In just one example, the lead developer of the Mississippi Lime formation in Oklahoma and Kansas, SandRidge Energy Inc. (NYSE:SD) , has spent nearly half a billion dollars to drill 116 disposal wells and install 700 miles of wastewater pipeline. For SandRidge Energy Inc. (NYSE:SD), its disposal system is the most effective way to manage produced water and a key to controlling its costs as it ramps up its oil and gas production. Given the company’s financial situation, potential earthquakes are not a risk that it can afford.
Furthermore, while earthquakes are a major concern for wastewater disposal wells, the risks don’t stop there. EXCO Resources Inc (NYSE:XCO) , for example, was fined over $150,000 after it was found that an underground pipe at its wastewater disposal well in Pennsylvania was leaking. This disposal well was located in a sparsely populated area and didn’t cause much harm. However, it highlights another major risk faced with disposing of the wastewater, a risk that could be heightened by the fact that wastewater disposal is not a core business for most oil and gas companies.
Whether or not wastewater disposal does indeed cause quakes, I think we can all agree that it is a risk that needs to be better managed by the industry. One company sees these risks as an opportunity, and it’s stepping up to the plate and presenting a better solution to the industry. Heckmann Corporation (NYSE:HEK) offers oil and gas producers a comprehensive environmental solution, which includes the delivery of the water required for drilling, its collection after it has been used, followed by the treating and recycling of as much as possible, and then the disposal of the remains.
While the company does own 46 disposal wells, the goal is to have less water disposed and more treated and recycled. Last year the company bought a stake in a wastewater treatment and recycling facility in the Marcellus and has plans to expand its capabilities in treatment and recycling. It can then replace the need for fresh water in the drilling process by using this recycled water. That means less produced water is making its way into disposal wells.
Because of its now nationwide reach, and the risks involved with disposal, more exploration and production companies are likely to contract with Heckmann’s cradle-to-grave approach to water management. As this happens we will see more producers move away from simply disposing of produced water and instead treating and recycling as much of it as possible. Heckmann is the one company with the best position to deal with this problem, making it the one company with the resources to eliminate the one risk that makes energy companies quake.
The article 1 Big Risk That Has Energy Companies Quaking originally appeared on Fool.com is written by Matt DiLallo.
Fool contributor Matt DiLallo owns shares of Heckmann. Matt DiLallo has the following options: Short Jun 2013 $4 Puts on Heckmann. The Motley Fool owns shares of Heckmann and has the following options: Long Jan 2014 $4 Calls on Heckmann and Short Jan 2014 $3 Puts on Heckmann.
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