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EOG mum on location of 'look-alike' play Independent won’t pinpoint Barnett Shale mystery play; natural gas reserves estimated at 500 to 800 bcfe By Ray Tyson Petroleum News Houston Correspondent
Independent producer EOG Resources has caused quite a stir in industry with its mysterious Barnett Shale ‘look-alike’ play, located somewhere in the vast expanse of Texas and a good distance from Fort Worth in East Texas, home of the prolific Barnett Shale field, among the hottest gas plays in the United States.
EOG chief executive Mark Papa lately has been talking up the company’s position in the Barnett look-alike shale play, willing to discuss with analysts and investors everything from reserve estimates to drilling plans on EOG’s current 125,000-acre stake in the mystery play.
However, Papa and the company refuse to disclose the play’s exact location, supposedly for competitive reasons while EOG negotiates for another 25,000 acres in the area, according to the company.
Papa told analysts at the recent UBS Global Oil & Gas Conference in Austin that an EOG competitor, described by Papa as a “large cap peer company,” apparently had accumulated a large stake in the play similar in size to EOG’s position. Vintage grabbed 135,000 acres in Palo Duro “All I can say is that it’s somewhere in the state of Texas hundreds of miles from Fort Worth,” EOG spokeswoman Marie Baldwin said June 1.
Industry speculation has the Barnett look-alike mystery play located in the Palo Duro Basin just south of the Texas Panhandle, or possibly near El Paso on the western edge of the Lone Star State.
Vintage Petroleum hardly qualifies as a large independent referred to by EOG’s Papa. But the Tulsa, Oklahoma-based producer has acquired more than 135,000 acres in the Palo Duro Basin, roughly the amount of EOG’s stake in the mystery play, and currently is among the largest acreage holders in the region.
Robert Phaneuf, Vintage’s vice president of corporate development, who also addressed the UBS conference, said Vintage had received some core results from the company’s first well in the Palo Duro play and that results from a second test well were expected soon. Vintage not disappointed “To date all the information we’ve seen from the cores are not disappointing to us relative to our expectations,” Phaneuf said.
At the UBS conference, Papa made available an EOG chart showing reserve estimates of 500 to 800 billion cubic feet of gas equivalent on the company’s portion of the Barnett look-alike shale play.
He said that based on information gathered from deeper wells drilled in the area, the play is about 350 feet thick and should produce around 120 bcfe per square mile, compared to 10-15 bcfe per square mile for most other shale plays EOG has observed in the United States.
“So what we’ve done is look around for shale plays in the U.S. and basically say let’s look for the ones that have about as much gas in place as the Barnett, and that really limits how many of them that we’ve been able to screen and focus on,” Papa said.
He said that as far as the Barnett look-alike play in Texas goes, “we know that it is gas-bearing and rich. It’s identical, as far as we can tell” to the Barnett Shale field near Fort Worth. In fact, “the shale itself is actually called the Barnett shale in this area,” Papa said.
Meanwhile, Papa said drilling had started on EOG’s Barnett look-alike acreage and that the company would analyze a core section from the first well, followed by the drilling of an offset horizontal “frac” well. Should know by end of year “So certainly by the end of the year we’ll have a good feeling for whether this is a screaming success, or an ignominious failure,” he said.
The “big unknown” in the mystery play is whether the shale rock contains so-called “micro-fractures” necessary for proper gas extraction, Papa said.
“If there are no … fractures, we’re dead in the water,” he said. “If there are … fractures, we probably are going to look like geniuses.”
Houston-based EOG holds some 460,000 acres in the Barnett Shale field near Fort Worth, probably the largest acreage position in the huge play next to big exploration and production independent Devon Energy, by far the dominant producer in the Barnett Shale with about 550-million cubic feet of gas production per day.
Papa, during the company’s April conference call on 2005 first-quarter earnings, raised a few eyebrows when he claimed the Barnett Shale field was much larger than initially believed, covering portions of at least six additional Texas counties generally westward of the Barnett Shale core area.
Papa said that EOG’s entire 460,000-acre position lay within the new boundaries of the Barnett Shale “gas window,” adding that the company planned to acquire another 40,000 acres in the Barnett, elevating the company’s total stake in the Barnett to around 500,000 acres.
He also said EOG plans to increase its Barnett production to 60 million cubic feet per day this year from 6 million cubic feet per day last year. To reach that goal, Papa said the company intended to increase the number of rigs operating on its acreage to seven from four by June 1, “and we’ll likely increase the rig count even further in 2006.”
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