THE MAVERICK BASIN

The Maverick Basin has long been an enigma. While the 4,500-square-mile sedimentary basin apparently contains all the requisite elements for sizeable oil and gas accumulations, for decades it has frustrated efforts to unravel its secrets. Beginning in the 1920s, waves of exploration by oil companies succeeded in uncovering only one substantial field, Conoco's Sacatosa in Maverick County. In 1956, oil was discovered at 1,250 feet in an Upper Cretaceous San Miguel sandstone that pinched out over the Chittim Anticline. Although that multimillion-barrel field still produces about 2,000 barrels per day, no peers could be found. Operators were tantalized by many shows of oil and gas, but overall production was quite lackluster. Companies pulled up stakes and moved on, largely concluding that the nonconforming basin lacked good reservoir rocks. Still, a few independents continued to poke around the strange little province, which lies tucked against the Mexico-U.S. border in Maverick, Dimmit and southwestern Zavala counties, Texas. Patience is a necessary ingredient of genius, as Benjamin Disraeli once said. And today, the independents' patience is paying off as such technologies as 3-D seismic and horizontal drilling are yielding results in the Maverick Basin. The most visible achievements to date are claimed by The Exploration Co., a public firm headquartered in San Antonio. Indeed, TXCO has now racked up more successes in the Maverick than any company in the last 40 years. The company holds 210,000 gross acres in the basin, including 95,000 acres it recently acquired on the Farias Ranch. Most of its position lies in Maverick County in the vicinity of the town of Eagle Pass. In 1999, TXCO drilled 10 wells, up from seven in 1998. This year, the company will drill 26 wells. "The Maverick is an underexplored basin," says James Sigmon, president. "It's been bypassed, largely because it's a carbonate basin in the Gulf Coast. It's a long way from the Permian Basin, and many people don't even know where it's located." An interior rift basin, the Maverick is floored by Triassic sediments. Throughout the Jurassic and Cretaceous, fine-grained carbonates accumulated as massive deposits. Shallow-water limestones and dolomites developed during a marine transgression; some 18,000 feet of sediments were eventually deposited. The basin was uplifted during the Laramide orogeny, and the Chittim Arch, its defining structural feature, was formed at that time. "The Maverick Basin has been an industry backwater, and it's hard to find good, solid facts about it," says Robert Scott, chief geologist. "We've shot in excess of 125 square miles of 3-D seismic, the first ever acquired in the basin, and that's revealed some wholly new concepts." Indeed, it has been TXCO's tremendous results in the Lower Cretaceous Glen Rose formation that have caught the industry's attention. "The 3-D seismic revealed patch reefs in the Glen Rose. I was dumbfounded the first time I saw an amplitude map that showed all these reefs," says Scott. Prior to TXCO's 3-D survey, geologists believed that detrital zones accounted for the few instances where porosity had been encountered in the Glen Rose. The scattered reefs that had been drilled were mistakenly interpreted as bioclastic debris, deposited in bars that ran parallel to the shoreline. Naturally, offsets based on this type of interpretation failed to extend production, adding to the basin's poor reputation. Actually, the Glen Rose contains small patch reefs that are comprised of rudistids, a type of bivalve, along with some corals and stromotaporoids. "The reef building organisms were stationary, gathering their food by straining water through their vascular systems and extracting nutrients out of it. They needed to be up off the muddy bottom, in shallow water," notes Scott. Unlike pinnacle reefs, this type of reef has little vertical relief. Fortunately, the 3-D seismic proved quite adept at imaging the pods of porosity. Since discovering the reefs several years ago, TXCO has grown its production impressively. The company's Prickly Pear Field now consists of 17 Glen Rose producers, and its last 10 field wells have each been successful completions. According to the Texas Railroad Commission, field production has jumped from an average of 2.7 million cubic feet per day in 1997 to 20.76 million per day-along with 200 barrels of condensate-in early 2000. Prickly Pear is a "string of pearls" field, with each well tapping a separate patch reef. The reefs, which range in size from 80 to 640 acres, contain average recoverable reserves of 2.5 billion cubic feet of gas. Depths to the formation are 4,500 to 6,000 feet in TXCO's area, which straddles the Chittim Anticline. The company finds it can drill and complete wells for $400,000 apiece. The high-deliverability producers can sustain rates of 2 million cubic feet per day for a couple of years before beginning to decline. Thanks to its extensive 3-D seismic database, the company has inventoried about 40 Glen Rose prospects. It plans to drill 14 wells in the play this year; seven in its own program and seven in partnership with Castle Exploration Co. Inc., a subsidiary of Radnor, Pennsylvania-based Castle Energy Corp. In 1999, the companies formed a joint venture on a 33,000-acre lease block, located north and west of Prickly Pear Field. They have already acquired 3-D seismic over the bulk of that acreage. Still, the Maverick doesn't yield its secrets easily. TXCO's attempts to extend production away from its established field area have so far been frustrated. Stepouts to the north and west have encountered reefs, but have been wet. "3-D seismic defines the reefs so nicely that we never have missed a reef. We've drilled some filled with water rather than gas, and we're working with the seismic to distinguish between the two," notes Scott. "Offsetting that difficulty is the fact that the reefs to the south are much larger," says Charles Strain, principal, Houston-based Strain Consultants Inc., an equity research firm. "If TXCO can have some success to the south, the Glen Rose will be a much improved play. Their forte has been drilling these Glen Rose gas wells, and their record of success is excellent." The Glen Rose play is still in the young stage in the Maverick Basin, notes Sigmon. "We're gaining more knowledge all the time, with the 3-D seismic, and well and core data that we are collecting." While this play remains the backbone of its program, TXCO also is expanding beyond the Glen Rose. The Pearsall, an overpressured fractured carbonate zone occurring immediately below the Glen Rose, is quite intriguing. Indeed, TXCO was initially attracted to the Maverick Basin by the potential of the Pearsall. "The basin has a history of shows of oil and gas, as well as a record of high absolute open flows," says Sigmon. "One Pearsall well, the #1 Winn, tested at the rate of 265 million cubic feet of gas per day." Yet, only about 45 or so vertical wells had been drilled to the Pearsall, and it had produced very little. Wells in the Pearsall had maximum reserves of about 2 billion cubic feet of gas, but the average well recovered only about 350 million cubic feet. TXCO was interested in applying horizontal drilling to the Lower Cretaceous Pearsall, and its initial 50,000-acre position in the basin was acquired in 1989 to develop that play. The company tried a horizontal well early on, but could not establish production. "Drilling technology had not yet been developed for high-pressure, horizontal gas wells," says Sigmon. "We drilled our first well tremendously overbalanced, and were unsuccessful. Today, horizontal wells are drilled in high-pressure environments every day, and we're ready to try the play again on our acreage block." "The Pearsall is geopressured, with reservoir pressures about twice the normal gradient," adds Scott. "We feel that fractures enhance the reservoir qualities, and we're going to try drilling the wells underbalanced." The company plans three Pearsall tests this year, each budgeted at $900,000. Average recoveries in the 2.5-Bcf-per-well range are anticipated. Another independent, Houston-based Camelot Oil & Gas LLC, a small private company, is already active in the Lower Cretaceous. The company owns six producing wells, as well as a number of wellbores that it can reenter. Says chief operating officer Alan Townsend, "We've been in business about a year. We purchased Los Cuatros Field both for the horizontal drilling play in the Lower Cretaceous and for the Glen Rose reef play." Billy Hitchcock is the other principal; Eldon West is Camelot's geologist. In the Los Cuatros area, the Lower Cretaceous zone ranges from 6,500 to 7,500 feet deep. During the initial drilling in the field in the late 1970s, operators encountered some significantly overpressured intervals. The high initial rates and high pressures, coupled with low cumulative production, indicated to Camelot that the field was a very promising candidate for horizontal drilling. "We look at this as a plumbing problem rather than an exploratory problem. There's a lot of gas in the system, and we just have to find where the reservoir is and how to tap it effectively to make it economic," says Townsend. Many of the wells had commingled production from the Glen Rose all the way down into the Sligo. The wells were drilled with intermediate casing set around 6,000 feet, and often were completed openhole from that point to total depth. "Because of the openhole completions, it's difficult to determine where the pay zones actually are, but these types of wells give us perfect opportunities for reentries," says Townsend. "The key is to find the zone to go horizontal in. There are high-pressure shows through the whole section." Camelot has just finished drilling its third well, a 1,000-foot horizontal reentry, and at press time was moving in a completion rig. "We're encouraged that this well will be commercial," says Townsend. At press time, the company was in the final stage of designing a 3-D shoot over its 18,000-acre position. "We're going to look both at the Glen Rose and at fracture orientation information. We hope to glean some useful information for our horizontal idea as well," he concludes. Another Cretaceous fractured carbonate interval of interest is the Georgetown. This normally pressured formation is an oil reservoir, however, and lies above the Glen Rose. The Georgetown is a known producer in the Maverick Basin; Wipff-Fitzpatrick Field, a long, narrow trend associated with faulting, has made several million barrels of oil. Currently, TXCO is evaluating production from two horizontal, short-radius reentries that it has drilled in the Georgetown. The laterals are in the range of 2,000 feet. "The Georgetown has wonderful porosity, but the permeabilities are low," says Scott. TXCO estimates that a grassroots well in this zone could yield 150,000 barrels of oil, for a completed well cost of $250,000. A workover could cost in the neighborhood of $50,000. The company plans two new Georgetown wells and one recompletion this year. The Maverick Basin may yield even more opportunity, as it also offers potential for coalbed methane production. Says Sigmon, "Coal outcrops on the Mexican side of the border, and is still mined there today. On the Texas side, coal was mined up until the first World War." The seams contain highly volatile, B- and C-grade bituminous coal. TXCO drilled three core holes last year and plans five additional tests this year. "We have coal and we have gas, and we're in the process of determining how we want to develop it. It's potentially economic," he says. No zone offers as much potential in the Maverick Basin as the deep Jurassic, however. "The salient points we see for the Maverick Basin are that it has a number of relatively shallow, conventional formations to be developed, and in addition has the considerable attraction of the deep Jurassic," says analyst Strain. "The Maverick Basin is the only one of the six interior Jurassic rift basins in the Gulf Coast that doesn't have significant production from Jurassic-age rocks." Says Sigmon, "No wells have been drilled deep enough in the basin to test the Jurassic formations, which contain many of the world's largest oil and gas fields." Indeed, just three wells have been drilled below 13,000 feet in Maverick County, the most recent a Conoco test dating from 1977. That well stopped short of the Jurassic interval, and a 1953 Shell well and a 1956 Exxon well were drilled outside the basin proper on the very fringes of Jurassic deposition. "There's never been a drillbit in that section," says Scott. "Nobody knows much of anything about it. With our 3-D seismic, we can see the faulting and structuring at depth. We also see a thick package of seismic reflections, with faulting and pinchouts within it." "If the Jurassic in the Maverick Basin has anywhere near the potential of some of the analogous Jurassic-Cretaceous basins, it could be huge," agrees Bruce Lazier, principal of Dallas-based San Jacinto Securities. "Until now, that play has been completely neglected." This year, the Jurassic will finally get tested. TXCO has entered into a joint venture on its original 50,000-acre block with Blue Star Oil & Gas Ltd., a newly formed private firm headquartered in Dallas. Jerry Jones, who is also the owner of the Dallas Cowboys professional football team, owns Blue Star. The company acquired the rights to the 191,000-acre Chittim Ranch, and is shooting an immense program of 3-D data. Under its agreement with TXCO, Blue Star has acquired a 58-square-mile survey on TXCO's leases; it is now acquiring another 300 square miles on Chittim Ranch. Also, the company will drill an 18,000-foot Jurassic test on TXCO's acreage to earn a 25% interest in the deep horizons. Blue Star further has the option to drill a second deep test to earn an additional 25% interest. Drilling should begin this fall. Notes Strain, "Based on the 3-D seismic, and looking at the size of Jurassic fields in the analogous basins, we think a discovery as large as a trillion cubic feet could be made." Strain puts the probability of success for the Jurassic test at about 10%. "When you put together the coalbed methane, the oil play in Georgetown, the bread-and-butter Glen Rose, the high-pressure gas in the Pearsall and the huge, completely untested structures in the deep Jurassic, the Maverick Basin is tremendously exciting," agrees Lazier. "It's one of the few remaining places in the onshore U.S. with this type of potential."