ProDril successor lands in bankruptcy

CODY, Jun 11, 2009 (Billings Gazette - McClatchy-Tribune Information Services via COMTEX) -- PDRT | Quote | Chart | News | PowerRating -- A company that had promised to pay up to $67 million in royalties from earnings to hundreds of ProDril investors, including many in Park County, has filed for Chapter 11 bankruptcy protection.

Particle Drilling Technologies of Houston stated in a filing last week in federal bankruptcy court that it had $2.9 million in assets and liabilities of $1.4 million and that the company has located an undisclosed potential buyer.

The company said in a May 27 statement that it would cease operations and fire eight employees. Shares of Particle Drilling, which in 2005 had traded above $7, closed Wednesday at 3 cents in over-the-counter trading.

The company has not been able to profitably market its product to industry, and therefore it never paid royalties to ProDril investors. Public financial filings show that Particle Drilling was funded mainly through sales of company shares and was unable to cover operating expenses as its stock price sank.

Particle Drilling in 2004 purchased patents on proprietary drilling processes and technology from ProDril, a privately held Cody company that had sought to develop the technique as a way to reduce costs in drilling through rock during oil and gas exploration.

Three former ProDril executives pleaded guilty in 2006 to federal felony charges of conspiracy to sell unregistered securities.

David A. Nall and William D. "Dan" Elsom were each sentenced to four months of home confinement and fined $2,000, while ProDril founder Harry "Hal" Curlett was sentenced to four months in federal prison and fined $5,000. No restitution was ordered.

Dozens of Park County residents and hundreds more from across the country had invested in ProDril, banking on the company's plans to develop and market its drilling technologies for use in oil and gas exploration.

But despite spending what Curlett has said was a total of about $18 million between 1992 and 2003, the company was never able to perfect or commercially market its technology, leaving some Wyoming investors feeling burned by what they saw as hype, mismanagement and deception from ProDril insiders.

According to a recent regulatory filing, Particle Drilling had 19 employees at the end of 2008 and had spent more than $45 million since its formation in 2003 in developing the particle drilling system.

Butch Hazel, a Cody electrical contractor who had invested in ProDril and Particle Drilling, said he was disappointed that the technology has not been successfully commercialized, despite the millions invested.

"With all that money spent, obviously, somebody thought it was a good idea. It wasn't just smoke and mirrors," said Hazel, who also worked to develop improvements to the drilling method and had sought a patent for his work.

"We had come up with another way to handle the metal particles," said Hazel, adding that he lost money by investing in ProDril and felt bad about promoting the company to friends.

"It's a great idea, and it wasn't the first time this idea has been pursued," he said of particle drilling, which employs a high-speed blast of hardened steel ball bearings to strike rock millions of times per minute ahead of the drill bit.

"The delivery system is the really critical part, and it's been proven beyond a doubt that when the system is working, it can increase drilling speeds by up to four times, but we never had a consistent shot-delivery system," Hazel said.

Curlett said in 2006 that there was a "significant potential (ProDril investors) are going to get their money back" through royalties paid by Particle Drilling.

It is unclear whether that royalty agreement would remain in effect if a new buyer acquires the technology.

Deep heat Curlett had retained the patent rights to use particle drilling for geothermal energy exploration, and he formed Deep Heat Energy Corp. for that purpose.

Public records on file with the Wyoming Secretary of State's office show Deep Heat Energy was administratively dissolved in June 2007.

Public records on file with the Park County Clerk's office show a lien filed in May 2007 by the Wyoming Department of Employment for unpaid unemployment taxes that now total $1,206 with interest.

Terrawatt Corp. is a Houston-based company that in 2006 had employed Curlett as its technology director and had opened a Powell office for developing an experimental geothermal energy technology.

Curlett said in 2006 that the venture had the potential to produce "literally unlimited energy, everywhere in the world."

Telephone numbers for Terrawatt offices in Powell and Houston have been disconnected.

Neither Curlett nor Particle Drilling President Jim B. Terry responded Wednesday to messages left seeking comment.

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