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[Editor's note: A version of this story appears in the November 2019 edition of Oil and Gas Investor. Subscribe to the magazine here.]
What’s the word on the Austin Chalk?
How about mixed? Good, troubling and confusing results make ‘mixed’ the best term to employ in describing recent news flow about the greater Chalk. The legacy play arcs across the Gulf Coastal plain from near the Mexican border on the west to an emerging play just east of the Mississippi River. Chalk history is fascinating, with the play producing almost 1 billion barrels of oil in its 50-year history and more than 4 trillion cubic feet of natural gas.
Chalk interest was revived once again last year, first in the emerging play on trend near the intersection of Mississippi and Louisiana, east of the Mississippi River, where Marathon Oil Corp., ConocoPhillips Co. and EOG Resources Inc. were involved in a big acreage land grab.
This occurred simultaneously with news about the Chalk in the eastern Eagle Ford (east of the San Marcos arch) where WildHorse Resource Development Corp. generated positive news using modern well completion techniques before selling the acreage it bought from Anadarko Petroleum Corp. for $625 million to Chesapeake Energy Corp. for $3.98 billion.
Meanwhile, a steady stream of independents, many privately held, chipped around the edges, blocking up Chalk acreage and experimenting with completion modalities. Results of those efforts are now becoming public. This, too, has been all good.
Then came second-quarter 2019 earnings. ConocoPhillips noted that three of its four Louisiana wells in the emerging Chalk were big producers, only the production was 90% water with oil cuts under 100 barrels per day (bbl/d) of oil. The company plans to divest the 210,000 acres it acquired previously. Similarly, at least one EOG neighboring well in the emerging Louisiana Chalk trend has produced significant water volumes.
That said, EOG, Devon Energy Corp., Cimarex Energy Co. and Australis have filed more than 60 permits recently in the emerging Chalk east of the Mississippi River.
Still, consider the ConocoPhillips news troubling.
This would not be the first time the Chalk promised much only to deliver economic heartache. The natural fractures through the Chalk have always been a source of large flush hydrocarbon production. But production declined quickly as operators drained the fractures. Early horizontal efforts in the 1990s involved attempts to intersect multiple fractures via openhole completions, though the results were the same, even if it took longer to get there.
Meanwhile, the industry has learned a lot about tight formation plays in the intervening years. It appears possible to obtain matrix production via the application of tight formation drilling and completion technologies, including longer laterals, closer stages and larger proppant loading in a slickwater plug and perforate configuration. In other words, think of Eagle Ford drilling and completion methodologies applied uphole in the Chalk carbonate.
In Webb County, SM Energy Co. completed a second Austin Chalk test in the second quarter with a 30-day peak rate of 3,200 barrels of oil equivalent per day (boe/d), 19% oil, 38% NGL. The Watson State 167H featured a 12,875-foot lateral. SM Energy’s earlier Chalk test, the Galvan Ranch C 917H, generated a peak rate of 2,500 boe/d on a 7,886-foot lateral. The company plans two more Chalk tests by year-end.
So the news contains opposite results at opposite ends of the greater Chalk. As for the middle, TreadStone Energy Partners used Hart Energy’s DUG Eagle Ford conference to discuss recent efforts in Hearne Field, an Austin Chalk play formerly operated by Anadarko Petroleum where TreadStone has 52,000 HBP gross acres. There are nine rigs active in the area, and increased developmental efforts have propelled area oil production from a low of 37,000 bbl/d in 2017 to 80,000 bbl/d currently.
To date, TreadStone has drilled 20 infill Austin Chalk wells. The company has evolved its completion recipe and now cases and cements Chalk completions on stage spacing under 150 feet and proppant loading up to 2,500 pounds per foot. Previously, the completion modality relied on multilateral openhole wells and commingled multiformational production with low proppant treatment.
However, openhole completions created well integrity issues. TreadStone is reporting 30-day IPs of 945 bbl/d and 10-month cumulative production of 160,000 bbl, a threefold increase over legacy Chalk wells, and is extending the completion modality lower to tap the Eagle Ford.
There is a limit to how many times one can apply the term “revival” to a 50-year old play. Tantalized by occasional good news in otherwise mixed Chalk results, operators are exploring whether the third time will be the revival charm.
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