While the emerging Woodbine play in East Texas poses a highly variable stratigraphy, the results can be robust if you know how to play it, says Crimson Exploration chief executive Allan Keel. “We don’t see the Woodbine play as being a blanket play like the Eagle Ford, Bakken or Haynesville shales—it changes as you move across the area.”
Nonetheless, “the results we’ve seen from our operations and from our neighbors’ operations are outstanding,” Keel told an IPAA/ Tipro audience in Houston in May.
Houston-based Crimson Exploration holds some 18,000 net acres in Madison and Grimes counties, the epicenter of the developing play. It drilled its first horizontal well in March. The Mosley #1H came on at 1,200 barrels of oil equivalent per day and has made more than 60,000 barrels of oil equivalent (BOE) in its first two months, one of the play’s top producers to date out of more than 100 horizontal completions.
“We’re excited,” Keel said. “This is a fantastic area.”
His enthusiasm is beginning to spread. Focused in a six-county area that also includes Leon, Robertson, Brazos and Walker counties, small independents such as CML Exploration, Petromax Operating, Woodbine Acquisition LLC and the privately held Crimson Energy Partners III have dominated the land heretofore. But recent results have attracted large independents including EOG Resources Corp., Devon Energy Corp., Chesapeake Energy Corp., Encana Corp. and the newly formed Halcon Resources Corp. jockeying for position.
Halcon president Steve Herod likes the legacy conventional production history of the East Texas play and the opportunity to apply modern-day unconventional drilling and completion technology.
“Our hope is it will be repeatable and consistent over a fairly large area,” he says. “The economics are quite attractive—you can drill these wells for $6 million or less and get 400,000 BOE estimated ultimate recoveries (EURs) on average.”
While the Woodbine formation gets marquee billing, the allure of the region is its stacked pay. Up to nine different producing horizons plus three shales are present. Also enticing producers: the Buda, Georgetown, Edwards, Glen Rose and Eagle Ford.
Global Hunter Securities investment banker Michael Bodino knows the play well. He has been following it for two years, helping Woodbine Acquisition with $250 million in funding to make its entry purchase in May 2011. “In this East Texas Cretaceous play, there are just big, thick sections of sediment—thousands of feet of organically rich material,” he says. “I like this play a lot and for a lot of reasons. It can become one of the big premium plays.”
The Woodbine also goes by the moniker Eaglebine, reflecting the presence of the overlying Eagle Ford shale. The Woodbine sands are ubiquitous across East Texas, deposited in fluvial flows and marine sediments in the Cretaceous period. These sands thicken between the San Marcos arch to the west and Sabine uplift to the east. To the northwest, the Woodbine is more shallow and oily; it becomes deeper and gassier to the southeast.
But while thick, the depositional makeup is complex, according to a regional study by reservoir-services provider Core Laboratories. “No single, simple, depositional model can be used for exploring the Woodbine traps,” the study reported. That can be tricky from an operational standpoint, as certain horizons are predominant in sections across the expanse but phase out elsewhere.
For this reason Bodino prefers the name East Texas Cretaceous play. “The areal extent of the play is more expansive than those six counties when you consider the various sands.” Because of the stacked nature of the pay, he believes the play will ultimately be a horizontal development in some areas and see vertical multizone completions in others, similar to Permian Basin Wolfberry completions.
Industry activity has coalesced in western Madison County, where recent well results are impressive. Privately held Woodbine Acquisition leads the buzz. Its Pavelock 1H well in southwestern Madison County posted an initial potential (IP) of 1,808 BOE per day and is currently flowing about 1,300 barrels. Before that, its Gibbs Brothers 2H well held top IP honors at 1,366 BOE per day.
Other zones make the grade as well. Crimson Energy Partners’ Jackie Robinson 4H targeted Lower Eagle Ford in Brazos County, on trend with the industry favorite, South Texas’ Eagle Ford, with 800 barrels per day; Devon Energy’s Mathis #2H IP’d 763 barrels from the Georgetown in Madison County; and Navidad Resources LLC flowed 582 barrels and 2 million cubic feet per day from Ferguson #1, which targeted Buda in eastern Madison.
In a research report in early April, Tudor, Pickering, Holt & Co. analysts Brian Lively and Brad Pattarozzi took a deep look into the play and determined “economics are good—real good.” The analysts reviewed 55 horizontal wells completed since 2009 and estimated that wells paid out in less than a year with greater than 250,000 BOE EURs, 90% oil. “Well results so far are superior to many of the new plays,” they said.
Substantial vertical production history has to a large extent derisked the play in and around the major producing counties, according to the report. “The biggest variables going forward are how do lithology, thickness and prospectivity change as the play moves away from these focused areas.”
First and focused
With 150,000 acres amassed and a goal of up to 250,000, Halcon Resources has taken a pole position in the Woodbine, concentrating in Madison, Leon and Grimes counties, according to Herod. Halcon emerged as a new venture in January, the next project of former Petrohawk Energy chief executive Floyd Wilson following Petrohawk’s sale in August 2011. The Houston company has already assembled positions in nine U.S. plays, including the leading position in the Woodbine.
“It’s a high-potential area that hasn’t got as much attention as some of the other shale plays,” Herod says. “It could be a very significant producer.”
Unlike the Eagle Ford, Haynesville and Fayetteville shales, where the Petrohawk team excelled, the Woodbine is a conventional sandstone reservoir with multiple targets.
“We feel like it’s a great place to apply the horizontal drilling and big-stage frac approach that we used so successfully in the (South Texas) Eagle Ford (at Petrohawk),” he says. “The Woodbine is our main target, but there is certainly potential in various other zones.
“One thing that does appeal to us quite a bit is the opportunity in the Eagle Ford, Buda, Georgetown and Glen Rose. Not all of them are necessarily going to be prospective on all the acreage, but you’ve got a shot at other formations that could be very productive and highly economic. It’s different than the (South Texas) Eagle Ford or Fayetteville, where the focus was on one zone.”
Herod acknowledges he is encouraged by industry results. Halcon estimates average well costs to be $5.5- to $6.5 million, with an estimated EUR of 467,000 BOE. At press time, the company was drilling its first well. A core and logging of its Covington 1H well shows the Woodbine, Austin chalk and Eagle Ford to all be prospective.
Halcon has one rig running and will add two more by early August. A fourth rig is planned for the fourth quarter, with up to 24 wells anticipated by year-end.
Woodbine ramp-up will be a “healthy part” of Halcon capex, he says. “Our MO is to move things along.”
Crimson Exploration’s Woodbine drilling program is yielding impressive results, according to a May research note by Pritchard Capital Partners analyst Stephen Berman. The company’s first operated well, Mosley 1H, was producing 1,125 BOE per day two months post IP, with 93% oil and gas liquids. The well was drilled with a 6,300-foot lateral and 23 stages.
The reason for such strong IP results: laterals exceeding 6,000 feet and perf-and-plug completion technology, Keel said in his Houston presentation. Using results from 40 wells drilled since 2009, newer wells employing these techniques consistently posted above an average IP rate of 680 BOE per day.
“If you use perf and plug and longer laterals, you’re going to get a higher recovery,” he said.
The average EUR for all Woodbine wells to date is 400,000 BOE. Newer wells top that with a projected 500,000 EUR.
With well costs ranging from $6- to $7 million, Crimson estimates returns of 99% to 150% based on $95 oil and $3 gas. That compares with 30% to 75% returns estimated for its Eagle Ford shale program.
Another prospective formation on its acreage—the Georgetown—is a blanket play that also has significant potential. “We think the Georgetown play is going to take off,” he said. Crimson will test the formation later this year.
More than half of the company’s $74 million in 2012 capex will target Woodbine, with Crimson drilling seven to nine gross wells there this year. It has more than 100 locations here.
Also active is Canada’s Encana. Its Gresham 1H well in Leon County, drilled in February with a 5,300-foot lateral, is rumored to have IP’d between 600 and 750 barrels per day, with an announced 30-day rate of 230 barrels of oil per day. While the market appeared underwhelmed at the announcement, Pritchard analysts said the company was enthusiastic about the play during its June investor day.
Encana USA division president Jeff Wojahn said the wells were tightly choked back and the Eaglebine had exceeded initial expectations.
The Calgary company has drilled and completed six horizontal wells to date, of which four are producing with 30-day flow rates between 160 and 240 barrels equivalent per day. Encana plans six additional wells this year using one rig.
Fort Worth, Texas-based Woodbine Acquisition was assembled in late 2010 around the technical team of the former Encore Acquisition Co. It holds 15,500 net acres in Madison, Brazos and Grimes counties. Current total company production, all in the Woodbine play, is approximately 6,000 BOE per day (93% oil; 73% rich natural gas). Proved reserves at year-end 2011 were 15 million BOE. Woodbine Acquisition is planning two wells to test downspacing from 160 to 128 acres. And it is adding a second rig to test the Eagle Ford.
Woodbine Acquisition reports well economics as of year-end 2011 generated a 163% IRR at $95 oil and a $6.2 million per-well cost. This is based on using 5,500- to 6,500-foot laterals and 19 to 27 fracture stimulation stages. The company has announced it is positioning itself to be sold in early 2013.
ZaZa Energy in Houston appears poised to pounce on the conventional/unconventional combo program. The company now holds almost 90,000 net acres and while Eaglebine is the publicized target, ZaZa is interested in multiple stacked plays. The company plans four vertical and two horizontal wells in 2012.
Crimson Energy Partners III, an Energy Capital-backed private-equity company in Fort Worth, holds a contiguous 28,000 net acres in the northeastern corner of Brazos County. The company, not to be confused with the public Crimson Exploration, entered the play in 2005 with Buda on its mind, but noticed private explorers Petromax Operating and CML Exploration were working in the Woodbine.
Led by president Frank Starr, Crimson Energy has drilled eight Woodbine wells to date, two vertical and six horizontal, with average reserves of approximately 350,000 barrels of oil per well. IP rates are below those in neighboring Madison County; Starr believes this is because of lower permeability. Wells here post IPs between 350 and 450 barrels of oil.
The rates of return for Woodbine wells are 49% on a 5,000-foot lateral at $4.4 million to drill at $85 oil, and 53% on a 6,000-foot lateral well costing $5.4 million.
“It’s a pretty easy play,” Starr says. “You’ve got a low-perm, thick sandstone 35- to 40-feet thick. It’s fairly easy drilling.”
It takes Crimson Energy about 18 days to drill and complete. Woodbine and Eagle Ford completions involve 6,000-foot laterals using perf-and-plug technique with about 25 stages. Its first Lower Eagle Ford well flowed 700 barrels per day.
With a capex of $60 million, the company plans to focus on the Buda and Eagle Ford as well, having already drilled six horizontal wells into these other zones, including its noteworthy Jackie Robinson 4H. Cores suggest 20 million barrels of oil in place per section for the Lower Eagle Ford; 10 million for the upper Eagle Ford and 10 million in the Woodbine.
The Buda is a naturally fractured reservoir here and has historically been completed barefoot—no casing or perforations in the laterals. But declines were precipitous when the natural fractures depleted.
Crimson Energy’s last two Buda wells were completed with a sliding-sleeve system with swellable packers, using stage fracs in the natural fractures.
With a 7,000-foot lateral and 15 stages, the first well produced 50,000 barrels in its first 90 days and currently is flowing 350 barrels per day. That method will be reproduced on future Buda wells.
“This is a huge resource opportunity, with about 1.7 billion barrels in place across our position,” Starr says.