Tuesday, November 26, 2013

Happy Thanksgiving

It's almost Thanksgiving and the TuscaloosaTrenders have a lot to be thankful for.  I estimate that over the past three years approximately 1.7 million acres have been leased.  At an average of $200 per acre, that's $340 million of income for mineral owners.  Let's figure that land acquisition costs are $20 per acre.  That's $34 million to the landmen of the world.  With 34 wells drilled, I estimate a total of $544 million spent by the operators with the service companies as benefactors.  Some mineral owners are already blessed with that amazing "mailbox money" every month. Over the past year, some speculators have made a really nice return on their high risk investments.

With all that said, it's a great time to offer some tax deductions to all of you.  I'm giving you the choice to fund the rewriting of the ObamaCare website or make a tax deductible donation to an organization that serves the poor directly and efficiently.  As many of you know, my favorite charitable organization is Emmaus House of Harlem.  The organization was founded by my uncle, the late Father David Kirk, in 1966.  The organization continues on today and has a staff made up of 100% volunteers.  Your donation goes directly to serving those in need.  I serve as the President of the board of directors.  Your donation is in good hands. This week, Emmaus will distribute 250 turkeys to families in need. An interesting calculation...a 1% tithe on $340,000,000 is $3.4 million.

Make a donation today:

Emmaus Harlem on Facebook:

2014 appears to be the "proof in the pudding" year for the TMS. From recent presentations, it appears that 40-50 wells could be drilled next year.  With all of this excitement, I look forward to making many "late night" posts keeping all of you up to date on the activity.  Your generosity is sure to inspire me. GEAUX BIG!

Happy Thanksgiving to all!

SPE Business Development Meeting - TMS Panel

Along with Rob Turnham (Goodrich) and Joe DeDominic (Sanchez), I presented last week at the SPE Business Development meeting as part of a TMS panel.  130 people attended.  Several have requested a copy of my presentation.

Thursday, November 14, 2013

Comstock Resources Announces Entry Into The Tuscaloosa Marine Shale

This was released by Comstock this morning:

Comstock Resources, Inc. Announces Acreage Acquisitions

FRISCO, TexasNov. 14, 2013 /PRNewswire/ -- Comstock Resources, Inc. ("Comstock" or the "Company") (NYSE: CRK) announced today that it has entered into agreements with certain parties to acquire leases on 55,000 acres (53,000 net) in Louisiana and Mississippi for $54.5 million aggregate consideration.  The purchase agreements are subject to customary closing conditions and adjustments.  The Company believes the acreage being acquired is prospective for oil in the Tuscaloosa Marine shale formation and is near successful wells drilled by other industry participants.  The leases cover acreage in Wilkinson and Amite Counties in Mississippi and in East Feliciana and St. Helena Parishes in Louisiana.  Comstock expects to complete the acquisitions in the fourth quarter and is pursuing other lease acquisition opportunities in this and another play prospective for oil development.

"These acreage acquisitions will allow Comstock to expand its oil drilling program beyond its current successful program in South Texas's prolific Eagle Ford shale play" stated M. Jay Allison, Chief Executive Officer of Comstock.  "The Company's 2014 drilling program will still be primarily focused on developing our Eagle Ford shale properties as we await a more favorable natural gas price environment to resume drilling in our Haynesville shale natural gas properties.  By adding new acreage in plays prospective for oil we can ensure that we have an adequate inventory of future drilling locations which will allow us to continue to grow our oil production and oil reserves base in future years."

This press release may contain "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995.  Such statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described herein.  Although the Company believes the expectations in such statements to be reasonable, there can be no assurance that such expectations will prove to be correct.
Comstock Resources, Inc. is an independent energy company based in Frisco, Texas and is engaged in oil and gas acquisitions, exploration and development primarily in Texas and Louisiana.  The Company's stock is traded on the New York Stock Exchangeunder the symbol CRK.

Source: Comstock Resources

Source: Comstock Resources

Sanchez Energy's Earnings Call

Last week, Sanchez hosted an earnings call. Here are the TMS highlights:
  • Additionally we have entered the Tuscaloosa Marine Shale, which will provide substantial upside and value creation as that play continues to be de-risked through an increased drilling pace.  While our drilling focus continues to be on the Eagle Ford, we are very excited about recent developments in the TMS and look forward to participating with other operators in the area, as well as kicking off our operated drilling program early next year.  Other operators in the play have recently announced increased capital commitments for the purpose of accelerated drilling programs, which is a positive move for the TMS in terms of its development cycle.
  • In the TMS we’re in the midst of planning for our 2014 program, which we expect will include participation in several non-operated wells prior to the start of our operated program. We are in the process of filing several drilling unit requests with the Mississippi state board of oil and gas and are evaluating options on drilling rigs. With the majority of our leases either HBP by shallow production or with sufficient remaining term, we can take the time needed to correctly plan our operations.  
  • As mentioned, we’ve significantly strengthened our balance sheet and liquidity this quarter with the issuance of the 11 million shares of common stock at a price of $23 per share before operating costs and added $200 million of tack-on notes to our second quarter $400 million senior note offering. These offerings are used in part to fund our previously announced acquisitions in the TMS, Wycross and Five Mile Creek areas in the Eagle Ford.

  • Q&A

    Neal Dingmann - SunTrust
    And two more if I could. Tony just moving over to TMS, what do you envision? I know you mentioned a few non-op wells initially. Is that the plan maybe for the first half of next year? Number one, is it mostly just on the non, you’ll stay on the non-operated side? I’m trying to get a sense of how many of these wells you’ll be part of early on or when we can think about the first operated well?

    Tony Sanchez - President & CEO
    Yes, I’d say we are shooting for our first operated well as soon as possible. I think the logistics of drilling wells in Mississippi has some leave time associated with them from a permitting process principally, but we are working on getting our units formed that we would operate and would spud as soon as possible.

    The most likely would be, hopefully sometime early in the first quarter. You had commented that and you thought that we were gong to be participating principally as a non-op into the first half. I think we’ll always participate as a non-op, but I think our operated program will become the voice point starting in the first quarter of next year.

    I’m looking at the math now. Other companies are actively forming units, and principally in Wilkinson and Amite Counties of Mississippi and I’ve seen AFEs come across my desk that we are signing off on. Some of them are low interest wells, 3% to 5% working interest. Others are hired at 20% or 30% and our more times than now we’re going to participate, but we are working diligently to get our units set up, to get the paperwork in place, the services sourced rigs and on to start really as soon as practically possibility. I just think its going to fall hopefully in the first half of the first quarter of next year.

    Ron Mills - Johnson Rice
    Okay. And then Tony, just to clarify some comments about the TMS, it sounds like you want to start the operated program as soon as possible. It sounds like you have some at least well proposals in front of you. Do you think it’s one of these things where the non-op definitely comes before the operated or could you start your operated program even before you’ve really participated in many non-op wells?

    Tony Sanchez - President & CEO
    No, I think logistically that non-op is going to begin first and so when we get a better sense of the ordering of the wells, what our working interest is in the wells, where they are, we’ll start to put that out there. But the way a lot of this planning goes is you go out and you form a bunch of units, you take it to the Mississippi Oil and Gas Board and get them approved, send letters to the non-participating other mineral owners or lessees and get the things like surface use agreements and air permits and things done.

    So you basically because of the lead-time you got to start working on a bunch of them at the same time. When we get a better idea of the ordering, we’ll put that out, but its highly likely that we’ll be predicating as a non-op first, and that’s entirely a function of timing at this point.

    Phillips Johnston - Capital One
    Okay, and then just in TMS, you talked about getting units set up, but have you actually determined yet where the first three operated wells will be located or is that going to be sort of contingent on how some of the non-op results come in?

    Tony Sanchez - President & CEO
    I would say, we’re actually in the process of filing units across the – across section of we’ll consider it the mid county and then we’re looking at recent well results where the non-op interest would be what’s the timing of the non-op wells and where it makes sense for us to test the TMS. So there’s a lot of factors in play and we don’t have it determined yet.

    Joe DeDominic - Chief Operating Officer
    Fundamentally we’re going to approach it the same way we did the Eagle Ford in 2011 and 2010. Just get up as close as to where its proven successful as possible, then we work our way out from there.

    Ben Wyatt - Stephens
    Great. Just jumping over to the TMS, Joe I know you spent some time down there in a previous slide, but just curious kind of how you guys are thinking with your initial wells. Will you guys be kind of above the rubble zone, below the rubble zone or are you guys kind of think there’s already a secret sauce on the way to drill and complete these wells? Just maybe some initial thoughts around how you guys will go about that.

    Tony Sanchez - President & CEO
    Yes, we talked about that. Obviously we’re talking a couple of wells for next year initially. We’ve actually talked internally about do we want to drill one above, one below and maybe one just partially in the rubble zone, because there’s actually some thinking that maybe the rubble zone is important for productivity.

    So we’re evaluating new data that comes in. We’ve of course been with and talking to other operators in the play and I think as an industry we’re all trying to land in the right spot to be most effective and get the most oil for the cheapest amount, dollars right. So there is some sharing going on among operators and so we’re trying to figure out how best to approach it. But I think you’d see us trying to do a little bit of both initially, to try and learn the best way to go forward.

    Paul Grigel - Macquarie Research Equities
    Hi, good afternoon. Most of my questions have been answered. Just a quick one on the TMS, really two parts. One, on the AFEs that you guys have been looking at on the non-op side, where have well costs been coming in and then on your first off wells, I know it’s still early, but any projection or change in projection on what you’re expecting for well costs as well?

    Joe DeDominic - Chief Operating Officer
    What was the second part of the question?

    Paul Grigel - Macquarie Research Equities
    On the operated wells that you guys will be going forward, if there’s been any change to what you’ve presumed for well costs in the TMS.

    Joe DeDominic - Chief Operating Officer
    Yes, ASC’s have been coming in the $13 million to $15 million range per well and we see our preliminary estimates of what it would cost on an operated basis in that same range.

    I think like we experienced in the Eagle Ford, the big decrease in well cost will come as a result of development drilling. The TMS people had complained about the high well costs. Our first Eagle Ford wells would cost in $15 million to $16 million. Now we’re regularly bringing them in at $9 million.

    So again, once we go into a development program where we’re drilling off multi well pads, we have some continuity to the program and we would expect well costs to come substantially down, but on a one off basis we’re seeing them in the $13 million to $15 million range, which is certainly lower than where they were even six months ago. So they’ve already started to come down, no question, but I would expect another big step down once we start pad drilling.


    Tuesday, November 12, 2013

    Amelia Resources LLC Announces an Update on Acreage Sales

    November 12, 2013 10:54 AM Central Standard Time
    THE WOODLANDS, Texas--(BUSINESS WIRE)--Amelia Resources, LLC announces an update on the status of acreage sales in the Tuscaloosa Marine Shale (TMS) play.
    Amelia Resources announced today that it has facilitated the sale of over 95,000 acres in the TMS play. The company has served as a consultant hosting a data room and marketing large acreage blocks in the TMS. Amelia is marketing 85,000 additional acres that represent the last remaining large acreage block available in the play.
    Amelia’s President, Kirk Barrell, said, “The TMS play continues to gain momentum with additional drilling and acreage acquisitions. Recent announcements by TMS operators indicate that there will be a significant increase in capital invested and drilling across the play in 2014.”
    With 23 years of experience across the Tuscaloosa Trend, Amelia Resources, LLC has evaluated over 1,000 wells in the TMS across Louisiana, Mississippi, and Texas.
    Barrell stated, “Wells such as Goodrich’s Crosby 12H-1 illustrate that this unconventional reservoir has the ability to produce prolific amounts of oil in a short period of time. As in all unconventional plays, costs and operational challenges will decrease through time. 2014 will be an exciting time for this play as it moves to development mode and new operators enter the project.”
    Amelia Resources LLC is a privately held exploration and production company. The company generates drilling prospects and is actively engaged in several projects across the onshore Gulf Coast. Amelia was founded in 2003 by Kirk Barrell and has offices in The Woodlands, Texas, 30 miles north of Houston. The company leverages its 27 years of geological and geophysical experience to obtain strategic positions in drilling projects. Updates on the TMS and Austin Chalk projects are provided by the company at www.tuscaloosatrend.blogspot.com.
    CAUTIONARY STATEMENT: This press release contains certain forward-looking statements regarding various oil and gas discoveries, oil and gas exploration, development and production activities, anticipated and potential production and flow rates and the economic potential of properties. Accuracy of these forward-looking statements depends on assumptions about events that change over time and is thus susceptible to periodic change based on actual experience and new developments. Amelia Resources LLC cautions readers that it assumes no obligation to update or publicly release any revisions to the forward-looking statements in this press release and, except to the extent required by applicable law, does not intend to update or otherwise revise these statements more frequently than quarterly. Important factors that might cause future results to differ from these forward-looking statements include adverse conditions such as high temperature and pressure that could lead to mechanical failures or increased costs, variations in the market prices of oil and natural gas, drilling results, unanticipated fluctuations in flow rates of producing wells, oil and natural gas reserves expectations, the ability to satisfy future cash obligations and environmental costs, and other general exploration and development risks and hazards.
    Amelia Resources, LLC
    Kirk A. Barrell, 281-798-6741

    Wednesday, November 6, 2013

    Encana Corporate Strategy Launch

    Encana presented an update on their corporate strategy yesterday.  The company will focus on five oil plays of which the TMS is one of them.

    The slide below was presented summarizing their plan for the TMS.

    Acreage approximated from Encana's website presentations; Wells: TMS producers; Structure: base of TMS

    Tuesday, November 5, 2013

    Goodrich Earnings Call - 11/5/13

    Goodrich Petroleum presented their third quarter results today.  The TMS highlights are:

    • execute an increased capital budget and acceleration of the TMS in 2014
    • currently have 2 rigs running in the TMS, going to 3 rigs in the first quarter of 2014, and 5 rigs by the end of the year with continued success.
    • We've established a preliminary capital expenditure budget for 2014 at $375 million, with $300 million allocated to acceleration of development of the TMS, where we estimate that we will drill or participate in as many as 31 gross, 24 net wells, which is a blend of 100% working interest wells and 67% working interest wells.
    • We are budgeting 45-day drill times, although we think we will do better, 60 days spud to spud, and 75 days spud to sales cycles times.
    • We continue to be optimistic with the resource potential of the play as our Crosby wells cumulative production has reached 138,000 barrels of oil equivalent per day or over 90% crude oil in 8.5 months, with a current rate of approximately 250 BOE per day on a very flat declining curve. This would compare to similar cumulative production from the Anderson 17 #1 well in 15.5 months, and 155,000 BOE for the Anderson 18 #1 in 16 months. 
    • When considering recent wells in which we've operated or participated as an non-operator, 5 of the last 6 wells are trending on or between our 600,000 BOE and 800,000 BOE curves, with the oldest of these wells now approximately 18 months old.
    • The Crosby well continues to perform in excess of our 800,000 BOE curve.
    • We have drilled our Huff well in Amite County, Mississippi, with 5400 feet of usable lateral. We drilled the curve and lateral in a record time of 12 days but have experienced completion delays due to temporarily sticking to drill pipe, which we have now resolved, and cleaning up the wellbore prior to running production casing.
    • We believe our ability to knock at least 10 days off of our 45-day AFE of $13 million, which will save $1 million in drilling costs is very achievable, considering that we normally drill the vertical portion of the well and run intermediate casing in less than 25 days.
    • We spudded our Weyerhaeuser 51-1 well last week, which is the initial well on our newly acquired acreage with our partner, Sinopec, with plans to drill 3 wells back to back on the acreage.
    • After the Huff, that rig will move to the CMR 8-5 well in Amite County, Mississippi. 
    • The 3 wells drilled on Sinopec JV acreage will be spread out from the Weyerhaeuser in the middle to a well on the east and an additional well to the west.
    • We continue to see very consistent results across the CMS when similar frac recipes are pumped. 
    • The increased activity levels in 2014 from us, Encana, which today announced it will spend $200 million to $300 million in the TMS next year, and other companies we know are building positions, to allow for rapid delineation and progression to development mode for the company.
    • We feel like we've got a nice core acreage position that's already de-risked. You will see us with a combination of stepping out away from the core in a gradual manner, and in particular, locating wells near Devon wells, in particular, on our acreage block, where we could put the proper or the more effective completion recipe on those wells.
    • We are seeing new operators in the play. To answer your last question, we expect 2 or 3 of them. Certainly 2 of them to potentially start talking about that, so we're aware of the files from assignments in the parish courthouse. And so I think that's a given, but we'll let them discuss it when they're ready to talk.

    The entire transcript:

    Monday, November 4, 2013

    Goodrich Petroleum Announces Quarterly Results

    Here is the TMS related information from Goodrich's earnings announcement today:

    Goodrich Petroleum Announces Financial Results And Operational Update

    HOUSTON, Nov. 4, 2013 /PRNewswire/ -- Goodrich Petroleum Corporation (NYSE: GDP) (the "Company") today announced financial and operating results for the quarter ended September 30, 2013 and provided an operational update.

    Tuscaloosa Marine Shale ("TMS"):
    Preliminary 2014 capital expenditure budget allocates $300 million for the TMS to drill up to 31 gross (24 net) wells with five operated rigs running in the play by the end of 2014 pending continued success.
    The Company drilled its Huff 18-7H No. 1 (97% WI) well with usable lateral of approximately 5,400 feet. The Company drilled the curve and lateral in a record time of 12 days but has experienced completion delays due to temporarily sticking the drill pipe shortly after reaching total depth. The Company successfully freed the drill pipe and is currently cleaning out the wellbore in preparation of running production casing. The cleanout of the wellbore is expected to be completed within the next few days.
    Cumulative production from the Company's Crosby well has reached 138,000 barrels of oil equivalent ("BOE", 90% oil) in 8.5 months, and five of the last six completed wells are currently producing at or above the Company's 600,000 BOE type curve (See current Management Presentation posted on website).
    The Company currently has two rigs running in the play and has commenced drilling operations on its Weyerhaeuser 51H-1 (67% WI) well in St. Helena Parish, Louisiana, the initial well of three consecutive wells planned on its recently acquired acreage block, with plans to move a rig to its CMR 8-5 (100% WI) well in Amite County, Mississippi after the Huff 18-7 well.


    Capital expenditures for the quarter were $91.4 million, of which $66.3 million was spent on drilling and completion costs, $22.7 million on the Company's producing property and leasehold acquisition in the TMS and $2.4 million on other leasehold acquisitions and extensions, facilities and other expenditures.  Capital expenditures for the first nine months of the year were $204.2 million, of which $174.6 million was spent on drilling and completion costs, $22.7 million primarily for the TMS acquisition, $5.9 million on acreage acquisitions and $1.0 million on facilities and other expenditures.


    For the quarter, the Company spent approximately 32% of the capital in the Eagle Ford Shale trend, 57% in the TMS and 11% on the completion of previously drilled Haynesville Shale wells.  The Company conducted drilling operations on 8 gross (6 net) wells in the quarter, including 6 gross (4 net) Eagle Ford Shale trend wells  and 2 gross (1.96 net) wells in the TMS. We added 9 gross (4.87 net) wells to production in the quarter, of which 5 gross (3 net) were in the Eagle Ford Shale trend, 1 gross (0.90 net) in the TMS and 1 gross (0.50 net) in the Haynesville Shale trend.  As of quarter-end, the Company had 8 gross (5.32 net) wells drilled and waiting on completion comprised of 2 gross (1 net) in the Haynesville Shale trend, 5 gross (3.33 net) in the Eagle Ford Shale trend and 1 gross (0.99 net) in the TMS.

    For the year, the Company expects to drill and complete 21 gross (14 net) wells in the Eagle Ford Shale trend (down 1 gross (0.7 net) wells due to the reallocation of capital from the Eagle Ford Shale to the TMS), 9 gross (5 net) wells in the TMS and 13 gross (5.7 net) wells in the Haynesville Shale trend.

    TMS Permits

    The map below depicts the latest drilling permits.  2014 should be a more active drilling year.  The locations indicate a focus between -11200 and -13000 subsea true vertical depth.  

    Friday, November 1, 2013

    Upcoming Earnings Calls

    Get the popcorn popping for back-to-back earnings calls for Goodrich and Halcon on November 5.  Sanchez Energy will present on November 7.  It will be interesting to hear their plans for 2014.