if frac succeeds shareprice will rocket, page-15

http://www.platts.com/weblog/oilblog/2009/11/06/it_wasnt_so_lon.html


New fashion in E&P: gas assets, but with liquids 'topknot'
By Starr Spencer on November 6, 2009 1:25 PM | No Comments | No TrackBacks

It wasn't so long ago that upstream companies were stampeding to buy natural gas properties. For a few years in the late 1990s and early 2000s, it seemed like every CEO's wish list included stakes in what was fondly called the "North American gas fairway" stretching from New Mexico to the Canadian Arctic.

A lot of the frenzy stemmed from what was then a growing gap between North American gas demand and the ability of industry to deliver the goods. Companies were reviving long-dormant LNG plants and planning dozens of new ones. Gas was a trendy commodity, and corporate presentations routinely included maps sporting company logos of the western North American gassy continental corridor that proudly boasted their regional holdings.

A rash of gas-weighted independents such as Chesapeake Energy and EOG Resources bulked up and attained industry prominence chiefly on that commodity.

But what difference a decade makes. Now oil prices are robust and gas prices are pushing slowly up -- albeit how long this will last is uncertain -- many US corporate managers are now hedging their bets by chasing properties that contain sizeable gas pools with healthy liquids streams.

"Liquids-rich is good," Bob Simpson, Chairman of XTO Energy, said during his company's earnings conference call this week, noting that the company, once overwhelmingly weighted to gas, has stepped up its oil and liquids mix in the last couple of years.

Quicksilver Resources, a large operator in the giant Barnett Shale gas field in north Texas, was one of the first independents to exploit the "gas-plus" resource there. EOG Resources was another pioneer who deliberately chased the Barnett's oil window which is chiefly located in that play's northern rim.

At the time these companies began pursuing more liquids content in gassy properties a few years ago, gas was still riding high at prices that rarely dipped below $5/Mcf and during peak usage months often rose into the double-digits. But in the last year or two, gas supplies have done an about-face. In an unexpected twist on expectations earlier in the decade, gas is suddenly not scarce but abundant, thanks to the Barnettt and other shale plays where wells have been drilled that boast astounding production rates.

Besides the Barnett, one promising gas play with liquids topknot is the Eagle Ford Shale in South Texas. There, companies are already talking up the play's liquids shots even though testing is in an extremely early stage. But many companies say they are encouraged by what they are finding and say the gas there is extremely rich at up to 1200 BTU.

Pioneer chief operating officer Tim Dove, for example, said that if his company's first Eagle Ford well, which flowed 11,300 Mcfe/d, were dry gas, it would have captured $57,000/day at a gas price of $5/Mcf. But the gas, plus gas liquids and condensate, boosts that to a robust $96,000/day.

The liquids component "may be one of the keys to Eagle Ford economics being very competitive as compared to several other shale plays," Dove said.

And even hard-line gas gun Chesapeake, whose properties are today about 8% oil-prone, wants to become oilier to the tune of about a 20% leverage over time, according to CEO Aubrey McClendon.

Anadarko Petroleum is also chasing more oil-oriented plays. Besides its own Eagle Ford operation, the big independent is active at the West Texas Haley gas field, where its most recent well in the Bone Spring area yielded about 3,000 Mcf/d with 1,000 b/d of condensate.

"We like what we're seeing there on the economics, based on liquids recovery," Bob Daniels, Anadarko Senior Vice President, Worldwide Exploration, said in the company's recent earnings call. "We have teams out looking around the country to see if there are other (pure oil or gas-with-oil) plays we'd like to get into."