property. Those shares would have been worth more than $9 million then but less than $3.5 million at today’s price.
Here’s how the filing describes the project’s status:
Our fiscal year 2008 capital budget for the Deerfield Missouri project is US$5.9 million. We have drilled a number of exploration wells. After analysis of the drilling results, a thermal pilot project has been designed and is being implemented that includes approximately 60 development wells over 10 acres. The construction has commenced and commencement of thermal pilot operations may occur as early as the fourth quarter of the 2008 fiscal year.
By the way, I’m grateful to reader John Cahill for bringing this story to my attention. Cahill, who describes himself as an oil-industry veteran, says the formation under Vernon County has been known for decades, but that production wasn’t economical when it was explored previously.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
This doesn’t say how many acres Mege West Energy acquired for $925,000 plus (as I interpret this ambiguous feature of the post) 4.75 million shares of its stock. If they don’t find oil, maybe they could use the land for grazing cattle and make money converting the manure to methane. But I doubt that until the price of oil rises to perhaps $5,000 per barrel.
Rate this post 3 stars because it’s interesting, but not entirely clear.
As I read it, MegaWest has acquired mineral rights but not the land itself. Another SEC filing says it bought “the rights to earn a 100 percent interest in oil development agreements over 7,620 undeveloped acres of land in Vernon County.” The company is also “aggressively leasing additional lands in the area, and to August 28, 2007, have acquired an additional 2,710 acres of undeveloped oil and gas leases.”