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Evaluation of Texas mystery play continues EOG Resources says Barnett Shale look-alike play depends on ‘micro-fractures’ to aid gas flow, CEO Mark Papa tells analysts Ray Tyson Petroleum News Houston Correspondent
The success of EOG Resources’ mystery Barnett Shale look-alike play, located somewhere in the wide expanse of Texas, hinges on the existence of tiny “micro-fractures” that allow natural gas to flow through rocks to the surface.
“The bottom line is if it does we’re in business,” Mark Papa, EOG’s chief executive officer, said in a July 27 conference call with industry analysts. “If it doesn’t, we’re probably out of business” in the play.
Still, the big Houston-based exploration and production independent refuses to disclose the location of the play. It is said to be similar to the shallow formation that makes up the prolific Barnett Shale field near Fort Worth, Texas, among the hottest unconventional gas producers in the United States.
EOG will say only that the Barnett look-alike is situated “hundreds of miles” from Fort Worth. Analysts speculate it either it is in the Palo Duro basin just south of the Texas Panhandle, or possibly near El Paso on the western edge of the state.
EOG has said its portion of the Barnett look-alike field holds an estimated 500 billion to 800 billion cubic feet of gas-equivalent reserve. And the company said it may pick up another 15,000 to 20,000 acres to go along with its current 125,000-acre position in the play.
“That’s why we’re being quiet about it,” he explained. “We don’t want to alert anymore competition than is already there.” Exploration program continues Meanwhile, EOG is continuing its exploration program in the Barnett look-alike play, but is unsure whether sub-surface rocks on its acreage contain sufficient micro-fractures to make the project a commercial success. That will require further testing, Papa said.
He said a core sample taken from a vertical well drilled into the Barnett look-alike during this year’s second quarter “will give us a little hint of that (micro-fractures), but it’s really going to take testing a well and fracing it to really answer.”
EOG also plans to drill a second vertical well offsetting the first well to further test the play, Papa said, adding that based on the data EOG probably would “kick that well horizontally” and do another test. However, EOG is not necessarily looking for commercial flow rates from the initial wells, he added.
“But we would like to see a gas rate that is 100, 200, 300 million cubic feet per day as opposed to 2 million cubic feet per day,” Papa said.
On other subjects, Papa said EOG is expecting overall U.S. gas production to fall about 1.3 percent this year vs. last. “The percent of fall will likely decline each quarter throughout the year, but we still see it in decline for the full year,” he said.Despite the overall U.S. decline, EOG’s 2005 second-quarter production increased 20 percent from the same period last year, with significant increases in all four of EOG’s producing areas: the United States, Canada, Trinidad and the UK North Sea. Natural gas production rose 21 percent overall led by increases of 32 percent from Trinidad, 16 percent from Canada and 14 percent from the United States.
EOG also reported second quarter 2005 net income of $247.6 million or $1.02 per share, compared to second quarter 2004 net income of $142.2 million or 60 cents per share.
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