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.


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Replies to This Discussion

John, I see where Kirk Barrell said that EOG and Indigo minerals has permitted a well in Vernon Parish.  Would like to see a good well here and also some more activity in Rapides Parish now that the companies are learning how to drill a TMS well. 

Halcon strikes development deal for Tuscaloosa acreage

Apollo Global Management LLC will invest up to $400 million in a subsidiary of Houston-based Halcón Resources Corp. that will own all of Halcon’s 314,000 acres in the Tuscaloosa Marine Shale....

Read more at:

Tuscaloosa Marine Shale ("TMS") - Delineation Ongoing

Halcón operated an average of two rigs in the TMS during the second quarter and expects to spud approximately eight operated wells in the play during the second half of 2014, while running two rigs. The Company is a non-operated partner in several TMS wells that were spudded during the first half of 2014 and are performing in line with expectations. Halcón plans to participate in 10 to 12 non-operated wells in the second half of 2014.

As previously disclosed, the Company's first operated eastern TMS well, the Horseshoe Hill 11-22H-1 (92% WI - 7,060' effective lateral), located in Wilkinson County, Mississippi, achieved a 24-hour average initial production rate of 1,548 Boe/d, assuming full ethane recovery.

Completion operations are ongoing on Halcón's second operated TMS well in Mississippi, the Black Stone 4H-2 (87% WI - 5,400' drilled lateral), located in Wilkinson County. All 22 frac stages were successfully pumped; however, the Company encountered fill during clean out operations near stage 10. Halcón was only able to partially clean out the fill and additional clean out operations are underway. Flow back is expected to commence once clean out operations are finalized.

The Fassman 9H-1 (84% WI - 6,030' drilled lateral), located in Wilkinson County, Mississippi, is awaiting completion. This well is located three miles west of the Goodrich Petroleum-operated Crosby 12H-1 well and was landed in the same lower target interval. The 6,030' lateral was drilled in approximately 6.5 days, or 918' per day, which is a record in the play for the Company.

The SD Smith 1H (98% WI - 7,556' drilled lateral), located in Wilkinson County, Mississippi, is also awaiting completion. A pilot hole was drilled with a full state-of-the-art logging suite and recovered 200' of conventional core. This well was drilled in 33 days (spud to TD), after adjusting for the time it took to drill the pilot hole.

Halcón recently spudded the Shuckrow 10H-1 (87% WI), located in Wilkinson County, Mississippi, and is planning a 6,700' lateral for this well.

The Company expects to spud the George Martens 1H (97% WI), located in Wilkinson County, Mississippi, in the next week and is planning a 7,000' lateral for this well.

The industry continues to make progress delineating the play. Economics are expected to improve over time as drill days come down, competition for services increases and efficiencies are realized. Halcón continues to believe it can reduce the number of drilling days by 15% to 20% on average by year-end.

The Company has approximately 315,000 net acres leased in the TMS.

 From my limited knowledge, they better get some more rigs headed this way or they'll be renewing or losing a lot of leases in the next 2 years

From the continued lack of competition I am guessing they will not have much trouble getting new leases signed cheaply if the old ones expire. No one else has the $ balls to jump into the play with the mixed well results they are getting. It is likely that the SLC will be another Beech Grove for GDP and HK is having a problem completing the Blackstone because of fill in coming through at stage 10, either through the perforations or a crack? - hum! and the Smith? , ECA has not announced any #'s on its wells - a bad sign. The play really needs a lot of good news if the expiration of leases is to become a serious problem for the current operators. They could re-lease for a few dollars more than they originally paid in most areas. This could change with some successive excellent well results, we are still waiting and hoping for that. IMO

I agree that with the latest news there hasnt been much to get excited about. I  havent heard much on the SLC (good or bad), they are trying to prove the area around the Blackstone sites so I guess we cant judge till some results come in on all these wells. . Floyd sounded optimistic when talking about the core sample from the Smith.This area along with the SLC seems to be really thick and hopefully not more gas than whats needed for good uplift.   Drill times on the Denkleman and Smith were nothing to complain about so I guess thats a positive but all these operators need to start hitting some homeruns if this thing is to take off in 2015. Ive read where areas of the Bakken took 2 years and a lot of wells before it got rolling.  

Ive talked to a guy in the EF who is originally from this area. He  works for a company thats involved in the TMS and every other shale play. .  I asked him his thoughts and he told me that the reason we (TMS) arent seeing more action is because its a busy time in the shale playes everywhere and everyone is still as busy as they can be in East Texas.  He was confident that eventually this area will be on par with the EF or better.  Take that for what its worth and you'll still need a dollar for a cup of coffee but its something to keep hopes up

You are right about the busy shale plays - the TMS has a lot of competition for attention, $ and drilling rigs with so much area yet to drill in other proven plays. I think the SLC will only IP in the 800 bopd range, which is not terrible but will not helpful for diverting interest to E. and W. Feliciana or the stock values of the TMS operators.  TMS operators have plenty proven acreage to keep them busy in Ms. for another couple years. In my opinion, we still have through at least the middle of 2015 before commerciality will be determined - before the Beech Grove, SLC and Blackstone I was thinking commerciality by this fall. ECA keeps   postponing their determination. Hurry up and wait some more unfortunately.

I have always thought that the TMS would suffer or be "high hanging fruit" as compared to the other shale plays now in full swing.  The EFS and the Bakken are fully proven and great producers, why would any company with an interest there divert either capital or resources from those areas when there is still so much going on to a more complicated and expensive area? 

The above is why I think we see the cast of characters we do in the TMS.  Now, the one big upside for the TMS, and not in a comparison sense to any other area, is that it is basically proven that the oil is there in the rock.   No company is going to waste time and resources speculating on an area where the oil presence is speculative.  But they will risk time and resources if the challenges are mechanical and production related.  The O&G industry is about as resilient and innovative as anything in the world and if the juice is worth the squeeze they will figure it out, sooner if the money makes more sense. 

There are several upsides ive seen.  90+% oil production of LLS and the location of the play in proximity to the Mississippi River / Gulf coast terminals have to be worth something.  As mentioned, Floyd Wilson claimed the 200' log from the SD Smith was the best seen in the TMS.  From the little reading ive done on logs its hard to not get excited over this.  Especially considering Mr. Wilsons hesitation of releasing any information.  He reminds me of some of these SEC football coaches press conferences.  They give just enough info to create more questions. 

I am not an investor but it does seem curious that stock prices(GDP and HK) seem to rise or fall just before the public is informed about the recent results of their latest wells. Some big traders seem to have better info than the average investor. Watching GDP yesterday is an example - I predict the SLC will be a disappointment based on GDP stock tanking in advance of the IP announcement and the previously unrevealed problems on the HK Blackstone have been hurting HK stock for a few weeks and IMO took the steam out of any potential stock price rise yesterday, despite their good earnings report and positive comments on the TMS. There seems to be a pattern of ups and downs in stock prices in the days just before a well result is announced. Am I wrong on this?

I don't keep up with the particulars of stock prices and fluctuations because it basically has no relevance in my business.  IMO there are two general factors causing stock volatility for TMS operators.  One is the heavy promote by HK and GDP, much less so by ECA.  The higher companies build expectations, they farther they have to fall when results don't support those expectations. The other is how many eggs does each company have in the TMS basket.  ECA has few in relation to all their other proven areas of operation and exploration.  HK  has Bakken and El Halcon at the top of their operations reports but a good bit of exposure to the TMS.  GDP is all in.  As has been mentioned in prior discussion threads by members with deep industry experience and personal knowledge of Goodrich Petroleum, they have bet the farm.  So when less than stellar results become public it weighs much more heavily on GDP even if the results are not from their wells.  Any TMS news that is negative to neutral is going to have the greatest impact on GDP stock.


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