Wednesday, May 4, 2011

Devon Energy Announces The Tuscaloosa Marine Shale Play

Today in Devon's Q1-2011 Corporate Earnings Conference Call they announced their position in the Tuscaloosa Marine Shale Play.  The highlights were:
· The TMS is the stratigraphical equivalent to the Eagle Ford Shale
· The TMS is approximately 200 to 400 feet thick, at depths of 11,000 to 14,000 feet across the acreage position
· Oil production has been established, up dip in the play from the TMS
· They plan to utilize horizontal drilling and fracture stimulation to enhance the productivity of the reservoir in both the oil and liquids rich portion of the play.
· They have leased or have committed under contract approximately 250,000 prospective net acres, at an average cost of $180 per acre.
· They plan to drill the first two horizontal wells in the play this year.
· This is a frontier play
· The TMS is deeper than Eagle Ford Shale
· There have been some vertical wells drilled in there that indicate that indicate good porosity and permeability. And they’re also seeing some silt and carbonates, which indicate that it may be somewhat brittle and able to be fractured.
· IPs on the vertical wells have been seen up to 300-barrels per day.
· A very small number of horizontal wells have been drilled a couple or three years ago and they were of limited horizontal length, on the order of 1500 to 2000 foot with only three stages, but they tested up to 500-barrels per day from these very limited and minimally fracked wells.
· All of these give them reason for encouragement.
· It's very early on, and they will start drilling horizontal wells, and need more data on rock frac-ability.
· There are some sands below that are wet; need to stay away from those.
· Need to get more information on the phase, oil and natural gas, because there just aren't that many wells defining those boundaries.
· There are some risks associated with the play
· The play has encouraging qualities
· Established a 250,000 acres position for less than $50 million.
· If successful, they  will create a lot of value.
· Rig out there in the second quarter.
· Obviously, the first wells will be more science wells; not going to have the efficiencies that will have in later wells.
· Eventually the $12 million range is somewhere where they will be looking at drilling and completion costs.

Audio of the conference call:
http://edge.media-server.com/m/em/qx6bm9yp/r/1/lan/en

JP Morgan's assessment:
https://mm.jpmorgan.com/stp/t/c.do?i=73C00-1DE&u=a_p*d_589210.pdf*h_-25p8mmp

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