Southeastern Kansas is booming. A coalbed-methane play, centered in Wilson County, has the area hopping. Rigs are drilling, pipelines are snaking through the fertile farmland, and wells are producing growing volumes of coalbed methane. The Cherokee Basin is an old, shallow producing area, one that had been in decline for decades. Such conventional reservoirs as the Bartlesville shoestring sands and the Mississippian Chat were largely played out. The oil and gas business was as familiar as an old shoe, and about as exciting. That changed abruptly last year. Oklahoma City independent Devon Energy announced its launch of a major coalbed-methane play in the Cherokee Basin, a geologic province that stretches from southeastern Kansas into portions of southwestern Missouri and northeastern Oklahoma. While this was news to many in the industry, the local players had long known of the area's coalbed-methane possibilities. Hydrocarbon exploration dates back to the 1860s, and the basin's coal seams have been mined since Kansas was a territory. "Coal underlies the eastern quarter of Kansas, in both the Cherokee and Forest City basins," says Larry Brady, geologist, Kansas Geological Survey. The region is blessed with as many as 17 separate coal seams, ranging in depth from the surface to 2,000 feet. They do not attain the tremendous thicknesses that are common in the Rocky Mountain basins, however. "In Kansas, we're talking about thin beds-many are a foot to 1.5 feet thick. In certain areas, some coals can be four feet thick, but those are not widely distributed." Most of the seams prospective for coalbed-methane development occur in the Middle Pennsylvanian Cherokee Group, a 300- to 500-foot-thick sedimentary section that contains about 12 to 15 net feet of coal, he notes. Some intervals are true coals; others sport a significant amount of shale. The main targets in southeastern Kansas are the Weir-Pittsburg, which is the thickest coal, although it is not present everywhere; the Riverton, which is widespread; and the Mulky. There is also some activity in the younger Summit coal and the Little Osage, a black shale that immediately overlies it. Despite what would appear to be its slim pickings, the coalbed-methane play in southeastern Kansas has several strong positives. The area has a long history of shale and coal-gas production. It is also laced with existing infrastructure, including excellent connections to regional and national gas markets. As a result, gas prices are only lightly discounted from Henry Hub prices. Fee acreage predominates, so the problems of federal land access that Rocky Mountain operators often grapple with are not an issue. Permits are received predictably, and local jurisdictions are knowledgeable and cooperative. Further, the citizens largely welcome the economic boost the industry gives. The typical Cherokee Basin well is drilled on 80-acre spacing. Sustained initial production rates vary from 10,000 to 150,000 cubic feet per day, and water production will kick off at 10 to 70 barrels per day per well. As the wells are dewatered, gas production increases. The water is pumped into disposal wells, usually in the Arbuckle Formation. According to the Kansas Geologic Survey, the average coalbed-methane well in southeastern Kansas can produce 60 million cubic feet of gas during a two-year period. A framework for production Shale gas was produced from the Cherokee Basin as long ago as the 1920s. Indeed, this part of Kansas was once the locus of a thriving shale-gas industry. In a classic paper published in April 1929 in the Bulletin of the American Association of Petroleum Geologists, authors Homer Charles and James Page describe the play: "The presence of shale gas in eastern Kansas has been known since drilling for oil and gas began many years ago. Because of the small volumes encountered and the accompanying troublesome saltwater, shale gas was not then considered of commercial value. Changed economic conditions since have made it worth producing." Truly, the more things change the more they remain the same. The main producing interval in the 1920s was the Mulky, a hybrid of a very thin coal overlain by a black carbonaceous shale. At the time the paper was written, hundreds of wells were scattered throughout eastern Kansas. The Mulky reemerged as an economic objective in the same area in the late 1980s, when a number of wells were brought on production. Some of these wells have made as much as 180 million cubic feet of gas, at the rate of 50,000 to 60,000 cubic feet per day. Other zones were being tested as well. In 1987, William Stoeckinger, a Bartlesville-based consulting geologist, was working with Wichita firm Stroud Oil (Stroud has since changed its name to Jones Gas Inc.) Stroud developed Sycamore Valley Field, a coalbed-methane accumulation in Montgomery County. Sycamore Field produces from a three-foot seam of Weir-Pittsburg coal. The prospect was put together from data gleaned from vintage drillers' logs. "That field has produced about 1.7 billion cubic feet of gas from a 1,000-acre block. We had 14 wells drilled on 80-acre spacing," says Stoeckinger. The cost to drill, complete, operate and gather the gas was 85 cents per thousand cubic feet (Mcf). Additionally, because the wells were drilled prior to 1992, they were eligible for Section 29 tax credit. Sycamore Valley is still producing about 400,000 cubic feet of gas from 10 wells. "It's a nice little field." To be successful in the Kansas play an operator needs deep pockets, cautions Stoeckinger. The wells can be very troublesome, producing very small volumes of gas, but huge amounts of coal fines and water. Compression is a must; the infrastructure requirements are substantial. A crucial question is the drainage area: "There's only so much gas in place, and it's important not to space the wells too close." Devon Energy Clearly, Devon Energy has rapidly become the dominant player in the Cherokee Basin, amassing some 420,000 net acres. It has two main areas: Fireside in Neosho, Wilson and northern Labette counties, Kansas; and Lenapah, mainly in Nowata County, Oklahoma. It owns close to 100% interest in the acreage and operates it all. Unlike most predecessors, Devon is working with all the coals. "We're targeting the Cherokee coals between 600 and 1,100 feet. We typically open them all up, and hydraulically fracture them," says Don DeCarlo, vice president and general manager of Devon's Rockies division. In addition to the Weir-Pittsburg seam that produces in Sycamore Valley Field, Devon also completes the deeper Riverton and Rowe coals and the shallower Bevier and Mulky intervals. This approach means Devon's wells flow at higher rates and recover more reserves than the historical average. The firm spends about $80,000 to drill and complete a Cherokee Basin well; it expects ultimate recoveries of 250- to 500 million cubic feet per well. After six to 12 months of production, its wells can make 300,000 cubic feet per day. The economics of Devon's Cherokee Basin play are very similar to those in Wyoming's coalbed-methane developments in the Powder River Basin, DeCarlo says. Its finding and development costs are 25- to 50 cents per Mcf; operating costs, including compression, dehydration, gathering and transportation, add 50 to 70 cents per Mcf. By year-end 2001, Devon had drilled 125 wells, 65 in the Kansas portion of the play and 40 in Oklahoma. This year, the company plans to spend $35 million and drill 300 to 400 wells. At press time, Devon was busy building infrastructure to deliver its gas to the pipelines that traverse the play. It has a wholly owned subsidiary, Tall Grass Gathering, that moves the gas from the wellhead to the market point. In 2001, Devon's net production from the Cherokee was about 4 million cubic feet per day; it forecasts average net production of 25 million per day in 2002. It expects to more than double this again in 2003. Development could span a tremendous area-Devon has identified more than 2,000 locations on its present acreage. "There are several things we like about the play. The economics are good, the regulatory environment is favorable and the transportation network is established," he says. "It's a low-impact play in an area that's used to the development of oil and gas." The Cherokee Basin also offers a strong marketing advantage because of its proximity to the inter- and intrastate transportation grids. Generally, gas sells for only five to 10 cents below the Henry Hub level. At times, depending on conditions in the Kansas City and St. Louis markets, it fetches a premium. The company continues to purchase acreage in the play. "The Cherokee Basin is one of our up-and-coming areas, and we'll be actively exploring there. It's a very large area, and we see a lot more potential." A Kansas independent Quest Resource Corp. is a small public company that is focused on the Cherokee play. Quest, headquartered in Benedict, has been active in southeast Kansas for 25 years. "We grew out of a family business that we developed here," says Doug Lamb, Quest's chief executive officer. "Our niche is the 500-square-mile area served by our pipeline network. This is where we have the opportunity for substantial growth." Initially, the company concentrated on converting existing wells into Mulky producers. The Mulky reaches a thickness of about four feet in Quest's area, which is centered around Thayer Field in Wilson County. During a six-year span, it made 25 conversions from marginal oil wells. Comfortable that the play was real, a year ago the company started an aggressive leasing program. Quest has amassed a 45,000-acre position. To date, it has drilled or recompleted more than 50 coalbed-methane wells, and is producing about 3 million cubic feet per day into its gathering system. "Going forward, we expect to drill 40 to 50 new wells per year. We have at least 200 additional locations," says Lamb. Quest drills all its wells to the Mississippian, and it sets casing to that depth. "But right now we are focused on the Mulky, which we can produce immediately," says Mike Ebers, a Chanute, Kansas-based consulting geologist. The company is also completing wells in the Summit, a similar coal/shale zone in the overlying Marmaton Group. A completed Mulky well typically costs Quest less than $50,000, and most pay out in less than a year. Average recoveries are close to 150 million cubic feet per well, during a 15-year life. As the shale-gas operators found out almost 80 years ago, it's a reliable producer. The Mulky begins making water and gas immediately, at the rate of about one barrel per thousand cubic feet, and continues at that pace throughout its life. "In many ways, a Mulky completion behaves more like a shale-gas well than a coalbed-methane well," says Ebers. Currently, the company is expanding its 150-mile gas-gathering system. It has completed the first stage of a 10-mile-long, 12-inch-diameter trunkline. "We've been so successful with our drilling program in Thayer Field that we have quite a bit of stranded gas. Right now, we're focusing on 15 new wells that we need to put online. We have some very strong production growth coming, from stranded gas and from new wells that are in the completion stage," says Lamb.