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.

http://www.investingdaily.com/tes/18938/emerging-shale-oil-plays.html

 

Post any articles or information you believe to be relative to the TMS.

Tags: TMS, headlines, news

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Replies to This Discussion

One obvious question from the MS mineral auction is, on whose behalf is KEW Drilling bidding?  A two employee company working out of a residential address in Dallas isn't going to be drilling any wells.  The other that comes to mind concerns the section-township-range of the bid tracts.  What's the chance that section 16's in 8 different townships are the only bid tracts in one auction. 

Skip:

The woman that is behind KEW is very wealthy and has knocked the ball out of the park in other shale plays, so I am told by some insiders.

KEW has been leasing in the play for about 3 years and has a sizeable position, some of which may has already been assigned to Halcon. 

They are not bidding on behalf of anyone except themselves and they are re-selling it to interested operators for a return on the bonus and an ORRI.

~ ~ John

Thanks, John.  KEW Drilling is a trade name for MPE FINANCIAL, L.P. A LIMITED PARTNERSHIP.   I'll try to find the time to look further at their investments in other plays.  Any idea about all those Section 16's?

In Mississippi, Section 16 in each township is reserved to support  schools.  The land is owned by the state and the use of same is by lease with the proceeds going to the schools.

One of the first long horizontal wells in the TMS was the Board of Education 16H in T1N R5E.

Thanks for the clarification.  Interesting concept.  Does the state own 100% of the minerals in those sections?  Is there a separate auction for state lands other than schools?

Skip:

See there in lies the big problem we now have in this country. The Government has forgotten that "we the people" are the boss and they are the servant.

In their eyes they are now the boss and we are the servant such that they are exempt from having to live under the very rules imposed on the citizens.

The Emperor has no cloths my friend. Congressmen can buy stock on inside information learned while performing Congressional duties, while a citizen would get jail time for doing the very same thing. On and on.

 ~ ~ John

The state and publicly owned minerals are force pooled like any other mineral interest in LA. Since there is no penalty for UMIs, it is an academic question whether the state would be exempt from a penalty if there were one, although I share Skip's inclination that it would be exempt from any risk fee.

Are mineral owners also exempt from the severance taxes for the 1st few years like the oil companies are in La. and Ms.?

Royalty interests have severance tax deducted until such time as the operator of a qualifying well has applied for, been approved and received a refund.  In other words the operator is paying and deducting from first sales until the exemption is approved.  The operator will refund the royalty owners portion when they receive their refund.  As we haven't discussed this topic in quite a while I have no idea of how long the process is currently taking.

The royalty is more important than the bonus and rent figures. But when the going gets good, both royalty and the bonus/rent will come up considerably off the low. Patience is a virtue. So is Jack Daniels at times.

Cheap Shot:

Fine anything (specially the good Kentucky brown stuff) has got to sauté a little while. LOL

~ ~ John

Interesting, I just read on YAHOO message board where GDP board of directors each purchased between 4,000 to 6,000 shares of GDP each at $24.98.  Apparently they are ON BOARD!!  GO GDP!

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