TMS related news.
In recent quarters, a handful of independent exploration and production (E&P) outfits have touted their acreage in the Tuscaloosa Marine Shale (TMS), a formation that stretches from Texas to Louisiana and Mississippi. The field is far from a new discovery; famed Mississippi wildcatter Alfred Moore spearheaded drilling in the TMS in the 1960s.
The play’s proximity to the Haynesville Shale should make it easier for producers to redirect drilling rigs from the out-of-favor dry-gas play and limits bottlenecks associated with a lack of midstream infrastructure. Despite boasting similar geologic characteristics to the Eagle Ford, the TMS is far from a slam dunk, which explains the low prices that early movers have paid to build an acreage position.
Goodrich Petroleum Corp (NYSE: GDP), for example, amassed about 74,000 acres, paying an average of $175 per acre. Meanwhile, Devon Energy Corp (NYSE: DVN) has accumulated 250,000 acres on the Louisiana-Mississippi border at an average cost of $180 per acre.
Thus far, early movers in the TSM have yet to report drilling results, though management teams have indicated that these tests have been encouraging. Devon Energy recently completed drilling, coring and logging its first vertical well in the play and plans to sink its first horizontal well later this year. Denbury Resources (NYSE: DNR) and its partner EnCana Corp (TSX: ECA, NYSE: ECA) are at a similar stage in their drilling program and plan to sink a horizontal well in September.
During EnCana’s conference call to discuss second-quarter results, Executive Vice-President Jeff Wojahn described its TMS assets as “a promising liquids-rich opportunity” based on “how the rock breaks, the hydrocarbon content and gas in place, and the like.” Management also pegged the drilling costs for its first horizontal well–a 12,000-feet deep vertical shaft with a 7,500-foot lateral segment–at about $8 million.
Meanwhile, Goodrich Petroleum’s CEO provided a bit more color on his outlook for the TSM during the Q-and-A portion of the firm’s Aug. 4 conference call:
We’re very comfortable today with what we see from a geologic standpoint of going ahead and drilling wells. In fact we don’t really even see much need, at least in most of our acreage, for pilot holes. There [are] sufficient amounts of historical vertical wells that have been drilled through the Tuscaloosa Marine Shale that we’re comfortable going out and drilling today. I would characterize at least in our view that the sole or the largest single risk to the play is just one of the economic performance versus well costs. We know the Tuscaloosa is present, sufficiently thick, thoroughly oil saturated. It’s just a little unproven in that no one has drilled yet a well that’s demonstrated in the EUR horizontally that would match up to costs. And that’s just [be]cause there haven’t been really many or any of them out there that have done that.
Drilling results in this frontier play could provide a meaningful upside catalyst for these E&P operators. At the same time, if the play proves uneconomic to produce or drilling results disappoint, the low cost of acreage provides a degree of downside protection.
Post any articles or information you believe to be relative to the TMS.
It ain't all comin' up roses now for some:
Don't overlook reading the Comments to this article. I don't think the author understands how money is made in the oil patch. The debt is always high because the costs are very high , but the payoff can be tremendous.
Debt is not always high in the oil patch, look at the oil majors like Exxon. Debt is high with shale drillers, because they are always having to drill a lot of wells to keep production stable and that capital drain can cause serious problems when the commodity price collapses. Ask the stock owners of NG stocks about how money is make in NG patch.
True. The article and my comments were about the "shale" oil patch and not really about the Majors or the conventional oil patch, Major operators are not typically debt ridden. Small business operations of all types on the other hand are commonly debt ridden and under capitalized - but, the opportunity for big stock gains are greater with the likes of HK and GDP than with Exxon. Traders in shale operator's stocks like GDP and HK are not invested for quarterly dividends,they are looking for buy outs and big stock value increases that come with new oil/gas discoveries - it is not a game for "risk averse" investors. Investors that are afraid of losing money need to stick to Exxon type oil stocks, This author is speaking to people that don't understand why anyone would take a risk . No pain No gain, it is educated gambling not "retirement savings investing" when you buy shale operator stocks. IMO
Encana to divest midstream assets to focus on liquids-rich plays.
More about Austin Chalk than TMS, well update about delay hit in second Pryme/Nelson well in Avoyelles:
Latest update on Pryme-Nelson well in Avoyellles: