For The Industry And Its Investors, It's All About The Plays

Production in the Eagle Ford, Permian and Marcellus shales is at high tide and companies that have a stake in the plays don’t expect drilling to ebb anytime soon, according to a panel of industry leaders who spoke at NAPE's Business Conference on Aug. 17 in Houston.

Production in the Eagle Ford, Permian and Marcellus shales is at high tide and companies that have a stake in the plays don’t expect drilling to ebb anytime soon, according to a panel of industry leaders who spoke at NAPE's Business Conference on Aug. 17 in Houston.

In the Eagle Ford, Charles Cusack, Petrohawk Energy Corp.'s vice president of exploration, says that job No. 1 for his company is to identify sweet spots, acquire them and turn them into production and value. "That's the reason we got paid a really nice premium for our company," said Cusack, referring to BHP Billiton's July 14 announcement that it plans to acquire Petrohawk for $12.1 billion.

What's the secret to identifying sweet spots? "You need to get into the play and figure out what makes it unique, and the only way to do that is to get the well logs," Cusack said, adding that prospectors are fortunate in that most of the shale plays across the country have older well logs. "There's a lot of evidence out there already. The key in the Eagle Ford was getting the well logs and finding cutoffs that work, and mostly you have to do that through analogs to other shale plays."

In evaluating Eagle Ford logs, Cusack said that one of the main factors he looks for is a high-density porosity. Pointing to a geological slide of the Hawkville region of the Eagle Ford, he said, "In the area shaded yellow, you can see the tremendous density response, a lot of it over 15%. It's not the key in every shale play, but in the Eagle Ford it certainly is."

When it comes to capturing the acreage, Cusack recommends making a quick decision and advises against "over-sciencing" the situation. "If you keep thinking that you need to go out and get more data and do this and do that, there will be other companies that (acquire the land) before you can get it. If you more quickly, you can beat most of the competition most of the time," he said.

And, Cusack said, it's not too late to jump in to the Eagle Ford.

Petrohawk's leases in the Eagle Ford, Haynesville and Permian shales cover more than 1 million acres and produce more than 1 billion cubic feet per day, according to Cusack.

So what's possible in the Permian? Just about anything if you ask John Christmann, Apache Corp.'s vice president for the Permian region. "If anyone's looking for work, we need people in Midland, Texas," he said, referring to the West Texas town that sits atop of the Permian shale. "It may be tricky finding a house, but we definitely need people. If I could get more folks in Midland it would help us take this rig count up."

Christmann's comment underscores a surge in exploration and production in the Permian. He said that Apache currently has more than 5,000 locations in the play and produces 92,000 barrels of oil equivalent per day. And the company's plans call for those numbers to increase.

Apache currently has 24 rigs in the Permian, which Christmann calls "opportunity rich," and he expects to double that number within the next five years. The company plans 550-600 new wells during the five-year period, according to Christmann.

"We're in every county of the Permian, and we’re probably the one company that has that kind of exposure. We're not a one-trick pony out here," he said.

Christmann identified areas of the Permian that Apache is targeting for growth, including Central and North Basin platforms; the Eunice, New Mexico area; and the Deadwood area. He considers Deadwood to be the "crown jewel" of the transactions Apache conducted with Mariner Energy Inc.

Six wells have been tested horizontally in the Permian's North Basin and Central Basin platforms at a 100% test rate, he added.

Alan Farquharson, senior vice president of reservoir engineering for Range Resources, sees some irony in the fact that the Marcellus, the basin where the gas industry actually started, is still largely untapped. "Here we are 150 years later talking about the potentially second-largest gas field in the world. We've gone back to where it all started."

The Marcellus shale, Farquharson said, has a 100-year plus supply of natural gas, multiple sweet spots and a low break-even cost. He also touts the shale's location, which is relatively close to the heavily populated Northeast.

However, being on the Northeast's doorstep does not hold every advantage. "The closer you get to New York, the more people don't understand about fracing and what the impacts are," he quipped.

"What a lot of people tend to forget is that shale development has been going on for more 100 years," Farquharson said, adding that with a renewed interest in shale development that "it's absolutely phenomenal how the industry has changed. We've gone from being a sunset industry to a sunrise industry."

From Range's point of view, another advantage to producing in the Marcellus is that it sits just below the Upper Devonian, another play in which the company prospects. The company considers that to be a geographical advantage simply because it’s more practical to develop adjoining plays simultaneously versus shales that are many miles apart.

Farquharson said that Range pioneered water recycling in the Marcellus and the practice of disclosing fracing chemicals, which he says are mostly 99.9% water and sand.

Like the Permian, the activity in the Marcellus is helping to create jobs and make a positive economic impact, Farquharson said. He also cited a Penn State University study that concluded that activity in the Marcellus spurred $1.1 billion in local taxes in 2010.

Contact the author, Mike Madere, at