Saturday, March 29, 2014

Current Activity

Here's the current play activity.  Thank you to all who provided updates to me.  It's becoming more of a challenge as activity escalates.

Source: SONRIS, MSOGB

Friday, March 28, 2014

TMS Summit - Natchez

Just a reminder that the TMS Summit will be next Monday and Tuesday in Natchez, MS. 
National News Network will be covering the event.
http://tmssummit.com/agenda/

Goodrich Petroleum Announces The Passing Of Its Chairman-Emeritus Henry Goodrich

The industry lost another legend. The Greatest Generation was also the greatest generation of oil finders....true pioneers.

HOUSTON, March 27, 2014 /PRNewswire/ -- Goodrich Petroleum Corporation (NYSE: GDP) today announced the passing of its Chairman-Emeritus Henry Goodrich at 83 years old. Henry was a cherished, founding member of the Board of Directors since 1995. Henry was a pioneer in the state of Louisiana oil and gas industry. He began his career in 1950 with Union Producing Company and later formed and operated Goodrich Oil Company from 1975 to 1995, building it into a prominent independent exploration and production company. In addition to his business success, he was very involved and influential in government policy as it dealt with the energy industry as well as many charitable causes. He served as President of the Louisiana Association of Independent Producers and Royalty Owners (LAIPRO) and was a member of the LSU Alumni Hall of Distinction, LSU Alumni Federation and the Board of Trustees of Rhodes College. Although we mourn our loss with Henry's passing, we celebrate his life, as a passionate, caring, genuine, generous man who enjoyed life to the fullest. He will be greatly missed by his family, fellow Board members, employees, friends and acquaintances, as Henry was beloved by all that had the privilege of knowing him. Goodrich Petroleum Corporation is an independent oil and gas exploration and production company listed on the New York Stock Exchange. 
SOURCE: http://phx.corporate-ir.net/phoenix.zhtml?c=83169&p=irol-newsArticle&ID=1913136&highlight=

Tuesday, March 25, 2014

Halcon CEO Touts the TMS

Halcon’s Wilson Says Tuscaloosa Shale Among Last Big Shale Finds
"Floyd Wilson, the wildcatter who helped discover the fastest-growing U.S. oil field, says a prospect called the Tuscaloosa Marine Shale is among the last great fields that may emerge in the U.S. energy renaissance.  The chairman and chief executive officer of Houston-based Halcon Resources Corp. (HK) said in an interview yesterday that his company in the last six months has acquired 250,000 acres in the field that spans from Texas to Mississippi. The company expects wells there to produce between 500,000 to 1 million barrels of oil each.

Wilson’s previous company, Petrohawk Energy Corp., helped discover and develop Texas’s Eagle Ford formation, where oil output rose to 1.2 million barrels a day last year from about 50,000 in 2007, according to data compiled by Bloomberg. In 2011, BHP Billiton Ltd. (BHP) bought Petrohawk for $15 billion.

The Tuscaloosa prospect is “maybe one of the last remaining large footprint oil shale plays in the U.S.,” Wilson said in an interview at the Howard Weil Energy Conference in New Orleans. “It’s an important oil resource play. The puzzle is how to get it out economically.”

Halcon shares have fallen almost 50 percent in the past year after surging to a high of $12.76 in February of 2012 just months after Wilson took over.

The company began drilling its first well less than two weeks ago in the field, where there may be as many as 2 million acres of drilling opportunities, Wilson said. The decision about whether to seek a partner in a potential joint venture will depend on how much risk the company sees in developing the field, he said.

Recent well results have made the Tuscaloosa’s prospects look better, he said. The lower the risk, the less likely Halcon will take on a partner, Wilson said."

Source: http://www.bloomberg.com/news/2014-03-25/halcon-s-wilson-says-tuscaloosa-shale-among-last-big-shale-finds.html

Monday, March 24, 2014

Goodrich Provides An Update

Goodrich Petroleum provided this update today:

Goodrich Petroleum Announces Results Of The CMR 8-5H-1 Well And Provides Operational Update In The Tuscaloosa Marine Shale ("TMS") 
 HOUSTON, March 24, 2014 /PRNewswire/ -- "Goodrich Petroleum Corporation (NYSE: GDP) today announced the completion of its CMR 8-5H-1 (100% WI) well in Amite County, Mississippi. The well has achieved a peak 24-hour average production rate to date of 950 barrels of oil equivalent ("BOE") per day, comprised of 900 barrels of oil and 300 Mcf of gas, and has produced an average of approximately 900 BOE per day over six days. The well, which landed in the Company's lower target, has approximately 5,300 feet of lateral and was fracked with 20 stages using composite plugs that were drilled out prior to flow back. The Company also announced an update on its Weyerhaeuser 51-H-1 (66.7% WI) well in St. Helena Parish, Louisiana. As previously reported, the well has experienced mechanical issues and the Company did not get all of the permanent frac plugs drilled out. The well is in the early stage of flow back and based on flowing pressure and fluid rates, the Company does not expect peak rate for the well to be as high as previously drilled wells. The Company is currently fracking its Blades 33H-1 (66.7%) well in Tangipahoa Parish, Louisiana. The Blades 33H-1 well was drilled to total depth in 36 days, landed in the Company's lower target and has a lateral length of approximately 5,100 feet. The Company is using composite plugs with plans to drill them out prior to flow back, similar to the CMR 8-5H-1 well. The Company is currently drilling the C.H. Lewis 30-19H-1 (81.4% WI) and Nunnery 12-1H-1 (91.2% WI) wells in Amite County, Mississippi, as well as the Beech Grove 94H-1 (66.7% WI) well in East Feliciana Parish, Louisiana. All wells are planned for 6,000 foot laterals or greater in the lower target and will use composite frac plugs to be drilled out prior to flow back. The Company has in excess of 300,000 net acres and three rigs running currently in the play, with the plan to go to five rigs by the end of the year pending continued success. A copy of the latest corporate presentation is available on the Company's website at www.goodrichpetroleum.com. Goodrich Petroleum Corporation is an independent oil and gas exploration and production company listed on the New York Stock Exchange. SOURCE Goodrich Petroleum Corporation"

Saturday, March 22, 2014

Louisiana's Energy Future

A great endorsement for Louisiana's energy future:

"Recently, Russia sanctioned nine U.S. officials from entering its borders in retaliation for these individuals and the U.S. government championing freedom and democracy for the people of Ukraine and across the world. I was one of them. Being sanctioned by President Putin for this offense is a badge of honor for me and the good people I represent in the U.S. Senate. Louisiana, our neighbor Texas, and states like North Dakota are leading the energy revolution in this country to build an American powerhouse to support a manufacturing renaissance that creates millions of new, high-paying jobs.
This sanction will not stop me from using my power as chairwoman of the Senate Energy Committee to expand domestic energy production, responsibly increase energy exports around the world and continue supporting our allies and lovers of democracy.
Thanks to new technologies and bold financial risks taken by the private sector, we can now locate, capture and produce natural gas and eliminate our need to import. Louisiana is at this epicenter, and we are prepared to provide energy resources to our allies and turn the United States into an energy superpower.
We have become a gateway for natural gas exports. Already, Louisiana has one fully permitted facility in the Sabine Pass export terminal, owned by Cheniere, under construction to export the first shipment of LNG in this energy revolution. And we have two more conditionally approved in Cameron LNG, owned by Sempra, and in Lake Charles Exports that will soon break ground.
Natural gas is not the only resource that Louisiana, the Gulf Coast and the United States can export to help our friends. For several years, I, along with Sen. Ron Wyden, of Oregon, and Sen. Lisa Murkowski, of Alaska, have worked to build partnerships between oil and gas companies and universities along the Gulf Coast to connect to Eastern Mediterranean countries, including Israel, and help them produce offshore oil and gas.
While Israel recently discovered more than 30 trillion cubic feet of natural gas in the Leviathan and other fields off its coast that could be a national security game-changer, it lacks the experience in petroleum engineering and infrastructure to harness it. I intend to work to expand this model of cooperation to U.S. allies in Africa, South America and Eastern Europe.
Tyrants and dictators throughout history have had many reasons to fear revolutions, and this U.S. energy revolution is no different. I look forward to playing a leading role bringing energy independence to America and freedom to people around the world."
Mary Landrieu, U.S. Senator
Source: http://theadvocate.com/news/opinion/8697045-123/letter-sanction-by-putin-is

Thursday, March 20, 2014

Helis Oil & Gas Wildcats In The TMS-Far East

New Orleans-based production and exploration company, Helis Oil & Gas, has applied for a TMS unit in St. Tammany Parish.  This definitely is a TMS wildcat.  For reference, it's 64 miles from the Anderson locations.  The unit falls directly on the -13000' contour.

Congrats to Helis for investing in the play.  It's amazing to see small independents like Goodrich, Encana, Halcon, and Helis pioneering this emerging oil play. From a geologic standpoint, this will be an interesting location.  I will post some technical details in the week ahead.


TMS Play; Helis TMS unit (Source: LA Office of Conservation)

I've added it to Google Maps
https://www.google.com/maps/ms?msid=204256365055521729132.0004b5bbdae554174421a&msa=0

Good luck to my Northshore friends!!
St. Tammany Parish Courthouse, load up on the printer paper...the landmen are coming.....

Wednesday, March 19, 2014

Google Maps - TMS Wells

I've updated Google Maps with the TMS well/permit list:
https://www.google.com/maps/ms?msid=204256365055521729132.0004b5bbdae554174421a&msa=0

Make use of the Google Maps viewing options:

ROADS

AERIAL PHOTO

GOOGLE EARTH

DRIVING DIRECTIONS 

TERRAIN



Monday, March 17, 2014

Halcon TMS Permits

Source: MSOGB
 The list to the left are the current Halcon permits filed with the Mississippi Oil & Gas Board.  Some of these were originally filed by Encana.

Halcon TMS wells (Source: MSOGB)

Halcon TMS wells (Source: MSOGB)

Thursday, March 13, 2014

TMS Q&A

I've been light on posts lately so I've compiled this Q&A from the many conversations that I've had over the past weeks.


Q: Your blog activity has greatly decreased over the past few months…any reason for that?
KB: In my prior 450 posts, I “sliced and diced” the geology, engineering, land, and economics every which way I could.  The lack of drilling activity is the reason for the decreased content. Stay tuned, 2014 will be busy.

Q: How do you feel about the play at this current juncture?
KB: I am currently the most optimistic that I’ve ever been in the play.  Back in 2010, I felt that the greatest risk was reservoir producibility.  I believed that the most important question then was whether the reservoir would show long term enhancement from hydraulic fracturing.  I believe that the initial rates, produced volumes, and decline curves are very encouraging.  I also believe that the best locations have yet to be drilled in the play.  Yes, I believe that there are better locations than the Crosby 12H-1 and Anderson wells.

Q: Will you tell us where those are?
KB: No. That would make my investors very upset.

Q: What do you think of Halcon’s newly announced position?
KB: I believe that they have a significant position in the play.  The company’s management and technical teams have a strong track record of proving up new plays.  Stay tuned.

Q: What in your mind are the remaining hurdles in the play?
KB: In 2010 as I commenced my “TMS Tour”, there were four major “perceived” obstacles to the play:
  1.  Too much clay – I have argued from Day-1 that the clay was not an issue with regards to producibility of this reservoir.  Initial rates, produced volumes, and decline curves confirm that this is not an issue.  The TMS reservoir is ~100-150’ thick and is incorrectly “lumped” into the entire Eutaw Formation which can be up to 1000’ thick.  The Eutaw represents both the Tusc-A TST and HST.  The TMS occurs in the basal part of the Tusc-A TST where the least amount of clay exists.  Clay increases vertically from the base of the TMS as you transition into deeper facies until reaching the maximum flooding surface (MFS).  High clay content also occurs above the MFS and decreases when transitioning into the HST where the deltas start to deposit sediment back into the basin.  Log analysis and mudlogs indicate that the MFS is a top seal for the TMS reservoir.  Also, total clay and swelling clays have been confused.  Goodrich has provided excellent commentary and data on this.
  2. TOC is too low – In 2010, TOC’s ranging from 1-4 did appear low compared to other emerging plays.  Initial rates, produced volumes, and decline curves confirm that this is not an issue.  The Goodrich Crosby 12H-1 has produced 160 MBOE in 10 months.  The geochemical parameters are very consistent across the TMS-East.
  3.  A frac in the TMS will “frac down” into the wet and permeable Tuscaloosa sands – To date, I’m not aware of any well that has high water production indicating that this has occurred.  In addition, several pilot holes took conventional core below the TMS and confirm very high frac gradients.
  4. Too expensive and uneconomic – This is the final hurdle for this play.  I am confident that the engineers will overcome the current obstacles.  This play has only 34 completions and will see substantial reduction in costs in the future as has been seen in most every unconventional play in the country.  I would rather have mechanical challenges than reservoir rock challenges.

Q: Where is the sweet spot in the play?
KB: One of the great aspects of the TMS play is that there is a significant amount of well data from historical wells drilled to the Tuscaloosa sands.  These data present the opportunity to perform log analysis across the entire play.  Dense well control confirms the spatial variation in the thickness of hydrocarbon saturation across the play.  Keep in mind that the “sweet spots” are defined by the geology and the drill bit at some point will confirm them.  Early drilling activity in Amite County is is mostly driven by lease expirations not the geology.  With Halcon’s announced focus in Wilkinson County, the drilling activity will balance out geographically this year and patterns will begin to emerge.

Q: Are you still not a fan of the TMS-West?
KB: Don’t shoot the messenger (geologist).  The key to the TMS play appears to be the presence of interbedded siltstones and associated natural fractures.  The TMS-East is directly downdip and proximal to the Tuscaloosa deltas.  The distal deposition of silts interbedded with organic shales presents a perfect combination of hydrocarbon storage and source.  The brittleness of the siltstones results in naturally fractured reservoir rock.  The TMS-West lacks the influx of the siltstones and associated fractures.  With that said, continued advancements and scientific surprises continue to occur in these unconventional reservoirs across the country so don’t give up yet.  Recent successes in the Eaglebine play in East Texas present some interesting aspects compelling one to make comparisons to the TMS-West.  Rumor has it that EOG still plans to drill a well in Vernon Parish this year.  Stay tuned. It ain’t over until the…….

Q: Why hasn’t anyone drilled in the deeper part of the play?
KB: Currently, the operators are having drilling and completion challenges at 12000’, so 14000’ is perceived to be potentially more challenging.  Once these mechanical challenges are overcome, I believe that the deeper part of the play will yield significant results due to the higher pressure, GOR, and calcite.  Those aspects might present the opportunity to have shorter laterals resulting in competitive costs and comparable or even better economics than the shallower part of the play. The Devon Lane 64 well had 47 API gravity oil and excellent log parameters.  The flat “oil window” will make the downdip fairway successful. Lease clocks will compel the operators to test the deeper fairway sooner rather than later.  
The Cana Woodford/SCOOP play in Oklahoma is a great example of a deep unconventional play that is yielding attractive results.  Wells in that play have TVD’s in the 16000-17000’ range. 
          Cana Woodford: “The four wells had an average IP rate of 1,437 boepd (24% oil) with high-Btu gas and were drilled to the vertical depth of 15,000-16,000 ft. The EURs for these four wells are likely to be at the higher end of the Company-provided range of 6.6-10.2 Bcfe which imply robust well economics at current forward strip prices and $10 million well cost assumption.”


Q: What is the best length for the lateral?
KB: In every play a point of diminishing returns is determined where the dollars spent don’t equate to the reserves added.  At this point in the play with the drilling and completion challenges, it might be best to focus on ~6000’ laterals that can be drilled and completed successfully and economically.  With success, then pursue longer laterals.

Q: What do you think of the resistivity isopach map that Goodrich presented two weeks ago with their quarterly call?
KB: Resistivity is only one parameter to be considered.  Porosity is very important.  The rock matrix along with the naturally occurring fractures are the key to this reservoir.  I employ Exxon’s “Passey Method” that appears to work very well in this play as it does in others.  Mapping thickness and the mean of Delta-Log-R presents an accurate “sweet spot map”.

Q: You have posted many maps on the blog with a “blue dashed line” outlining the play in the TMS-East.  What does that line represent and why has it changed over time?
KB: On maps released some time ago, the line represented an estimate of the 75’ contour of an isopach of 5 ohm-m or greater of resistivity.  I’ve since replaced that line with a 62’ contour of an isopach of Passey Delta-Log-R > 0.9.  This thickness is a rough estimate of what I consider to be the economic limit of the play (IRR=20%, EUR= 410 MBOE).  The outline will continue to evolve as new data is integrated and the parameters are re-calibrated.  Hopefully, with time, it will expand.

Q: In an internet chat room, one individual presents a conspiracy theory that you change the “blue dashed line” so that you can lease cheaply outside of it. Is this true?
KB: I wish that I were that sneaky.  As I’ve told Joe before, he would be better off spending his precious time researching Area 51 and the JFK assassination.

Q: Why won't you return my phone calls and emails?
KB: I can't respond to every inquiry.  Please use the COMMENT box on the blog so everyone can take part in the conversation.

Q: Do you think that Goodrich’s acquisition of the Devon acreage was a good buy?
KB: I believe that the acquisition was brilliant and strategic.  I believe that the acquired Devon acreage is more geologically attractive than their original position.  Future wells on Devon’s tracts will prove that Devon had very poor frac design and incorrect landing zones.  In hindsight, this transaction will be the deal of 2013.

Q: What price will Goodrich's stock reach if the play is successful?
KB: This blog doesn't focus on the equity markets nor should the content be used to make investment decisions.  Call Jim Cramer.

Q: You used to distribute a weekly Scout Report.  Do you see yourself doing that again?
KB: That report took a lot of time to generate.  I appealed to the masses for donations to my favorite charity to inspire me to continue this free service, but the response was lackluster.

Q: What are your estimates of EUR across the play?
KB: I agree with the range of 400-800 MBOE that the operators have presented.  Pay thickness varies across the play so subsequently EUR’s will too.  The “bullseye” in the play could exceed 1 MMBOE.

Q: When this play reaches “de-risked” status, what will be its best attributes?
KB: I believe that this reservoir has very consistent parameters that gradually change east-west and north-south.  This will present very repeatable results in the future.

Q: Is there still hope for Avoyelles Parish?
KB: Absolutely.  EOG's lack of success doesn't help the cause and I consider them to be one of the best unconventional operators in the country.  I believe that their entire TMS acreage position is not in the best location of the play.  Their core in Avoyelles has strong technical attributes.  Thicknesses in the "bullseye" of the isopach in Avoyelles have thicknesses comparable to the Anderson area in Amite County.  EOG's first two wells landed too high.  Their third, the Paul 15-1, still has a fish in the hole.  The fourth, the Dupuy 30H-1, while not having all stages contributing, should have had better results.  Upcoming activity by Halcon in Wilkinson County will help shift focus to the western portion of the TMS-East.
http://tuscaloosatrend.blogspot.com/2013/03/eog-permits-another-tms-well.html

Q: I keep hearing that 3D seismic will be acquired across the play.  Is that true?
KB: Once the play reaches "derisked" status, I expect 3D to be acquired across the core of the play.

Q: Is the Austin Chalk play dead?
KB: The Chalk never dies, it just has long hiatuses.  My hope is that with success in the TMS, the Austin Chalk will develop into a secondary target.  An acid frac might be the way to go.  Energy XXI's two attempts in Adams County didn't yield success.

Q: Will LSU beat Alabama this year?
KB: Without question….yes.

DISCLAIMER


Tuesday, March 11, 2014

Sanchez Energy - Earnings Call

TMS highlights from Sanchez Energy's earnings call:
     
·       Our ability to make step changes in efficiency and challenging areas will continue to be important as we prepare for our first operated wells in the TMS, which we expect to spud in early May
Neal D. Dingmann – SunTrust Robinson Humphrey
·       Okay, then lastly, I know that TMS is still few months away, just your thoughts as far as two things there, one are you participating near-term in some of these wells, I forget it. And number two, on your wells you have coming after six months down the road, is it too early as you already determined as far as how you want to drill it below the levels now and how you want to try to frac it or complete it? Have you guys started looking at [matters] that still kind of in the process?
·       Antonio R. Sanchez, III
·       It’s definitely in the process, Chris, can give you more details here, but it’s always in the process. I mean we’re continuing to tweak our Eagle Ford completions. We’re as high as ever on the TMS. There is a long lead time associated in getting the drilling there as you know. So that’s moving along, we expect to start our first well probably no later than May. The above levels are not below, it looks like below is the preferred way to go right now. We are participating where we can, any places we’ve got leases and formed units by other operators. So we’re committing the capital. We’ve got a team in place to execute and we’re looking forward to doing, I think it’s a basin that can add tremendous upside to our prospects. Chris?
·       Christopher D. Heinson
·       Just to expand on the TMS a little bit. It’s well known that TMS is a technically challenging environment to drill and we’ve been working the technical design of our wells for a period. One of the things that Sanchez – we’re shooting to do is we’re not just trying to drill wells for the sake of appraising the acreage. We actually believe we have a good shot of making money on our very first well. And so we have spent a lot of time and effort designing the well. As far as target goes, the so called rubble zone, it’s not actually a real zone.
·       What it is, is a highly fractured area just above the Richland sand or the Richland silt which is a zone that we look towards. People have gotten themselves into trouble when they have tried to land above that Richland sand because the rubble down is just no telling how far it may extend vertically in the section. So some operators who are trying to avoid it ended up intersecting highly fractured zones when they landed north of the Richland sand. So we will be targeting just below the Richland sand that would be our target. And we think we can actually complete up until that fractured zone.
·       Neal D. Dingmann – SunTrust Robinson Humphrey
·       Chris do you have any working interest in any of these non-ops now, or, you’re just waiting for your first one?
·       Christopher D. Heinson
·       We are participating for very small interest in (inaudible) well. It’s should be fracking soon. And there are several other wells that are coming up on a non-op basis that we’re participating in
·       Stephen P. Shepherd – Simmons & Co. International
·       Okay, that’s helpful. Thank you. My next question would be, anymore detail you can give about the TMS non-op program for this year, any idea of which well should be participating in, where are those wells are going to be drilled, anything like that you can offer?
·       Christopher D. Heinson
·       Yes, this is Chris. We have participated in one well that’s not to be completed actually this Sunday, that’s the loss in well. Additionally, we’ve seen most of dozen locations units formed in an around places where we have some acreage. Now, it looks a little bit difficult to predict, because there is a fairly extensive land process around the unit formation is when those operators were actually drilled.
·       We’ve seen that most amount of activity in and around Wilkinson county, where we actually have a fair amount of acreage, that’s going to be highly active area, so we expect quite a bit of non-op.
·       Dan E. McSpirit – BMO Capital Markets
·       Yeah, thank you. You expressed drilling your first operated TMS well in the context of making a return rather than simply defining the leasehold. What [field lower] [ph] returns are being targeted and how sooner do you see the TMS competing with the returns generated in South Texas?
·       Antonio R. Sanchez, III
·       Yes, so we think about it in terms of return that is sure. We are looking at, and I’m speaking off the top of my head here, but early on when we started looking at the TMS, we looked at what the returns would be, add a call it $15 million well cost which would be at the high-end of what a single well should cost out here and then looked at them anywhere from 500 MBoe to 600 MBoe EURs all the way up to 800. What we – based on the type curves that we had build most of which were on actual data and kind of juxtaposing that to what we get in Eagle Ford we got some comfort around the shape of that type curve and we are looking at returns at those high capital costs in the 17% to low 20%. So once we got our hands around that, we figured that’s a positive return from an appraisal well and we started look at the TMS under a development scenario. And because of its leverage to oil prices and the high IP rates you can get those returns then kicked up pretty quickly with the reduction in costs.
·       So a $10 million well cost at a 600,000 barrel EUR would generate at $90 a 50% rate of return. If you go up to 800,000 barrels, you’re looking at anywhere from 75% to well over 100% rate of return. So it’s – if you use those book-ins to make a judgment on the play which is the way we looked at it we started to get really comfortable with the potential that the TMS has. And then we’ve got some experience to base it on, the first wells that we drilled in Marquis, our first two wells cost a $16 million and then $15 million and now we’re drilling them for under $9 million. So we’ve got experience in dropping well costs from that kind of a magnitude to something substantially lower.
·       So I think that the price is there. We think that if the technical challenges are solved, that the TMS is going to be offering very competitive rates of return to what we’re drilling over in the Eagle Ford. We’re not prepared to make a decision yet and we probably won’t make a decision to go into full scale development until we have a number of wells under our belt. But all the pieces are in place to turn that TMS into a huge play. And I think with the introduction of several other operators into the area more money being spent by more players generally speeds up the process that I just described. So does that kind of answer your question, Dan?
·       Dan E. McSpirit – BMO Capital Markets
·       It does, and as a follow up to that just on that discussion and I appreciate the thoughts on under your base case or may be even under your high case, TMS return scenario, is there - what acreage in South Texas does not compete?
·       Antonio R. Sanchez, III
·       Probably the northern Cotulla acreage, so Zavala and Frio County don’t compete. Palmetto certainly would compete, the best part of - in Marquis, Prost and Five Mile Creek would compete, but yeah, those lower IP rate areas where the shale is shallower in the Eagle Ford does not compete to the TMS. The nice thing about how we’ve – the way we’re thinking about timing here is by the time we go into full scale development at the TMS, we will have largely drilled up some of our core positions in the La Salle County area, like Alexander Ranch. There we’ve got about another call it year and a half of drilling there. And then the Southern part of our Palmetto area, so we’ll move up into the middle of Palmetto. We’ll continue our Marquis area development, but we’ll be able to take certain discreet assets that we have already drilled up intensely such as the Alexander Ranch asset will be the key one. That would then generate a very large amount of free cash flow that we will use to fund our TMS development.
·       Dan E. McSpirit – BMO Capital Markets
·       Got it. And then as a follow and a final question, if you invested another dollar on leasehold acquisition, where would you put it, South Texas or acquired TMS perspective leasehold.
·       Antonio R. Sanchez, III
·       What, can you give me $2 and I’ll put $1 in each. I mean it’s interesting. TMS you can’t really get a good acreage in that core area where we are.
·       Dan E. McSpirit – BMO Capital Markets
·       Okay.
·       Antonio R. Sanchez, III
·       So we are picking up bits and pieces here and there, but they tend to be either non-full interest, but we’re hoping to get into formed units by other companies, or they’re additive to our units, but we are not being able to pick up big blocks anymore in the TMS, which is why we moved early when we did.
·       Phillips Johnston – Capital One Southcoast
·       Hi, guys thanks. Just following up on plans in the TMS, your CapEx budget for the year is $60 million to $65 million and I think you are planning on drilling and completing two net wells. So I’m just wondering if you can comment on what AFE you are assuming for both of those wells and what other kind of cost here are baked into your full year CapEx budget for TMS?
·       Michael G. Long
·       I’ll let Chris talk about what we’re thinking about for our first AFE on our well. We’ve made an – as Tony explained we’ve been AFE-ed or notified that we have acreage in several units that have been formed, we are expecting those non-operated wells to get drilled out into the future. We don’t have a – our deadline is to win any of those non-op wells will start, so our estimate of capital costs is an estimate at this point. So we don’t have precision or control over the non-op. We do know what we want to do on our first well with a lot of science and then what follow-up wells might be, but I can’t speak to the timing or the exact working interest we’ll have on all those non-op wells until the final AFE with a proposed spud -date for them comes in from the non-operators.
·       Christopher D. Heinson
·       Yes, our first well is expected to cost just over $15 million, but that includes the costs for the pilot hole associated with that. After drilling that well our next well will not have a pilot hole, so we expect cost to come down a little bit from there roughly about $1.5 million maybe even little bit more if we take up a few efficiency improvements along the way after our first well.
·       Curtis Trimble – Global Hunter Securities
·       Got you. Okay. Switch gears over to the TMS, I was wondering if you could talk a little bit about the acreage movements, I know early on maybe there was some discussions about swapping acreage over in Concordia Parish [Unclear] something possibly further South and East. And then, obviously there have been some fairly significant moves in the past few months on non-op any of that surprising, any of that actually occurred and had a little bit of scuttlebutt about possibly some of the better wells the Anderson wells for instance being drilled up again, [salt domes] and maybe that leading to some incremental natural fracturing that led to better deliverability any opinion or validity to that?
·       Antonio R. Sanchez, III
·       I’ll take the first one on acreage swaps. We’re not planning any large scale acreage swaps. Many of the operators have a fairly broken up acreage position. And so what we’re all trying to do to is work together try and make sure we form as many contiguous units as possible. And so there’s some minor trading back and forth but no major acreage swaps trying to move ourselves to a better part of the play.
·       We have actually what we’ve seen is sort of the core of the TMS is collapsing down into a much narrower window. Looks like the core of the core is that sort of Southern Wilkinson County going into Southern and mid – just across Louisiana State line. But it’s been structurally quite. So we don’t see anything structurally associated with salt domes or anything as being significant contributors for the Anderson.
·       Curtis Trimble – Global Hunter Securities
·       [Inaudible]] between what you’ve seen thus far from Lawson drill data and overall depth at Horseshoe Hill area that you guys have a little non-op participation in as well?
·       Christopher D. Heinson
·       I am sorry I didn’t hear the first part of your question.
·       Curtis Trimble – Global Hunter Securities
·        in terms of content fitness, anything like that of the target zone in the TMS between the Lawson area and the Horseshoe Hill area?
·       Christopher D. Heinson
·       All right, in fact the TMS as a zone is actually relatively predictable. [Inaudible] there is not much structurally going along or over the whole region?
·       Curtis Trimble – Global Hunter Securities
·       Because everything else that’s around it [inaudible] upper and lower?
·       Christopher D. Heinson
·       Yes.
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