We are hearing rumors that EOG is or has made plans to sell out their position in the Louisiana Chalk play due to poor results on initial test well and initial seismic result data from shoot.  Does anyone have any verifiable information on this subject?

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Although full scale development drilling is influenced by the price of crude, exploration drilling is required to define the economic areas and hold the leases.  It is relatively common for companies to drill lease retention wells that are not economic at current prices but will protect their land position and retain development rights for the longer term.  With the large acreage AC drilling units formed to date, it may only cost about $5K/acre to drill wells that would hold the development rights for a unit for the next ten years.  One unit well per ~2,000 acre unit will do it.  The question now is, how much time do operating companies have to sit on un-drilled leases?

  • EOG economic model is based on return on investment, not necessarily building production inventory. So, price of oil and costs to drill and market will drive EOG plans. Will be interesting to see COP results in East Feliciana Parish, which is slightly updip of Edward's Reef.

EOG is unable to calculate ROI without exploration wells, which of course also serve to hold leases.  And well cost is unknowable until the wells are drilled and completed.  No company sits on the kind of acreage that EOG has invested in waiting for the price of crude to rise.

Skip, I know you are correct about the big picture. My point about EOG is what analysts say about EOG as a company and their approch. Time will tell when it comes to the LA AC.

Time will tell alright, but the clock is ticking on those leases.  

jay

littleeasy, actually your comment is more applicable to the big picture.  My comment is specific to the LA AC prospect in its current state.  As I believe Rock Man and jay have pointed out previously, this will be a "sweet spot" play.  In other words, not continuously economic over a large area.  For this, and other reasons previously mentioned, it is of some concern that we are not seeing more indications of an exploration phase by EOG.  We can not rely on the formation of AC drilling units as a definitive indicator of coming exploration.  It is fairly common for units to be formed but never drilled.  That happened in a number of Haynesville Shale units in 2008/2009.  Forming units is cheap and a field order approving a unit makes no requirement for development.  Only wells will define the play and I thought we would have at least seen a number of permits by year's end even if no wells had been spud.

EOG has spent a lot of lease money, a lot of seismic money, SWD money.  Then shut everything down.  Clock is ticking on leasehold significantly.  No permits.  Strange philosophy to say the least.

Skip, by big picture, I meant O&G. I'm a research scientist with an interest in geology. Obviously not all areas will be equal in terms of potential production, but I believe given the uncertain geopolitical climate and the changes in US political and ecnomic outlook, players in the LA AC may be more cautious than when they planned this move. Just a guess on my part.

You could be right, littleasy.  I'm actually more interested to see what COP does in the new year.  They should be drilling the lateral in the McKowen well now and they hold a live permit for their next well.  When their rig moves, I will be looking for one or more additional permits.

Yes Skip, seems like COP activity in Kirk's LAMS Stack Play area in East Feliciana Parish is the current place of interest. Maybe they will investigate both updip and downdip sections around these Wells. I just hope they are deligent and forthcoming with their findings.

I see that ConocoPhillips leased two different tracts from east and west Feliciana in the state lease sale. 37 acres in one bid and 101 acres in another. They paid 776 per acre. There was a 44 acre tract in pointe coupe that received  no bids

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