ConocoPhillips Eyes Natural Gas Shale Investments -Executive

March 11, 2009: 11:54 AM ET


NEW YORK -(Dow Jones)- ConocoPhillips (COP) plans to continue investing in unconventional natural gas basins and has built up positions in the Haynesville and Eagle Ford shale reservoirs, Jim Gallogly, the company's executive vice president of exploration and production, said Wednesday.

"We're going to be a player in unconventional resources in a big way in the future," said Gallogly, speaking at ConocoPhillips' analyst meeting in New York.

Gas shale reservoirs have sparked a flurry of drilling activity from independent producers including Chesapeake Energy Corp. (CHK) and Petrohawk Energy (HK), but oil majors' involvement has been limited. And producers are sharply reducing rig counts as natural gas prices tumble.

ConocoPhillips has acquired a leading position in south Texas' Eagle Ford shale, buying up 300,000 net acres ahead of the rest of the industry at low cost, Gallogly said. The company also has a position in Louisiana's Haynesville Shale.

Buck

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Yes you are right it was Skylar Phillips for awhile. These are the same 320 acres that are being put into 640 acre plots. The original lease was by Dan Naremore and he sold to Long Oil and Natural Gas Corp. It became Skylar and then Sklar Phillips and next Phillips Petroleum Co. and now Phillips Energy, Inc.

My daughter works here in Houston for Spectre Energy which was or is part of Duke Energy which was once Texas Eastern. They are doing huge project in Canada and some projects with Conoco-Phillps, and Encana. I was assuming that Phillps and Conoco are connected there in Louisiana on the Haynesville Shale wells. This may be totally wrong.

The letters come from Liskow and Lewis Law Firm and the only names showing say it is for Encana Oil and Gas (USA) Inc. and some say for Samson Contour Energy E&P. L. L. C.

AS far as we know Phillips still owns the leases. That is who the checks come from at this time.

Just for everyone's information the original lease was for $37.00 an acre in 1989. Also one other little fact. My grandfather bought 80 acres around 1900 for $2.00 an acre. He had to sell 40 acres at one time during the depression to pay off the other 40. He farmed this land and made his living and lived in his log house that he built until he died. He never received any other income from the land. My mother never received any income from the land. I am the granddaughter and I am the first generation to receive money from this land. I have been able to have some income from trees he planted and the gas royalty since 1989. It was a very unexpected gift to me from my grandfather. When I was about 10 years old I was walking across the pasture with him and there was a stick with a red flag attached to it and I asked what it was and he told me the geologist was there looking for oil and that it was too deep to drill for but someday they would come back for it and for me to remember to always keep my part of the land. We got gas instead of the oil. From this you can see that I was very close to my grandfather.
Chevron has almost ALL of the southeastern part of Panola County. A lot of that was leased by Skelly Oil in the 40's which was bought by Texaco who merged with Chevron. My parents still have some holdings there that have been HBP since 1946.
They are partners with Keystone building the Trans Canada pipeline running through East Texas also.
Is that a north-south running pipeline?
Yes, it runs from OK to the Gulf Coast.
Sandstone, oil pipeline right?
Yes, It's a 36" pipeline that will eventually have a capacity to move 900,000 barrels of oil a day. Do you know if it is possible to have gas transmission lines with valves connected to the line where gas could also be sent through it?
Sandstone, I would say definitely not since this is a commercial quality crude pipeline delivering to Texas Gulf Coast refineries.

There is plenty of gas pipeline capacity that exists are will be built over the next few years.
Thanks Les B, Also do you know if the small gas processing plant around Carthage is being expanded? BP/Enbridge are running a pipeline along the same route as the Conoco/Phillips line. Most of the oil wells in that area are old with dropping oil production?
Sandstone, both the CP line and the BP/E line are being driven by increasing imports of Canadian crude oil. Originally these imports were refined in the Midwest but as the volume increases it creates the need to transport crude oil all the way to the Gulf Coast refineries.

Duke's East Texas Plant near Carthage is actually quite large (780 MMcfd) plus MarkWest has a fairly new 175 MMcfd processing plant in the area. I am not aware of any expansions and early information indicates the Haynesville Shale gas is fairly lean and may not require much processing or treating.
Sandstone, do you know where to find a map showing just where the north-south oil pipeline runs?
COP's existing Louisiana production is in western and central Bienville Parish (Ada, West Bryceland, and Sailes) and northern Webster/Bossier (Ivan and Cotton Valley).

In Bienville, they have a line of HBP acreage that runs north/south throughout nearly the entire parish until you get close to Castor and Lucky, where CHK and El Paso are drilling. With 1. the most recent CHK map that essentially ends on the western border of the Ada Field 2. the 2.24.09 Encana map which shows the eastern boundary near Gibsland and 3. the Questar map showing a Haynesville penetration on the western edge of the Ada field, there is the possibility COG is confirming the map eastward.

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