Skip to comments.Drilling beyond the Eagle Ford Shale
Posted on 09/23/2013 8:42:06 AM PDT by thackney
The Eagle Ford Shale is more than just the Eagle Ford.
Operators in South Texas are drilling into other rock formations, taking horizontal turns and in some cases getting big results.
While the Eagle Ford appears to be the mother lode the largest and most prolific South Texas formation several other rock layers sitting above or below it also are producing oil or gas.
Jeff Seiler, managing director of the banking firm Scotia Waterous, has tracked Texas drilling permits and found hundreds of cases of companies targeting other South Texas formations, especially the Olmos Sandstone, Austin Chalk, Buda Limestone, Edwards Limestone and Pearsall Shale, which companies are using to bolster the value of their Eagle Ford acreage.
We know these are coming on, Seiler said last week at Hart Energys DUG Eagle Ford conference. Weve already seen development plans put together and built into valuations for transactions that are on the Street.
There have been 292 permits in the Olmos Sandstone, 177 in the Austin Chalk, 60 in the Pearsall Shale, 28 in the Buda Limestone and 24 in the Edwards Limestone.
Its a small slice of the thousands of wells targeting the Eagle Ford, a 50-mile-wide swath of shale that in Texas runs from the Mexican border to East Texas.
But Lance Robertson, vice president of Eagle Ford operations for Marathon Oil Corp., said the company has started considering other formations in its acreage.
Over the early part of this year, the middle of this year, weve transitioned from being just Eagle Ford focused to looking at other horizons including Austin Chalk and Pearsall, Buda and Wilcox (Formation). And while were uncertain of the scale of value of those today, we recognize theyre filled with hydrocarbon and are going to be a value enhancer to our Eagle Ford position. Were going to go prosecute those.
Some of the companys Austin Chalk wells drilled directly above the Eagle Ford where the two formations meet have come in producing 1,000 barrels of oil per day, Robertson said.
Seiler said that Texas American Resources is bringing on wells in excess of 500 barrels of oil per day in the Austin Chalk.
And in the Buda Limestone, Beeville-based Dan A. Hughes Co. is bringing on wells in excess of 1,000 barrels of oil equivalent per day, he said.
We think these wells are below $4 million in cost, Seiler said.
The Olmos Sandstone has been a longtime target for drillers, but Sieler said its being rediscovered through horizontal wells and hydraulic fracturing, the process of pumping high volumes of water, sand and chemicals at high pressure to crack open dense rock. Among the companies finding success in the Olmos is Houston-based Swift Energy in McMullen County.
Seiler said the Pearsall also has had encouraging results and is a very thick section thats hydrocarbon rich. And he said the Edwards is on the radar screen, but has not had as much activity. Were not sure what to make of it, how much running room it has, he said.
The Eagle Ford generally produces more oil on its northern arc, more natural gas to the south and natural gas liquids in the middle. Similarly, these other formations in some areas might produce dry gas, but in another area might provide a bonanza of profitable crude oil or natural gas liquids.
Allen Gilmer, chairman and CEO of the research firm DrillingInfo, said its not just other rock formations drillers also are starting to differentiate between the upper and lower parts of the Eagle Ford, targeting different zones within the shale.
That whole trend is going to be multiple rocks producing and each of them having very different criteria as to how to optimally produce them, Gilmer said.
Of the non-Eagle Ford formations, Gilmer said the Buda in particular is starting to produce strong results. He said there have been two or three spectacular wells in the northern Gonzales County area where the Eagle Ford isnt considered viable for oil production. Some of those look like theyre going to be right in the sweet spot of the Buda.
Tony Sanchez, CEO of Houston-based Sanchez Energy Corp., said the company recently drilled an Austin Chalk well in Frio County at a cost of $2 million.
That one was principally drilled to hold a lease, Sanchez said. To be totally honest weve been totally focused on the Eagle Ford. At this point, I think weve got our hands full with it. We think that the chalk is prospective certainly, but it requires work to develop the prospect. But we know that every Eagle Ford well we drill goes through the chalk, and well log it and tie it into our databases.
The company also has looked at the Buda and Pearsall, and said most of its acreage has Pearsall potential. We just havent seen good well results yet that justify the cost, Sanchez said.
Ultimately, Sanchez and many other companies will remain focused on the Eagle Ford, where theyre getting more profit for their dollars spent. Next year, Sanchez Energy plans to spend $660 million drilling wells in the Eagle Ford.
If we could double it, wed still drill that much more Eagle Ford, Sanchez said.
Does this mean that Eagle Ford actually starts at the Mexican border, or that it extends into Mexico but nobody is paying attention to that part because it's not in the US?
There have been Natural Gas Wells in the Eagle Ford Formation on the Mexico side of the Rio Grande.
But PEMEX controls all the exploration with no foreign investment or ownership. That has been proposed to change but I don’t believe it has yet.
Consequently, little has been done on their side.
Click map to see full North America Map from a couple years ago as put out by the US Department of Energy
More Info at:
Beyond US border, Mexico primes shale potential
glad to see Tony back doing something good, making money, and not trying to be a democrap politician.....
Doesn’t the Mexican Constitution prohibit foreign involvement in their petroleum industry, which is why their big oil field (Cataral?) is running down?
There has been talk of changing that.
Guest Commentary: Mexicos energy market benefits with foreign investment
But then it has been talked about for a very long time.
The Cantarell Field has been in production for over 3 decades. While they have some enhanced oil recovery and more will certainly be done, production rates are going to decline. It isn’t a magic fountain, it will not last forever at it’s peak flow rate.
Fairly interesting quote seen recently about the shale plays:
“I am hesitant to predict what can come out of the Bakken and Eagleford shales because in 2009/2010 I didn’t think they would ever produce much at all, nearly nothing.”
The reply was:
“The price of oil in 2009/2010 was about $65. If it still was $65 those shales would produce nothing and you would have been right.”
“We will never run out of oil” is a favorite conservative perspective, and it is correct. You can always drill . . . first for porosity bubbles the size of a warehouse and that will be profitable at $50/barrel. Then as those disappear, you can drill for the bubbles the size of a Section 8 house, provided the price is $100/barrel. Then you drill for fist-sized bubbles, but only if the price is $1000/barrel.
At some point it becomes clear that the price is not measured in dollars. It’s measured in joules of effort. At that point, people start to die.
There’s a helluvalota oil down there! I’m thinking of setting a rig up in my back yard.
Make sure that you own the mineral rights first.