Replies to This Discussion

Permalink Reply by jffree1 on November 4, 2009 at 3:50

I heard that remark, adubu, but I have to wonder... Devon is the most experienced shale operator around. Would they intentionaly risk damage to a good well just to "one-up" other operators? Could 37/64 choke become the new normal in East Texas?

Permalink Reply by Les Bamburg on November 4, 2009 at 3:59

Jffree, I believe choke sizes are almost a well by well case dependent upon reservoir characteristics, completion design, surface restrictions, operator, etc.

After 1-2 years of flow all wells will likely be at the same choke size - 64/64".

Permalink Reply by jffree1 on November 4, 2009 at 4:11

OK, thanks. So, as pressure is reduced the well eventually is opened to full open flow. Makes perfect sense to me.

I guess all of these wells are too new to know if/when they will need compression to move the gas? Is that something that is done on a one well basis or is it more likely to be found on the gathering system for a group of wells?

Permalink Reply by Les Bamburg on November 4, 2009 at 7:28

Jffree, operator will either add compression to the existing gathering network or install a separate parallel low (or intermediate) pressure network with compression.

Permalink Reply by jffree1 on November 5, 2009 at 2:32

Thanks, Les. I have a friend who is 70+ who builds compressor stations. He's been in Sherman for the last year. Work closer to home (for all the old dogs around here) would be a good thing. This is one of the few businesses anywhere that still value age/experience/knowledge and I salute them for being that way.

Permalink Reply by Connor Scott Thomas on November 4, 2009 at 12:41

Looks like Jurassic Exploration, Inc was right about all of the scouting as to the southern part of Texas. They have been touting the southern part of this play since day one. They must know whats going on.

Permalink Reply by jffree1 on November 4, 2009 at 12:48

CST, I hope they turn out to be 100% correct. Some of us have been skeptical just because we can't find out anything about JE, Inc.

Permalink Reply by JWC on November 4, 2009 at 14:11

Can't argue that. They have been pretty much right on. Maybe they can tell us how far South the play goes.

Permalink Reply by Wilma Watts on November 6, 2009 at 7:44

Devon Energy Commentary – Devon Energy was the operator of the Kardell #1-H well with a 48% working interest. Partner Crimson Exploration has a 52% working interest. Devon held their quarterly earnings conference call two days after they released the test results on the Kardell well. The chart at right illustrates the impressive the initial production test. Keep in mind these natural gas wells decline quickly, but the reserves can be substantial.

Devon is a large independent producer, with activities worldwide and offshore in the Gulf of Mexico. Historically many of these larger firms focus on areas outside the U.S. where potential returns are large and potential hydrocarbon resources have not been developed to the degree they have been domestically.

Prior to drilling the Kardell well Devon had drilled roughly nine wells in the northern part of the Haynesville field on both the Texas and Louisiana side. Devon had taken leases in the southern leg of the Haynesville field based on their geological interpretation which indicated the area might be productive of natural gas or crude oil.

Many of these oil and gas leases in the southern leg of the field had a three year ‘primary term’ during which the company can hold the leases without drilling activity. After that time the company must have production or drilling activity on the lands to maintain those leases past the three-year primary term.

The Kardell well was Devon’s first test of the southern leg of the field. In the conference call they noted the well’s initial test was a ‘strong indicator of the potential of the acreage’ in that area. They have decided to quickly expedite activity in the southern sector of the field. The Wall Street Journal even mentioned the well in an article on November 4th noting it was “one of the most prolific U.S. wells this year”.

By employing five rigs on the leasehold the company will attempt to hold their acreage past the primary term in this southern sector. They propose drilling 105 wells to preserve their leases. At $10 million per well, this is an expenditure of roughly $1 billion in drilling costs!

Keep in mind this is ‘real’ shareholder money – not stimulus funds or other types of economic grants. The largest towns in some of these counties have a population of 10,000 or so – so this is an incredible ‘stimulus package’ for the local economy.

During the call Devon noted the Kardell well is an ‘extremely strong well’ and that production had actually increased from the initial test data as the company attempted to recover the hydraulic fracturing fluid. The formation in the southern leg is deeper than on the Louisiana side, which means higher drilling costs but downhole pressures are also higher.

Some commentators have speculated that the shale formations in the southern area of the Texas side of the Haynesville shale are more brittle, therefore the hydraulic fracturing process is much more effective than wells on the Louisiana side of the field.

Permalink Reply by Wilma Watts on November 7, 2009 at 5:33

From the EXCO Resources Inc. earnings conference call last week:


Q: Eric Anderson - Hartford Financial: . . . And one question, do you guys had any comments on the news that [Devon Energy] announced in terms of their record well [the Kardell #1-H] in St. Augustine (County)?

A: Douglas H. Miller—Yeah. We did have some comments. We wish we owned it (laughter).

A: Harold L. Hickey — We saw it. We know Crimson very well. Oaktree is our largest shareholder and we were with them. We're not sure if it was a shale or a lime well. It's deeper, and I know Oaktree is jumping for joy so we're rooting for them. We don't have any acreage down there, but we're rooting for them."


Oaktree Capital Management L.P. is the largest shareholder of Crimson, as well as EXCO.

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