Found two articles on Woodford shales gas drilling and production for Newfield and Encana. Newfield especially is encountering very good results from horizontal drilling of the woodford shale and both it and Encana (the biggest gas producer in the US) are optimistic about the Woodford shale prospects, particularly that it could be as good or even better than the Barnett Shale.
This bodes well for THK, particularly if Devon is the operator for its 12.5% interest wells. Devon is the industry leader in Barnett shale gas production, and if anybody can get gas out of the Woodford, Devon would be it. Certainly the woodford play is generating a lot of interest; it's not bad when the premier gas producers in the country are after the same play as THK.
One caveat, one of the analysts thinks gas is going down to USD5 but I think he's dreaming. Gas has now just about bottomed and the long term trend is UP.
Newfield Provides Update on Woodford Shale Drilling Program Thursday, March 23, 2006 Latest Oilvoice Headlines
Newfield Exploration Company today provided an update on recent drilling successes in its Woodford Shale play in Oklahoma's Arkoma Basin.
Since October 2005, Newfield has drilled or participated in eight horizontal wells in the Woodford Shale play, of which five are currently being completed. The most recent Newfield operated wells include: the Parker 1H-36 (NFX 73% working interest) with initial production of more than 6 MMcf/d and production after 14 days of 4.8 MMcf/d; the Reeder 1H-10 (NFX 80% working interest) with initial production of 3 MMcf/d and a flow rate after 7 days of 2.6 MMcf/d; and the Whitlow 1H-27 (NFX 57% working interest) with initial production of 3 MMcf/d and a flow rate after seven days of 2.4 MMcf/d. The Reeder and the Whitlow wells were recently fracture stimulated and are still unloading fluids. Newfield holds interests in three earlier horizontal wells operated by another company.
"We are very encouraged with our early successes in the Woodford Shale Play," said Lee K. Boothby, Newfield's Vice President, Mid-Continent. "This is a 'home-grown' play and our dominant acreage position was leased between 2003 and 2005. The combination of our 100 vertical wells and recent horizontal results helps support our belief that we can drill and complete horizontal wells for approximately $4.0 million (gross) and recover 2.5 - 3.0 Bcfe per well."
Newfield has an interest in about 110,000 acres in the Woodford Shale Play - an area that covers 60 miles from north to south and 15 miles from east to west primarily in Hughes, Coal and Pittsburg Counties, Oklahoma. Since 2003, Newfield has drilled about 100 vertical wells, which currently provides gross production of approximately 41 MMcfe/d. Drilling efforts to date confirm the extent of the Woodford Shale throughout the Company's acreage position. The Woodford Shale ranges in thickness from 120 - 240 feet. To better exploit the shale's natural fractures, drilling efforts began focusing on horizontal wells in late 2005.
In 2006, the Company plans to drill about 65 wells in the Woodford Shale - 45 are expected to be horizontal. Newfield has six rigs running in the play and four of the rigs are drilling horizontals.
EnCana, EOG Bet West Texas Deposit May Boost Natural Gas Output March 16 (Bloomberg) -- EnCana Corp. and EOG Resources Inc. are betting a West Texas natural-gas deposit may be as lucrative as a nearby field, the second-most productive in the U.S.
The producers bought hundreds of thousands of acres in the new formation, known as the Woodford Shale. Using techniques that improve the flow of gas from beneath hundreds of feet of rock, they are starting to tap the deposit.
Woodford may rival the Barnett Shale, located near Fort Worth, EOG Chief Executive Officer Mark Papa said. Output from Barnett rose fivefold in five years and exceeded every area except the San Juan basin in Colorado and New Mexico. The gas is needed to counter declining output from older fields, which helped push the average U.S. gas price to a record last year.
``It could be better than the Barnett,'' said Ben Dell, an analyst at Sanford C. Bernstein & Co. in New York, as geological features point to higher gas pressure and potentially greater output. ``It's in the early days, and I don't think the investment community's really woken up to that yet.''
Oil was discovered in the Woodford region in the 1920s. Companies such as EnCana, the largest gas producer in the U.S. and Canada, and EOG are working there to boost production after declining output from older fields caused prices to rise.
EnCana is the biggest holder of drilling rights in the region, according to Alan Boras, a spokesman for the Calgary- based company. EOG, based in Houston, referred to Woodford as a ``mystery play'' while buying up rights and only identified the location last month.
Share Gains
``It's a very exciting play and we're optimistic,'' said Brian Hicks, a manager with U.S. Global Investors Inc. in San Antonio, Texas, who holds 230,000 EnCana shares in a fund he co- manages. The Woodford prospect fits EnCana's strategy, he said, and ``they certainly have the expertise and technological background to be able to enter that area.''
Shares of EnCana gained 54 percent last year and 34 percent the year before that. They are up 3 percent so far this year. EnCana shares carry a ``buy'' rating from 16 analysts, eight ``hold'' ratings and three ``sells.'' Shares of EOG Resources more than doubled last year; they are down 6.1 percent so far this year.
Companies seeking gas from the Woodford deposit are buying land in Culberson, Reeves, Loving and Ward counties, an area the size of New Jersey that has 25,000 residents. The number of drilling permits issued in those counties doubled last year, state records show.
Lighting the Fuse
The region's potential is ``huge,'' said Stephen Ruppel, a research scientist at the University of Texas at Austin. Geologists are only now analyzing the area's gas deposits in depth, he said, because success in the Barnett Shale ``really lit a fuse.''
While the Newark East field in Barnett was discovered in 1981, according to the U.S. Energy Department, it only became a major source of supply in the past six years. Newark East ranks as the fourth-biggest U.S. gas field, according to the agency, and had the second highest output in 2004.
Shares of Mitchell Energy & Development Corp., a company that pioneered methods to tap Barnett's deposits, more than doubled in value in 20 months before a $3.5 billion takeover by Devon Energy Corp. in August 2001.
Oil and gas producers passed over shale formations such as Barnett and Woodford for a century because the fuel is trapped beneath rock.
Passed Over
Mitchell Energy improved techniques to fracture rock deep underground to increase the flow of gas. Deposits requiring use of these methods, more elaborate and costly than traditional drilling, are known as ``unconventional.''
The Rocky Mountains, where many companies are tapping unconventional deposits, will probably pass the Gulf of Mexico this year as the largest source of gas for the U.S., according to a report this month from the Energy Department.
Surging gas prices made unconventional drilling worthwhile. Benchmark U.S. gas futures are trading at about $7 per million British thermal units this month, more than triple the average price of $2 in the 1990s. They hit a record $15.78 in December.
EnCana is boosting output with unconventional gas projects in Texas and the Rocky Mountains. ``They've made acquisitions and been pretty aggressive in buying land,'' said Garey Aitken, a fund manager at Bissett Asset Management in Calgary, which holds more than 4 million EncCana shares. ``They've done a good job with that.''
Grabbing Acreage
Production from the Barnett Shale began to surge in 2000, according to data from the Texas Railroad Commission, the agency that oversees the state's gas production. Output jumped to 502.9 billion cubic feet in 2005 from 101.4 billion in 1999. EnCana and EOG Resources both produce gas from the Barnett Shale.
``Everybody's been looking for the next Barnett Shale look- alike,'' said J. David Anderson, an analyst at UBS Investment Research in New York.
EOG controls 126,000 acres in Culberson County where the Woodford and Barnett deposits overlap, and disclosed the fields on a Feb. 2 conference call. EOG said its Woodford holdings may yield reserves of 2 trillion cubic feet.
EnCana holds 675,000 acres within the Woodford region. Vice Chairman Glyn Morgan, citing ``competitive issues,'' declined to give reserve projections for his company's properties.
``Everybody kept it on the down-low while they were grabbing acreage,'' Anderson said.
Several smaller companies also are in the area, including Abraxas Petroleum Corp. of San Antonio, whose shares doubled in the past year. Abraxas made most of its acquisitions in the area during the mid-1990s and was interested in conventional drilling for oil at the time, President Bob Watson said.
``We were lucky to be there,'' Watson said in an interview. ``The unconventional reservoir play developed around us.''
`Tough Drilling'
EOG'S well tests had positive results, said John White, an analyst at Natexis Bleichroeder Inc. in Houston. Even so, it is ``far too early'' to conclude that it will be as productive as Barnett, he said.
Woodford has thicker, harder rock than Barnett does and therefore will require bigger rigs and longer drilling times, increasing the expense.
``It may be tough drilling conditions, but if the gas is there similar to the Barnett, and in a much thicker section, it's certainly worth drilling deeper wells for the pay,'' said Glenn Darden, chief executive officer of Quicksilver Resources Inc., a Fort Worth-based company exploring in the Woodford region.
Because of the costs, development may stall if gas prices decline further, said Dell, the Bernstein analyst. U.S. gas futures, which set a record of $15.78 per million British thermal units in December, are now trading around $7.
``I suspect you may see some slowing up if you go down to $5 gas in the next month,'' Dell said. ``That will be a good test of how good they think it is.''
THK
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