Goodrich Touts Tuscaloosa Marine Success Despite Soft Shale Worries
Located within the Texas-Louisiana Salt Basin and straddling the state line between Louisiana and Mississippi, the Tuscaloosa Marine Shale play has been touted by some as the next “big thing,” perhaps even – wait for it – the next Eagle Ford. However, some early wells in the Tuscaloosa did not always yield the results that were expected, and that created a perception by some that the clay-like nature of the rock in the formation was limiting production.
That perception began to change back in February with Goodrich Petroleum Corp.’s prolific Crosby 12H-1 well in Wilkinson County, Mississippi. While one good well does not an Eagle Ford make, the Crosby well proved that whatever challenges the Tuscaloosa Marine Shale offered could be overcome. In fact, the company is doubling down on the Tuscaloosa after issuing 6 million shares of stock Oct. 15 to fund the accelerated drilling program in the Tuscaloosa Marine, according to a press statement.
Goodrich is adding a second horizontal drilling rig in the Tuscaloosa, and said it expects to have five working rigs – all horizontals – in the formation by the end of 2014. The total capital expenditures for 2013 are expected to be $255 million, up from the previous estimates of $230 million, with the increase used for the second drilling rig, Goodrich said in a press release.
Goodrich expects to spend $375 million in the Tuscaloosa Marine play in the two-year period of 2013 – 2014, and would like to spend more. The total estimated 2014 capex budget is $375 million, the press release said.
So, is Goodrich taking a leap of faith, or were those who doubted the potential of the Tuscaloosa too quick to dismiss it?
At the moment, the answers appear to be no and yes, respectively.
In hydraulic fracturing, water, chemicals and sand are pumped into underground fissures at high pressure. The sand holds the walls of the opening apart, allowing oil to flow up the well. Clay-like material can more easily absorb some of the water used from fracking, rather than fracturing from the pressure. And when fractures in softer rock do occur, the soft rock will sometimes cause the cracks to seal, preventing some of the oil from escaping.
Energy companies first began targeting the Tuscaloosa for the potential there – as much as 7 billion barrels of oil, according to the Basin Research Institute, Louisiana State University. However, the idea that the Tuscaloosa might not live up to advance billing took hold as activity in the Tuscaloosa got off to a slow start, in part due to the fact that many energy companies had committed their finite resources elsewhere. A lack of activity in parts of the shale left Louisiana with few, if any, rigs running in the state, Don Briggs, Louisiana Oil and Gas Association president, said in a statement earlier this year.
The perception that the softer rock would necessarily limit production has since been disproved. Shale formations offer their own challenges, and the Tuscaloosa Marine is no different; its hydrocarbon deposits are at a greater depth than, say, the Eagle Ford. However, the softer rock does not seem to be a major hurdle for drillers in the Tuscaloosa play.
In July, an Oklahoma-based independent pulled stakes from the Tuscaloosa Marine, and some parties misread the message. Devon Energy Corp. sold its two-thirds share of 277,000 leased acres to Goodrich for $26.7 million in July, according to the companies. The price was a fraction of what equivalent acreage in the Eagle Ford formation in South Texas would go for, and it increased Goodrich’s holdings in the Tuscaloosa to 320,000 acres, making it one of the formation’s chief players.
Devon’s decision to sell was a business decision, and was made with an eye toward what was going on in the market, a spokesperson for the company told Rigzone. The company evaluated several formations beginning in 2010 and 2011, and it made sense for the company to concentrate its resources elsewhere.
“We’re in several places, including the Mississippian-Woodford Trend, the Permian Basin, the Panhandle and Wyoming. We’re competing for capital, and you can’t be everywhere,” the spokesperson said.
With Goodrich now a major player in the Tuscaloosa, the company is being watched closely by others hoping to hit the jackpot in the formation. And thanks to the continued success Goodrich is having with one of its wells, the word has been getting out.
Goodrich’s Crosby well showed the potential of the Tuscaloosa formation. The well peaked at a 24-hour average rate of 1,300 barrels of oil equivalent per day, according to Goodrich president and chief operating officer Robert C. Turnham. Within the first five months of production, the Crosby well produced 100,000 barrels of oil equivalent. The total was comprised of about 1,200 barrels of oil and 600 million cubic feet of gas per day over 5 months, Turnham told Rigzone.
“The Crosby well has an oil figure of 92 percent, compared with a typical figure of 85 percent for wells in Eagle Ford. Some wells in the Tuscaloosa are as high as 96 percent oil. In one-half the time, it is producing as much as the Bakken formation,” Turnham told Rigzone.
The peak flow of the Crosby well, which was in heavy clay, and therefore represented more of a worst-case scenario for fracking in the Tuscaloosa Marine, was achieved on a 15/64 inch choke to maintain maximum reservoir integrity, and the well was fracked with 25 stages and has about 6,700 feet of usable lateral, Goodrich stated in a February press release.
A rise in Goodrich’s stock price in recent months is being attributed by the Tuscaloosa Trend blog in part to the company’s investment in the Tuscaloosa Marine Shale, and to its success with the Crosby well.
So, what did Goodrich do so differently from other early players in the Tuscaloosa, or were they just lucky?
It is not just luck. The lateral lengths used, and the distance between them, are among the factors that have been critical to Goodrich’s success, Turnham said.
“Tuscaloosa Marine Shale does have a higher clay content than some formations, so we use a clay stabilizer to basically keep the clay more docile, and we use more proppant. Also, we use engineering practices that have been successful in other formations, like having shorter intervals and 270-foot laterals,” Turnham told Rigzone.
While the Crosby well has been prolific, it is not ideally located within the Tuscaloosa formation. The well is in an area of the Tuscaloosa with the highest clay content, yet it is one of the highest-producing wells there so far, Turnham noted. So, that puts to rest the notion that drilling in the clay-like material limits output.
As for the cost of acreage in the Tuscaloosa Marine, it is substantially higher than what Goodrich paid for when it bought Devon’s land, but it is substantially lower than acreage in established formations like the Eagle Ford formation, where acreage can be north of $20,000 per acre.
Turnham put the current market rate for acreage in the Tuscaloosa Marine Shale at close to $3,000 per acre, with the potential to go higher someday.
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