SOUTH LOUISIANA

1996 and 1997 were boom years for geophysical contractors in South Louisiana. Crews blanketed the parishes, particularly in the transition-zone areas south of Interstate 10. All sorts of immense and expensive 3-D shoots were under way, several topping 500 square miles in size. The technology seemed to promise the best of everything: high-potential prospects would drop out of the surveys like manna from heaven, and the risks would be minimal. But, the business climate soured as oil and gas prices fell and budgets dried up. More than a few of the companies that sponsored the huge shoots were acquired or merged into different entities. Others were overwhelmed with the sheer volume of the data and the daunting task of interpretation. In many cases, the great promise that the wealth of data proffered to the industry remained unfulfilled. Today, those same datasets are finally yielding some enviable results for persistent independents. As the seismic industry hit the wall, costs for licenses for shoots that had been acquired for as much as $120,000 per square mile dropped precipitously. In the intervening slow years, many small generating shops put in countless tedious hours unraveling the seismic volumes and merging them with the existing subsurface information. The result? Independents have been posting incredible success rates in the complicated, capital-intensive and unforgiving parishes south of Interstate 10. Last year was good for many, and this year promises to be even better. A case in point is Houston-based Southwestern Energy Co. The firm shot several proprietary 3-D surveys in South Louisiana in 1996 and 1997, but the surveys were both prohibitively expensive and located in some problematic areas. Southwestern's management changed in 1998, when Harold Korell came on board as president and chief operating officer. Korell reevaluated the company's exploration and development efforts, and decided to rebuild the E&P organization. Al Stevens took on the job of president and chief operating officer of Southwestern's E&P unit. built a new management team and an exploration staff and set to work prospecting. The company drilled its initial internally generated prospect in late 1999. The well was a discovery, and last year it drilled four more exploratory wells. Three of those were successful, and Southwestern was firmly established in the Pelican State. "We're four-for-five on our internally generated South Louisiana prospects," says Korell. "We credit our success to having the right people. They are able to do the extensive regional work that puts us into the right environments." Richard Lane, now senior vice president of Southwestern's E&P operations, notes that the original proprietary 3-Ds acquired by the company in 1996 and 1997 weren't necessarily in areas that the new South Louisiana team viewed as most prospective. Consequently, it traded and leveraged those datasets into much wider coverage. Today, txhe company works mainly with existing 3-D surveys, augmented by an extensive grid of 2-D data. "We focus in central and western South Louisiana. We try to understand the geology of each sub-basin, and define what makes the region work and really pick it apart," says Lane. "We do prestack time migration to the seismic to clarify the time-depth images. Additionally, we comprehensively analyze the timing of the structures, the traps, the fault seals, and the pore-pressure gradients." Southwestern concentrates on developing prospects with potentials typically greater than 50 billion cubic feet equivalent (Bcfe) apiece. An average well for the company is in the neighborhood of 16,000 feet with a dry-hole cost of $5 million. "We see the game as going deep for large reserves-we're willing to take the risk to find something big. But we try to stay with 25% to 50% working interests, and we look hard for prospects with multiple objectives to mitigate risk." Three of the company's four discoveries have been in the Atchafalaya sub-basin in Assumption Parish, where in the eastern half of that play, Southwestern formed an area of mutual interest with Dallas-based Petro-Hunt Corp. The companies alternate operations on a project basis. Their first discovery was the Dugas & LeBlanc #1 on the Southwestern-operated Gloria prospect. The well, which encountered three separate Lower Miocene sand intervals between 14,400 and 14,856 feet, was placed on production in February 2000 and is currently making 9.6 million cubic feet of gas (MMcf) and 310 barrels of oil per day. Recoverable reserves are 16 Bcfe. Southwestern followed that with its North Grosbec discovery, a Petro-Hunt-operated, 21,080-foot test of a large, upthrown three-way closure against a buried fault. The timing of the structure looked good, and subsurface well control showed sands were present in the area, notes Lane. The Brownell-Kidd #1 found 50 feet of net pay in Upper Discorbis at about 16,950 feet. The huge find contained recoverable reserves more than 90 Bcfe, and the discovery well is steadily producing approximately 16 MMcf of gas and 575 barrels of oil per day. A development well, which should also intersect some thick, shallower sands not seen in the initial well, is currently drilling. Most recently, the company drilled the State Lease 16626 #1 on its Malone prospect in Lake Verret. The 15,798-foot test logged 260 feet of gas pay in five Miocene sands and flowed 8.1 MMcf of gas and 187 barrels of condensate per day from Planulina. A development well tested 9.5 MMcf of gas and 70 barrels of condensate per day from Marg A. "We designed the offset well to accelerate production. The first well encountered so many productive sands that it made sense to immediately develop some of the shallower ones with a second hole," says Lane. Recoverable reserves on this feature could reach 50 Bcfe, he adds. Southwestern's fourth discovery was to the north, in its Eden project in Lafayette Parish. This area produces from older Oligocene sediments. The 16,500-foot Robertson #1 well, on the Havilah prospect, is producing 7.3 MMcf of gas and 321 barrels of condensate per day; Southwestern expects the find to recover 15- to 20 Bcfe on a gross basis. The firm has two additional attractive prospects to drill in the Eden project this year. Other areas the company is exploring include portions of Lafayette, St. Mary and Terrebonne parishes. For 2001, Southwestern plans five exploratory and three development wells in South Louisiana, with the exploration projects alone carrying unrisked gross reserve potential of more than 840 Bcfe. South Louisiana will command about 32% of Southwestern's $75-million E&P budget this year, and Korell expects the region to add substantial reserves. "South Louisiana is our growth area, and if we enjoy even half the success in 2001 that we had there in 2000, I'll be really happy." Another independent that has been gaining note in South Louisiana with its 3-D exploration successes is Houston-based Cabot Oil & Gas , which began working in the state in early 1998. That spring, it entered into a joint venture with Union Pacific Resources (now merged into Anadarko Petroleum Corp. ) to shoot a 300-square-mile 3-D survey on 95,000 acres of Continental Land & Fur leasehold in Terrebonne Parish. The survey, mostly in marsh country, ran $100,000 to $110,000 per square mile. A number of prospects and leads were generated from that effort. The first test was the deep Etouffee prospect, in Kent Bayou Field and operated by UPR. The 19,270-foot Continental Land & Fur #1 discovery tested 1,600 barrels of oil and 5 MMcf of gas per day from Lower Cib op Sand. Currently, the field is producing more than 105 MMcfe per day from three wells, and the partners are drilling another development well. The Etouffee accumulation, in which Cabot owns a one-third interest, covers about 400 acres, says Michael Walen, Cabot senior vice president. After the Etouffee success, Cabot identified several shallower prospects in the 13,000-foot range. UPR elected not to participate, and Cabot forged ahead with 100% working interests. "We've drilled two of those, Augen and BonTon. Both hit, and together they are producing 40 million cubic feet equivalent per day," Walen says. At press time, a second well was drilling on the Augen discovery. Next, still on the CL&F seismic survey, Cabot bought a property that it believed harbored an updip location. The 13,275-foot Krescent discovery, which encountered 53 net feet of pay in the Bourg Sand, is currently producing 18.5 MMcf of gas per day. Cabot's success record so far on its wells in the CL&F survey is a remarkable 100%, with seven producers out of seven attempts. Meanwhile, in late 1998, Cabot also purchased the South Louisiana assets of Oryx Energy Co. The $70-million buy included interests in six operated and four nonoperated fields. The main properties were Belle Isle in St. Mary Parish, Lake Pelto in Terrebonne Parish and Chacahoula in Lafourche Parish. "We had determined that we were going to make South Louisiana a focus area," says Walen. Cabot reprocessed the Oryx 3-D data that came with the sale and embarked on a recompletion and development program. Production from the Oryx properties was 11 MMcf per day at the time of the purchase, and Cabot doubled that volume within a year. Additionally, at press time the company was just finishing a wildcat well near Lake Pelto that it generated from the Oryx data. The well, located on State Lease 16705, reached a measured depth of 16,343 feet and encountered 236 feet of net pay. This year, Cabot's companywide drilling budget will increase 36% to $167 million, and the Gulf Coast region will spend about 47% of that. The firm will take up to about a 60% interest in a 20,000-foot prospect, while on 15,000-foot or shallower wells it is comfortable owning interests up to 100%. In the CL&F survey, it expects to drill three deep Etouffee-type tests, along with a couple of shallower prospects similar to Augen and BonTon. It also will test two additional wildcats on the properties that previously belonged to Oryx. Today, Cabot produces 35% of its 200 MMcf of gas per day from the Gulf Coast region. Bolstered by its accomplishments, the company is expanding into new parishes and has purchased a number of additional 3-D surveys. "We believe that significant opportunities still reside in the deeper portions of South Louisiana's sedimentary basins. We're very happy with our success, although we recognize the risk inherent in this area," says Walen. Another independent that has racked up admirable discoveries via 3-D exploration is The Meridian Resource Corp. In 1998, Houston-based Meridian acquired all of Shell Oil 's onshore oil and gas properties in South Louisiana. "We are an exploration company, and we pursue large reserve accumulations that have been bypassed or overlooked or not understood by others," says Joseph A. Reeves Jr., chairman and CEO. "The keys to our success are our exploration team and our use of 3-D seismic." The Shell acquisition was a splendid deal-Meridian was able to acquire properties from a major that had already shot 3-D seismic across almost every one of its fields. Pre-Shell, Meridian had rights to 2,200 square miles of 3-D data; that total rose to 4,300 square miles after the acquisition. Meridian also bought rights to all of Shell's 2-D data in the parishes south of I-10. Meridian wasted no time in drilling prospects on its new properties. First, it hit a 10-million-barrel discovery at Weeks Island in Iberia Parish. It has continued a lively exploitation program there, drilling or participating in nine successful wells in and around the old salt dome field. Meridian owns about a 75% working interest in the Weeks Island acreage. The independent's next find was Thornwell, an exploratory prospect in Jefferson Davis Parish that came with the Shell properties. In late 1998, Meridian tested 18 MMcf of gas and 472 barrels of condensate per day at the M.A. Guidry 21 #1. Now, 10 successful wells have been drilled in the Marg idio sands, found at depths of about 11,500 feet. Field production achieved 85 MMcf of gas per day within 18 months of first discovery. Meridian operates and owns a third interest in this new field. An internally generated prospect on Meridian's Turtle Bayou/Ramos 3-D project in Assumption Parish was the next discovery. In 1999, the 19,270-foot C.M. Thibodaux #1 was completed flowing 12.6 MMcf of gas and 1,224 barrels of condensate per day from Miocene reservoirs. The field, initially estimated to contain recoverable reserves of 125 Bcfe, continued to expand as Meridian drilled more wells. For the prospect sizes it desires, Meridian generally targets opportunities below 15,000 feet. "3-D is absolutely essential at those depths. To be successful, you first have to understand the geology and the nuances of 3-D from acquisition and processing through the final interpretation. Unless you understand the faulting and how it connects and whether or not you have a seal, you've just drilled yourself a $5- or $6-million dry hole," Reeves says. In 2000, the company averaged net daily production of 141 MMcfe; it has proven reserves of 306 Bcfe and operates about 250 wells, all in South Louisiana's onshore and transition-zone parishes. Last year, Meridian drilled 23 wells and spent $100 million. This year, it will likewise spend about $100 million and drill about 25 tests, but it will focus even more strongly on deep exploration. About 73% of this year's capital will fund wildcats, land and seismic, and 27% will go toward development work. Indeed, in terms of feet of hole, Meridian is one of the most prolific drillers in South Louisiana. "That's our style," says Reeves. "We look for big, deep reserves. Since 1998, our success rate is 70% on all our exploration and development drilling. On the Shell properties alone, our success rate is nearly 80%." For 2001, Meridian has budgeted four wells at Weeks Island, five at North Turtle Bayou/Raymond and six at Thornwell/Lakeside. Additionally, two tests are planned for Main Pass, one at East Lake Arthur, and three at other locations sprinkled throughout the state. Net unrisked reserve potential for this year's program more than 400 Bcfe. "You run into all kinds of surprises and disappointments in South Louisiana," says Reeves. "It's a high-risk, high-reward area, and you have to risk a lot of dollars to find a lot of oil and gas. We do both." A firm that takes a different approach to South Louisiana exploration is Samedan Oil Corp. , a wholly owned subsidiary of Noble Affiliates of Houston. For the last couple of years, Samedan has stepped up its presence in South Louisiana by buying interests in prospects from other industry partners. In 2000, Samedan took six deals in southwestern Louisiana-two out of three were discoveries, two wells are currently drilling and one will spud shortly. The firm is also in the early stages of building an in-house generation program. "We've been excited about the quality of deals we have seen in southwestern Louisiana, both last year and this year," says Scott Rogers, Gulf Coast Region exploration manager. Active throughout the Gulf Coast, Samedan posted a 75% exploratory success rate in that region in 2000. Its recent exploration efforts have centered on Oligocene Marg tex and Bol mex prospects in the 12,000- to 16,000-foot range. Wells in this play takes about 60 days to drill to total depth and run between $2- and $3.5 million, with another $1 million for completion. "We look at deals all over the state, but we like that play and we keep coming back to it." Samedan selects strong geological prospects that have the structure nailed down and a good sand story, on trend with good stratigraphic and production analogs. "Then we look for a little something extra, like seismic character, to lower the risk. The acoustic story has to make sense," says Rogers. Samedan does not necessarily require 3-D seismic for its deals, but Rogers notes that the 2-D deals have trouble competing with the 3-D deals on a risk basis. "We're able to pick and choose, and we haven't seen any shortage of prospects." The company prefers to limit its risk exposure to $2 million or less, and it will take from 33% to 100% of a deal. On a prospect basis, it wants to see potential in the range of 25 Bcfe or greater, with individual wells carrying at least 10 Bcfe of potential. It likes to put as much money as it can into drilling, so to date it has shunned participation in large 3-D shoots. Last year, the independent hit a choice discovery on its Midridge Prospect in Lafayette Parish. The 14,100-foot Harry Stagg #1, operated by Samedan, cut 173 net feet of Marg tex pay. The well was a reentry of an old well that had faulted out the Marg tex, located on a three-way downthrown closure on a major east-west growth fault running through the area. The well started producing in August and is currently making 22.4 MMcf of gas and 1,030 barrels of condensate per day. "We're estimating that well will produce at least 20 Bcf and 1 million barrels of condensate, from a 120-acre closure," says Rogers. The company followed the Stagg with a discovery on the Ware #1, also in Lafayette Parish. The 12,100-foot test hit a productive sand above the Marg tex, and is waiting on pipeline connection. At press time, Samedan had two additional wells drilling, an operated test in Acadia Parish and a nonoperated one in Lafayette Parish. Its Acadia Parish well is the National Farms #1, a test of a large upthrown three-way closure that was not tested on structure. Subsurface control indicates that multiple sands are likely to be present. Following that test, Samedan will move the rig four miles north for another exploratory well. "Well costs are changing rapidly," notes Rogers. "About a year ago, we were paying $7,500 a day for a land rig and now the rate is $16,000 per day. If we get a prospect in right now without a rig, we can't drill it for six months." In Lafayette Parish, it has a wildcat under way on trend with its Midridge discovery, on the north side of South Duson Field. Hallwood Energy is operating that well, projected to 13,050 feet. The McConnell #4 will test an upthrown fault block adjacent to production. The Houston-based firm also has interests in Vermilion Parish's Kaplan and South Lake Arthur fields, its two largest Louisiana properties. The 2001 program includes various development and exploration opportunities within these fields. Samedan's partner in the McConnell #4 well, Denver-based Hallwood Energy Corp. , is another independent that sees growth opportunities in South Louisiana, says William Marble, Houston-based vice president of business development. The company entered the state when it purchased the assets of Quinoco Petroleum Inc. in December 1989. It has continued to grow its production since then, drilling mainly in Lafayette Parish. Today South Louisiana accounts for 13% of its net annual production of 26 Bcfe, and 10% of its reserves. Hallwood has about a dozen producing wells and associated facilities. Its most significant area is Scott Field. Two wells, the A.L. Boudreaux #1 and the G.S. Boudreaux #1, posted cumulative gross production of 84- and 64 Bcfe, respectively, until they watered out in 1999. Last year, the company recompleted the A.L. Boudreaux #1 and drilled a successful 13,600-foot Bol mex well, the Alfred Martin Heirs #1. That find is currently producing 10 MMcf of gas and 225 barrels of oil per day. Presently, Hallwood is drilling the McConnell #4 well and a 15,250-foot Scott Field well, the Dallas Fontenot #1, both in Lafayette Parish. "We're drilling inside the townsite of Scott, a suburb of Lafayette, in and amongst houses," says Marble. The company typically takes about a 25% to 35% interest in the Louisiana tests, which run in the neighborhood of $3- to $5 million apiece in its area. "We like Louisiana because the wells are high-rate producers, and it's a good place to find big reserves. We try to stay very focused on our area, and because we do that we have a very high success rate." Privately held Goodrich Energy is sold on South Louisiana as well, which is not surprising since the company has owned properties in the state for the past seven decades or so. Houston-based Goodrich traces its roots back to the Depression years. It acquired a great deal of fee mineral acreage from the 1930s through the mid-1950s, working almost exclusively in South Louisiana and South Texas, says Gary Robinson, general manager. Recently, it has expanded its 3-D exploration program into South Texas, but it remains a stanch Louisiana player. Recently, Goodrich has centered its South Louisiana activity in Iberia Parish, at Weeks Island salt dome, and in Cameron Parish, at East Little Cheniere Field. In a new twist to its traditional approach, Goodrich has begun to put together three regional joint ventures, two in Louisiana and one in Texas. "Good drilling prospects are going to become scarce in the next twelve months, and it will become very much a seller's market for prospects," says Robinson. "We believe that the best way for us to build an inventory of quality prospects will be to develop them ourselves." Goodrich is looking for high-potential prospects capable of producing between 50 and 100 Bcfe. Prospecting in areas that are geopressured, structurally complex, with multiple targets and with lower drilling maturity is its focus. Its first such regional project is in Cameron Parish. The proposed joint venture will purchase 420 square miles of 3-D data, which was acquired in 1997 but never fully utilized by the initial owners. Today, Goodrich can buy the same data that was shot for more than $100,000 per square mile for about 10% of its original cost. The company operates East Little Cheniere Field in the middle of the proposed venture, and is intimately familiar with this part of the world. Goodrich is presently drilling the Miami Corp. #1 to a projected total depth of 14,055 feet to test a high-potential Middle Planulina trap. The location is one of six prospects that Goodrich picked off of a 28-square-mile proprietary 3-D survey. In addition to the drilling well, two of those prospects are currently producing and a fourth will spud later this year. "The geology in this area is complicated enough that no amount of 2-D data or well control will ever unravel it. 3-D data is essential," says Robinson. From its experience with its pilot survey, Goodrich anticipates generating two prospects per 10 square miles of 3-D data. From the immense swath of data on its proposed Cameron Parish venture, it expects to generate about 80 ideas. Of those, it should be able to verify between 35 and 40 prospects that pass both the economic and operational hurdles. Goodrich then expects to be able to lease and drill 12 to 15 top-flight prospects. The strategy has allure. First, the previous owners of the high-resolution seismic data didn't drill up the resultant prospects, because both were acquired by other firms. Second, fresh approaches are opening up new opportunities that simply weren't recognized before. Work that has been done in the deepwater Gulf of Mexico is beginning to be applied to other areas, says Robinson. "Understanding is growing about the mechanics of salt sheet withdrawal. New structural models are evolving that are fundamentally different from the classic Gulf Coast faulting and salt dome growth models that have been in place since Exxon was Humble Oil ." In the deep water, it has been found that as sediments are deposited they push salt sheets out of the way. The process creates highly angular prisms of sediments of varying ages. These models give prospectors a new way to look for sand packages. "When we apply these concepts, in addition to the basic, careful integration of geology and seismic, we see new prospects," he says. "It's our opinion that although large volumes of 3-D data have been shot across South Louisiana, much of it was never seriously integrated with regional geology. That's an unusual opportunity for us." Nonetheless, South Louisiana remains an area that perhaps requires as much patience as it does 3-D data, effort and money. Tulsa-based Beta Oil & Gas recently announced that it had participated in a discovery in Terrebonne Parish, the Cenac #1. The 16,834-foot well, operated by Harken Energy , was drilled in Lapeyrouse Field. It tested at a rate of 10.8 MMcf of gas and 400 barrels of condensate per day from the Duvall sand. Bill Carl and Ken Savage, Beeville, Texas-based owners of Polaris Exploration Corp. , assembled the prospect, in conjunction with Leo Bader, Scott Laurent and Hershel Ferguson, independent geologists. They began with a 30-square-mile 3-D survey to confirm extensive subsurface geology, and found what appeared to be an untested fault block within the field. The effort was just beginning. Polaris shepherded the deal through one difficulty after another. "The prospect is in the wetlands and in a producing area, so the land situation was extremely complicated," says Carl. Meanwhile, a rash of mergers and acquisitions had partners shifting almost constantly. "We already had a number of partners because of the participants in the 3-D shoot, and the ownership kept changing. Mainly, with the support of Tom Fetters of Beta, and Jimmy Denny of Harken, the prospect was held together. After four years we were finally able to put the drill to it." No question, a massive amount of work goes into each and every South Louisiana test-this is not an area where a company can march rigs across the countryside. But, for those with a bent for prospecting and some gambling blood in their veins, appreciable reserves can still be found.