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!

Monday, July 22, 2019

EOG Austin Chalk Permits & Results

Over the past 2.5 years, EOG Resources has filed numerous permits for Austin Chalk wells spanning across South Texas and Central Louisiana.  In the past few months, they've added three new permits in Webb County, Texas.  The concentration of their activity has been in the prolific Karnes Trough.  EOG has outperformed the competition in this play to date.  The chart below depicts the average six month cumulative production (BOE).  Austin Chalk 3.0 continues.

Source: DrillingInfo

Source: DrillingInfo

Friday, July 19, 2019

Austin Chalk Eras

The Austin Chalk first produced in Texas in 1922.  The real first active era of drilling was during the 1970-80's drilling boom.  Most of the wells were vertical in search of naturally occurring fractures in the chalk.  That era ended with the crash in oil prices.

Austin Chalk 2.0 kicked off in 1990 with the advent of horizontal drilling.  This era saw hundreds of wells drilled horizontally in search of intersecting more naturally occurring fractures.  Giddings Field in Texas was heavily drilled during this time.  Austin Chalk 3.0 kicked off approximately in 2016 with the new strategy of hydraulically fracturing areas with higher porosity and hydrocarbon saturation.  Ironically, the most active areas in Texas today are where poor results were found in the 1990's.  Hence, find the porosity and saturation, not the abundant natural fractures.

Tuesday, July 16, 2019

Austin Chalk - Oil Gravity

As the oil and natural gas prices have oscillated wildly over the past fourteen years, companies have shifted from one commodity to the other.  It's been a wild ride.  The recent capitulation in natural gas prices might cause another pivot to oil for some companies. 

The Austin Chalk formation has produced a significant amount of oil across Texas so the oil and gas windows are well defined.  Much less production in Louisiana presents some unknowns with regards to oil gravity in the new exploratory areas of the play.

The maps below were constructed from thousands of completions in Texas.  The western portion of Louisiana has sufficient control to confirm the trends.  These maps have been "clipped" where little data control exists.  The "blue" outlines on the maps define Austin Chalk field boundaries.  In Texas, Giddings Field has a broad range of oil gravity from 30-63 API.  Active drilling today at Giddings Field in Washington County is focused in the range of 45-60 API gravity. EOG's recent "monster" wells in the Karnes Trough range from 38-47 API gravity.  Pearsall Field ranges from 32-35 API.  Brookeland Field in East Texas ranges from 37-60 API.  Masters Creek in LA-West ranges from 39-59 API.  ConocoPhillips' first two wells in Louisiana produced 36-37 API from their initial production.  A historical producer from 1996 north of the ConocoPhillips Hebert #1 produced 43 API from 12970'.

Tuesday, July 9, 2019

EOG Throws A Curve Ball

A couple of months ago I received phone calls with the rumor that EOG was drilling a Wilcox well in Pointe Coupee Parish.  I responded "that's nonsense".  A few weeks ago, EOG filed a permit for a 17100' vertical hole targeting the Austin Chalk (permit below).  Yesterday on SONRIS, plans for a Wilcox test and possibly plans for a Wilcox horizontal well were revealed.  Never say never.  There are some "wildcatters" left in the industry it appears. 

Based on offset wells, EOG plans to perforate and frac a 20" zone in the Lower Wilcox from 13450-70'.  Logs from an offset well are presented below with an estimated correlation for the two targeted zones.  Logs haven't been released on the Brunswick as of today.

The SONRIS data indicates that a horizontal might be drilled with the lateral covering 13062'-18205'.  If 13062' is the TVD, then the lateral will be ~388' above the vertical perforated zone.  EOG's plan should become more clear in the coming weeks.

This target zone represents early Wilcox progradational, lowstand sands with repetitive coarsening upward parasequences.  The Wilcox sands are "dirty" and low permeability with a very complex mineralogy.  They also have very diverse clays and determining "pay" and water on logs can be very challenging.  

This is clearly a "wild" test.  I'm perplexed, but hopeful that a new shallow, oil-bearing unconventional target gets added to the LAMS Stack.  Maybe we'll reach a "Permian-like" 3000' hydrocarbon column after all!

Monday, July 8, 2019

Regional Geology - Understanding the Basin

I believe that one of the key factors for most of the "capital destruction" in Shale 1.0, "The Great Land Rush", was due to two factors.  The first is that the land teams got too far ahead of their technical team's evaluation.  Very large acreage blocks were at risk of being lost so the company chose to invest in the acreage before their technical team had completed a thorough analysis.  I recall a story in Colorado where the land team of a very large independent leased an area where the Niobrara was outcropped at the surface.  Field trip opportunity for the geos!

The second reason is that the technical teams only focused on the "zone of interest" and spent little time gaining an understanding of the basin as a whole.  The regional structural, stratigraphic, and geochemical framework is so important.  The formations below and above the zone of interest provide vital details. 

This phenomena played out in the TMS during its first run from 2010-14.  Mudlogs and resistivity curves were the focus for many.  Now with interest increasing in the Austin Chalk, I'm not sure if many have invested the time to understand the basinal configuration and history.  The old science of "trendology" appears to be the "tool of choice" to date in the LA-West region. 

Austin Chalk 3.0 in Texas is being driven by the mapping of matrix porosity.  The current "hot spot" for drilling in Texas is located where horrible results were found during Austin Chalk 2.0 in the 90's.  Understanding the spatial distribution and thickness of porosity, saturation, geomechanical, and geochemical parameters is now the key to this current puzzle.

The maps below provide some regional views incorporating significant geological structures, salt features, bouguer gravity, and a simplified structural map on the Base of the Austin Chalk.  In the early 90's while at Amoco, I spent five years evaluating this basin incorporating paleo, 2D/3D seismic, logs, production, conventional core, and drill cuttings.  The most significant aspect across this basin is understanding the impact of the different Lower Cretaceous shelf edges and the prominent role that salt played with regards to deposition and structure.  Updip and downdip of the Fredericksburg Shelf Edge are two "different worlds" geologically.  The bouguer gravity map below illustrates the major difference on strike between LA-West to LA-East.  The ancestral Mississippi River created a very different depositional history in LA-East compared to LA-West.

Salt ridges and piercement domes greatly impacted the depositional patterns of the Tuscaloosa sands.  The most prominent Tuscaloosa field, Port Hudson, sits on top of a piercement salt dome.  Salt ridges guided the Tuscaloosa fluvial systems into the basin.  For the Austin Chalk, it will be interesting to see how salt-induced fracturing impacts the frac jobs and producibility of the formation.  Some fracturing combined with good matrix porosity should be a good combination.  Too much natural fracturing combined with a large proppant frac might connect with multiple water sources negatively impacting production.  These structural aspects will be important to evaluate as the results come in.


Wednesday, July 3, 2019

Active Rigs - July 2019

The LAMS Stack Play has four active drilling rigs.  Let's hope for this number to continue to increase.

Source: DrillingInfo

Source: DrillingInfo

Tuesday, July 2, 2019

Oil Price (WTI)

The "puck chasers" on Wall Street have expressed their "loss of love" for the oil and gas sector.  The chart below illustrates the rollercoaster ride of oil prices the last 3.5 years.  It's hard to plan a business when your product's price is so dynamic and unpredictable.  Venezuela, Russia, Iran, Saudi Arabia, and our tweeting President will likely keep this "wild ride" going for some time.