St. Helena well’s initial production spurs interest
The Encana Weyerhauser well, completed in November, averaged 784 barrels of oil per day and 309,000 cubic feet of natural gas, according to Encana’s filing with the state Department of Natural Resources.
“This is certainly a key well. There’s no doubt,” said Dan Collins, a Baton Rouge landman who spent much of last year negotiating lease agreements with landowners in the shale.
“You know, 800 of anything coming out of the ground daily is a lot,” Collins said.
That’s especially true when the anything in question fetches nearly $100 a barrel.
Around two dozen wells have been drilled or are being drilled in the Tuscaloosa Marine Shale, an oil-rich formation that covers Louisiana’s midsection. Energy companies have leased more than 1 million acres in the formation, but so far the firms aren’t sharing much of their early production figures.
Kirk A. Barrell, president of Amelia Resources, of Texas, said before the formation can be considered economically viable, 10 to 20 wells will have to be completed.
“You need the initial (production) rates for 10 to 20 wells, but you also need to get 12 to 15 months out and see what the decline of that rate is,” Barrell said.
Still, Collins said it appears the energy companies believe they have something.
Oil companies have proposed a number of wells and discussed putting multiple drilling pads on landowners’ property, Collins said. The shale’s future remains to be seen, but there probably wouldn’t be so much activity if the energy companies didn’t believe their investment is worthwhile.
Encana has leased around 270,000 acres in the play, has completed one horizontal well, and has two new wells under way, according to its investor presentations.
Encana spokesman Alan Boras said he could not discuss any details of the company’s Tuscaloosa wells.
But the company will release more information during its fourth-quarter earnings report, scheduled for Feb. 17, Boras said.
A lot of people think every well in the Tuscaloosa should produce 1,000 barrels a day, but it takes time for drilling companies to figure out the best approach, Barrell said.
Barrell, the author of a blog on the Tuscaloosa Trend, said people forget or don’t realize that the early results varied from wells drilled in the Eagle Ford Shale in Texas.
While there were a few good wells whose maximum production was around 1,000 barrels per day, there were a number of wells whose daily production never reached double figures, Barrell said.
Collins said in order to recover the millions in drilling costs, a well’s initial production has to be pretty strong because the production curve declines pretty rapidly.
Shale wells’ production rates generally fall about 75 percent after 12 months.
“I liken it to a ski slope. We certainly don’t want the black ski slope. We want one of those greens or blues that’s going to … gently drop over time,” Collins said.
Gifford Briggs, vice president of the Louisiana Oil and Gas Association, said the Encana well’s results will encourage additional testing.
But it’s difficult to say how significant the well is without knowing the costs and how long the well will continue producing at the same rate, Briggs said.
In this early phase, Encana and other companies operating in the Tuscaloosa are still trying to answer a number of questions, such as what is the right depth to drill and how to get the most effective fracture, he said.
Wells in the Tuscaloosa are drilled vertically for around 11,000 feet and then horizontally. Drillers then fracture the formation in multiple stages, forcing millions of gallons of water, mixed with sand and/or ceramic and chemicals into the formation to crack the shale. The sand and ceramic materials prop the cracks open, releasing the oil.
Fracking has drawn criticism from environmentalists and some landowners, who say the practice pollutes the air, contaminates water and consumes too much water. The oil and gas industry’s position is that fracking has been used for more than 50 years on thousands of wells with no evidence of groundwater pollution.
Collins said leasing activity in the area has slowed this year as companies have turned to drilling, but Barrell said his firm and its partners are still actively leasing.
Lease prices in the Tuscaloosa Marine Shale, compared to other shale plays, remains a “great, great value,” Barrell said.
Last year, leases were going for around $150 an acre.
Briggs said he has heard that leases are fetching $250 to $500 per acre.
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