Thursday, October 3, 2019

Upcoming Presentations

I'll be making several presentations on the Louisiana Austin Chalk & LAMS Stack Play in October.

LAGCOE 2019 - New Orleans, LA - October 9-11, 2019

SIPES Monthly Meeting - New Orleans, LA - October 15, 2019

Energy Summit 2019 - LSU - Baton Rouge, LA - October 23, 2019

Tuesday, October 1, 2019

Louisiana Austin Chalk & LAMS Stack Play Update

The activity in the Louisiana play has now shifted to the LA-WEST downdip region where Marathon and PrimeRock/New Dawn will be drilling some wells.

COP has made it official that they're exiting the play after drilling 3.5 wells in the updip portion of the LA-EAST region.  Frac heights penetrating the upper, water-saturated Austin Chalk resulted in very large volumes of water production.  It's astonishing to see them exit so quickly after investing over $300 million.  No TMS pilot holes were drilled on any of the four locations.  It's a tough Wall Street environment at the moment.  Sprint back to the "safe" Eagle Ford appears to be the strategy.

No official result has been posted on SONRIS for the Ironwood 37H-1.

They just finished redrilling the offset of the Crowell #1; On September 24, they reached a total depth of 22,500' (TVD 15,332').  They set 5 1/2" liner at 22,490'.  They spud on 8/3/19 so that represents 52 days of drilling.  That's a major success considering the pressure environment in which they are drilling and compared to their initial attempt.  The lateral length is approximately 7,100'.  The well is located just outside the southeastern limits of Masters Creek Field.

At NAPE, Prime Rock revealed that they have a shared contract on Ensign's 777 rig with Marathon.  The rig should be moving to Prime Rock's location soon in Vernon Parish (Crosby 10-1).  The well has a permitted total depth of 23,000' with a TVD of 16,200'.  This is a deep, ambitious well on the southern end of Masters Creek Field.  It will test the concepts of depletion, high pressure, and water production.

The OLP #1 well was a vertical pilot hole where conventional core was acquired.  Petroquest is seeking a partner to drill the lateral portion of the well.

Both Marathon and Equinor are acquiring 3D seismic.  In the downdip portion of the play, this is imperative due to complex geology and faulting.

Australis reports that fracture stimulation operations commenced on September 20 for their 5th and 6th TMS wells.

Tuesday, August 27, 2019

Austin Chalk - Drilling Update

The only people happy with the results in the "updip" region of the LA-EAST Austin Chalk Play so far are those in the saltwater disposal business!  It's not the start that any of us hoped for.  Fortunately, we have some of the best operators in the industry risking their capital to attempt to make this emerging play work.  Not so long ago, there was a time in our industry (pre-unconventional) where we used the term "exploration" for the early "higher risk" phase of the process.  The Wall Streeters are too young to recall those days.

ConocoPhillips just released the results for the Erwin #1.  Like the McKowen #1 and Hebert #1, it is producing primarily water.
Erwin #1 initial potential: 
28 bo, 25 mcf, and 2845 bw
CP 643
GOR 862
Oil gravity: 38
Perfs: 13447-18727 (5280’)

There has not been any official release on the EOG Ironwood 37H-1 results, but word "on the street" is that it's "water plagued" also.

I've shared my post below discussing the post-frac analysis for the McKowen #1.  These four interpretations are all still valid options:

Now with four results in, lets revisit these:

INTERPRETATION #1: The formation is mostly water bearing
The production results to date sure do support this interpretation.  The large unknowns on all of the wells are: how much of the frac water has produced back? landing zone location? How much formation water has been produced?  Frac height? What is the formation pressure?  Only COP and EOG know these answers.  In a normal pressure environment, it's going to be more challenging to get the frac water out of the reservoir.  

The most significant data to dismiss this interpretation is the very consistent high resistivities across the vast area.  A regional map of resistivity conforms extremely well to the depositional basin and decreases quickly and significantly where it should. Secondly, geochemistry data from core on trend with the Erwin #1 illustrates TOC's as high as 2.67%.  The Austin Chalk in the LAMS Stack Play area is a source rock.  The question is, how much is oil and how much is water?

INTERPRETATION #2 : The formation is still producing frac water back
Ditto to my points above. The frac water recovery is unknown. 

INTERPRETATION #3: Low formation porosity is limiting hydrocarbon production
This could be a contributing factor.  I believe that the natural fractures are more of the issue relating to the high water volumes.  In the current "hot spot" in Giddings Field (northwest Washington County) porosities average 7-8.5%.

INTERPRETATION #4: The large proppant frac could have penetrated into a large water-bearing natural fracture cluster
I lean on this interpretation due to the large volume of data in the area supporting the presence of oil in the formation.  All four wells have intersected natural fractures and small faults.  Once you frac up into the higher water saturations, it will be hard to "turn the water off".  Several hundred feet of "wet chalk" exists above the target zone.  The challenge will be designing a frac that stays focused in the bottom 100' of the formation where the oil saturation is highest.  A smaller proppant frac might be the answer. Natural fractures might be the enemy here.  Moving away from the Feliciana Salt Ridge might result in less natural fractures.

With all this said, the key question is whether the operators have the desire to continue the "exploration" era of this play.  Wall Street is not being really friendly to us right now.

Step 1: Determine where the oil/gas is
Step 2: Determine how to extract it from the reservoir
Step 3: Determine how to drill and produce it economically
Step 4: Conduct field wide development

The "updip" region of this play in LA-EAST is on Step 2.  More wells and diverse frac designs will be required.  The TMS is on Step 3.  EOG's 18 day drill on the Ironwood 37H-1 illustrates that they can drill the TMS economically.  Across the US basins, most of the industry (excluding EOG) appears to be stuck on Step 3 at $55 oil.  Much chaos ahead for the industry as a whole.

Tuesday, August 20, 2019

Wednesday, July 31, 2019

ConocoPhillips Provides A Project Update

On their quarterly conference call yesterday, ConocoPhillips ("COP") provided an update on their efforts in the LAMS Stack Play.  They have completed their pilot four well drilling program.  The McKowen #1 and Hebert #1 are producing and the Erwin #1 has begun flowback.  COP chose not to finish drilling the lateral in well #4 (Soterra #1) for unstated reasons.  On SONRIS it states that the pilot hole reached total depth of 13,390' which should be approximately 125' below the base of the Austin Chalk.  SONRIS states that they drilled to 12,156' and ran logs.  It does not state that they ran logs at the total depth of 13,390' which would be hard to imagine.  I assume that they ran a full suite of logs and acquired sidewall cores.  They drilled the curve to 13,349' and terminated drilling.  My speculation is that the data collected in the vertical pilot hole was not encouraging.  The Soterra #1 is across the edge of my "prospective limits" where the DLogR/TOC dramatically decreases to the south (map below).  The Mean DLogR is approximately ~1.2 in the Karnes Trough where EOG is making enormous wells. In southwest Giddings Field (Washington County) where many good wells have been completed, the Mean DLogR ranges from 1.2-1.4.

In prior posts (links below), I provided some insight on the McKowen #1 result. My potential interpretations #1 and #4 are now the likely options for the producing wells that have very high water cut.  Either the formation has very high water saturation or the large proppant frac is penetrating higher water saturations from the Austin Chalk above the target zone.  I don't have their landing zone and completions details, so it's impossible to make a firm interpretation.  Based on log calculations from hundreds of wells, I believe that the McKowen #1 and Hebert #1 are producing from higher water saturated zones above the "target zone".  Containing the frac in the bottom 150' will be the key.  That's where the best quality rock and highest TOC is located in this source rock.

Below are relevant statements from the COP earnings call:
"Lastly, we continue to evaluate our results in the Louisiana Austin Chalk play. So far, although we drilled oil from the first three wells that produced a higher water cuts and we were hoping to see. So the results to date are disappointing. Louisiana Austin Chalk is the primary target, we're also evaluating opportunities and other formations within the acreage."

"On the Austin Chalk, yes, we've tested three of the four wells that we had to test the Austin Chalk play there. And it's just as we brought those wells on the petroleum system isn't working as effectively as we hoped it would. The chalk hasn’t dewatered to the extent that they are – this required to get high enough production rates. I mean unconventional wells produce higher water cuts and other plays, I mean the Delaware Basin for example."

"So that by itself is not a disqualifier. But here the water cut that we've seen it’s been a bet over 90%. The oil rates have been about a 100 barrels a day. It's just unlikely to be enough to justify a development and that part of the play. There are targets in the Wilcox and there are targets and the Tuscaloosa Marine shale. So the acreage is not condemned by that primary target and the Austin Chalk doesn't look encouraging just now."
Matthew Fox - Chief Operating Officer

Note that COP confirmed the "stack" potential in the LAMS Stack Play!  It's mindboggling that they chose not to drill pilot holes through the TMS in all four wells.  At EOG's drilling rate in the Ironwood 37H-1, that's one more day of and valuable data.

All of the TMSers know that "tenacity" is our core skill set.  Yogi Berra might say it's "deja vu all over again".  See the list below of TMS horizontals from 2011 to the end of drilling in 2015.  Devon was the initial leader in the TMS and after they drilled 7 wells, they exited and sold to Goodrich.  70 wells were drilled through early 2015 after their exit.  A recent TMS well tested 1458 boepd.  EOG has proven that they can drill a TMS well in 19 days.  Does $7-8M DHC/CC at $57/bbl work at 1458 boepd and a 600-800 MMBO EUR?  We'll see!

We await the results from the Erwin #1 and EOG Ironwood 37H-1 in the coming weeks.

Wednesday, July 24, 2019

Austin Chalk 3.0 - A Comparison of EOG and COP

As we await results from ConocoPhillips' 3rd Austin Chalk well (Erwin #1) and the EOG Ironwood 37H-1, it's interesting to review Austin Chalk 3.0 in South Texas where these two companies are competing "head-to-head" in the same fairway.  The Erwin #1 and Ironwood 37H-1 have similar geological parameters so this will be a great operational comparison.  ConocoPhillips took a long conventional core in the Erwin #1 so the lateral placement should be ideal.  For this, advantage goes to ConocoPhillips.

The chart below, based on DrillingInfo's "Prac IP", EOG has 17 of the top 20 wells in South Texas (EOG and COP completions since Jan-2016).  The best wells are in the 38-45 API oil gravity range.  The Karnes Trough is a special place.  EOG named their wells after "tall peaks" for a reason!