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.
From today's Dallas Morning News:
WASHINGTON — After 38 years of oil-import anxiety triggered by OPEC"OPEC and the Arab oil embargo, the United States may at last have found its way to clear skies and smooth sailing, says Texas A&M petroleum engineering head Stephen Holditch.
“I’m convinced we have a chance for real energy security in the next five years because of horizontal drilling and hydraulic fracturing,” he said. “It’s a big deal. We’re going to reduce our oil imports big time.”
Holditch’s forecast isn’t fully reflected in the federal government’s expectations. But you can glimpse the possibility in the Energy Department’s data.
Oil imports are down 15 percent since 2006. Domestic oil production is expected to climb every year through 2022. Biofuels such as corn-based ethanol, already equal to more than 5 percent of total oil consumption, are expected to double in the next 25 years. That should just about cover the expected increase in demand for transportation fuels over that time period.
The United States consumes a little less than 19 million barrels of oil a day, mostly for transportation fuels. Imports accounted for 60 percent of the nation’s oil consumption in 2005. Last year, it was 42 percent.
Energy expert Dan Yergin, author of a new history of oil called The Quest, said the U.S. outlook has certainly turned around.
“Because of technology, what has seemed a near-irreversible growth in dependence on imports has been reversed,” Yergin said.
CERA, the energy analysis company Yergin chairs, estimates that oil recovered with horizontal drilling and hydraulic fracturing from tight shale formations will be 2.9 million barrels a day by 2020.
“That’s a hundredfold increase from where we were at the beginning of the century,” he said.
Horizontal drilling — where a drill bit goes down vertically and is then directed on a horizontal course — opened reservoirs for more recovery of trapped oil and gas with fewer wells on the surface.
Hydraulic fracturing is used in horizontal wells to pump large, high-pressure amounts of water, sand and some chemicals to break and hold open traps of natural gas and oil. Water pressure breaks the shale, while sand keeps the rocks spread open slightly. The chemicals offer some lubrication to ease the flow of the oil and gas, and they kill bacteria.
Hydraulic fracturing has become a key environmental concern because of water contamination and air pollution from gas escaping well bores. Holditch and Yergin serve together on an Energy_Department"Energy Department advisory panel that has recommended more disclosure and better drilling practices to deal with these health and safety concerns.
Both men, however, believe that these are breakthrough, game-changing technologies.
Canadian oil sands
They will not fully replace our dependence on foreign oil.
That dependence is different than in the past, however. The nation’s leading source of imported oil, at 2.6million barrels a day, is Canada. The oil sands in Alberta Province are yielding fast-growing volumes of unconventional oil and will supply larger amounts to the United States — if infrastructure projects such as the Keystone XL Pipeline are built. The project has drawn lots of opposition on environmental grounds, some centered on fears that a pipeline spill could contaminate water supplies and some centered on greenhouse gas emissions from Canada’s oil sands production.
Imports from OPEC countries, meanwhile, have fallen 18 percent since 2008. And imports from Persian Gulf nations are down 40 percent since 2001.
All of these changes have made the United States less insecure. But oil is fungible — that is, oil is oil, no matter where it’s from. Quality may differ, but the basic price of oil is set worldwide. An oil disruption in any part of the world will raise prices everywhere as bidders seek to make up for the shortfall.
“There is only one world oil market,” Yergin said. “We will be a lot more resilient, but we are still part of that market. A disruption anywhere ends up affecting the market everywhere.”
Scott said he has seen one estimate that 30 to 42 rigs would be working next year in the Tuscaloosa Marine Shale. That works out to between 5,400 and 7,200 jobs, he added.
Article in today's (11/1/11) Baton Rouge Advocate :
Shell Oil now taking an interest in onshore U.S shale.
More news on Encana shedding assets to focus on liquids rich plays.
Devon's 3rd Quarter Conference call.
CHK rules out the TMS in conference call. Aubrey said the TMS was too rich for his blood. Ohio's Utica is wonderful until they pass a state law that bans fracing.
Maybe he is telling the truth and maybe not. Encana just told analysts that their cost was around $10 million for the Weyerhauser well but they expect that cost to go down as they drill more wells. The cost of acreage at $225 per acre for a 3 year lease and 20% royalty can't be a cost problem either. I wouldn't expect McClendon to let on that he is interested in the TMS, if he was. I question why the TMS is too rich for his blood.
Encana: " The well that we’re drilling today is not really going to be indicative of our long term development costs so it’s very difficult to peg that particular well but I think in the early the days, the wells will be, you know, in the $10 million range and as we’re able to apply scale, we’ll come down to a lower number."
Kind of tough to believe as Chesapeake has paid as much as 25k and 25% ORRI to landowners in urban areas of the Barnett Shale, and the article stated that oil and liquids are 17% of their production, yet account for 40% of their revenues. I can't give you actual figures on the relative costs of drilling and completing, though I imagine the TMS is more expensive...
Also I think you would get a higher price for TMS oil than Ohio Utica oil. WTI is just a base the actual price you receive can be +/- $20 depending on quality of oil and closeness to the actual users of the crude.
Very few of us will still be alive when and if this comes true. But we may see the 2040 decline begin.
PREDICTIONS FOR year 2100 FROM YAHOO.com finance:
Use of oil, natural gas and coal will drop to almost zero by year 2100.
These finite sources of energy will eventually become extinct, especially at our rate of consumption. Some tables have oil use declining at five percent a year after 2040. Gas is expected to decline even faster.
Hydro energy and renewable energy (such as wind and solar power) are expected to see continued increasing use, and should become our primary sources of power by 2100 and beyond.