The Texas Panhandle is rocking and rolling. The tight-sand Granite Wash play has expanded to cover hundreds of square miles, and is enjoying a surge of drilling thanks to record natural gas prices, improved completion technologies and recent downspacing orders by the Texas Railroad Commission. The Granite Wash is one of a series of washes that were eroded off the Amarillo Uplift during Pennsylvanian time. Washes are essentially coarse debris, featuring mixtures of many different types of rocks that were weathered from the uplift, including granites, arkoses, limestones, cherts and dolomites. Washes can vary significantly in thickness, ranging between 200 and 1,500 feet thick, and depth of burial, occurring between 100 and more than 15,000 feet below the surface. The thickest parts of these wedge-shaped deposits are found closest to the source, and their uppermost beds drop down in the geologic section as distance from the source increases. According to the U.S. Geological Survey, more than 7,600 wells have penetrated various wash lithologies in the Anadarko Basin, and 2,700 wells produce from 32 major wash reservoirs. Wash fields commonly produce gas, but oil-filled reservoirs are sometimes encountered. Granite washes were deposited mainly during the middle and late Pennsylvanian, while chert and carbonate washes were deposited during the early Pennsylvanian. The largest gas field developed in the Granite Wash play is Hemphill, in Hemphill County, Texas, with an estimated ultimate recovery of 1.1 trillion cubic feet (Tcf) of gas. Mobeetie, in Wheeler County, ranks as the top oil field, with 7 million barrels of recoverable crude. The overriding characteristic of the Granite Wash is its heterogeneity. The complex sediments are highly variable, with little continuity. Wells in the low-permeability sandstones drain limited areas, making them excellent candidates for downspacing. As in other unconventional plays, Granite Wash operators concentrate on reducing costs and improving well flows. Play genesis The Granite Wash has a long history of production in the Texas Panhandle region, but the recent surge in activity had its start in multi-pay Buffalo Wallow Field. Located in Hemphill County, about eight miles south of Canadian, Texas, the field has produced 1 Tcf of gas and 1.5 million barrels of condensate since its discovery in 1967 as a Hunton pool. Production peaked in 1971 at 318 million cubic feet per day from a number of producing reservoirs, including the Morrow. By late 1999, daily rates at Buffalo Wallow had declined to just 26 million cubic feet from 58 active wells. Although it appeared to be in its sunset years, Buffalo Wallow was actually at the beginning of a remarkable rebirth. That's because a handful of independents started to develop the field's Granite Wash reservoirs in earnest. At Buffalo Wallow, the Granite Wash is about 12,000 feet deep and reaches a thickness of about 700 feet, with between 100 and 250 feet of net pay. The operators experimented with various drilling and multi-stage completion strategies in the low-pressure reservoir, and began to enjoy respectable flow rates. In early 2000, the Granite Wash was contributing less than a million cubic feet per day to Buffalo Wallow's production, but by January 2005 the reservoir was making more than 125 million per day. Industry interest in the field jumped significantly in late 2004 after the Texas Railroad Commission approved optional 20-acre spacing, doubling the number of permissible locations. A couple of new faces are now heavily involved in Buffalo Wallow, thanks to some of their recent acquisitions. Denver independent Forest Oil Corp. acquired Peak Energy Resources Inc., a privately held operator based in Durango, Colorado, in April 2005. In the transaction, Forest acquired 8,300 gross acres in Buffalo Wallow Field and another 25,000 acres in Wheeler, Hemphill, Roberts and Lipscomb counties, Texas. At the time of the acquisition, the Buffalo Wallow area properties were producing 20 million cubic feet per day from 41 wells. By the end of the second quarter, Forest had added eight wells to production, had another five working on completion, and had raised volumes to 29 million per day. Currently, Forest is running four rigs in the field, and expects to add additional rigs in 2006. On average, Forest figures well costs of $1.5 million, reserves of 1.5 billion cubic feet equivalent (Bcfe), and initial potentials of 1.5 million per day per well. "This field is basically a 1:1:1 ratio for cost, reserves and rates," says Michael Kennedy, manager of investor relations. "We give a range of costs between $1.4- and $1.9 million to drill and complete a well, and ultimate recoveries between 1.4- and 1.8 Bcfe." The company drills its wells to depths between 13,000 and 14,000 feet, taking them down to the Atoka in about 20 days. "We generally do four slick-water fracs in the Granite Wash," he says. "For us, it's the ability to frac and commingle the four zones in one well that gives us the rate to maximize the economics." The company has identified 370 drillsites in Buffalo Wallow, but has been conservative in its reserve bookings. "The important point is that we only booked one offset per producer at the time of acquisition; the remaining 330 locations were not in the proved category," says Kennedy. This year, Forest plans to drill 60 Granite Wash wells, which will more than exhaust its proven undeveloped (PUD) locations. Subsequently, each well will add new reserves. "We are determined not to get on a PUD treadmill." During 2006, Forest aims to drill another 110 wells, developing its 40-acre locations before moving to 20-acre sites. Buffalo Wallow now ranks as Forest's most valuable field, and it has the most activity of any property within the company. Daily production from the project is projected to reach as much as 40- to 45 million cubic feet in 2006. "For years, the Granite Wash was considered to be a secondary objective. But with today's prices, and the new use of the fracturing technology and commingling, the productive rates make it very economic." Indeed, the Granite Wash is quite straightforward, with few drilling or completion problems, no major issues with water disposal or land access, and excellent transportation infrastructure in the area. The only real issue is availability of services, he says. "It's a great play, and there's a ton of activity." Another firm fresh to the play is Noble Energy Inc. In early 2005, the Houston-based independent acquired Patina Oil & Gas, which had built a substantial position in the play through its purchase of privately held Bravo Natural Resources Inc. in late 2002. This year, Noble expects to drill more than 70 wells in Buffalo Wallow, in a mixture of 40- and 20-acre sites. Beyond that, it has another 250 locations in inventory. "The economics are good, especially in this price environment," says Greg Panagos, Noble director of investor relations. At present, Noble is running five rigs in Buffalo Wallow, and one rig in Billy Rose, a newer area in central Wheeler County south and east of Buffalo Wallow. Here, the Granite Wash is shallower, occurring between 5,000 and 8,000 feet. Noble expects to drill roughly seven wells at Billy Rose this year. "We don't really characterize this area as exploration. It's a tight-gas sand play, and once we figure out how to make it work, it's more of a manufacturing operation for us." An expanding play Another operator with a robust drilling program in the Granite Wash is Cimarex Energy Co. The Denver-based firm had a long-established position in the Texas Panhandle through the E&P business of driller Helmerich & Payne Inc., which sold the unit to Cimarex in 2002. When Cimarex acquired Magnum Hunter in mid-2005, Cimarex added 60 sections to the 30 legacy sections it already operated in the Panhandle. At present, Cimarex is running four rigs and has drilled 25 Granite Wash wells at a capital cost of $37 million. During 2005, it plans to drill up to 34 wells in the play, says Mike Stone, Midcontinent region manager. Currently, Cimarex is producing 24 million cubic feet gross per day from the Texas Panhandle. The company works the play mainly in Hemphill and Roberts counties, in Hemphill, Northwest Mendota, Red Deer and Cree Flowers fields. It has been drilling 10,000- to 13,000-foot Granite Wash wells on 40- to 80-acre spacing, as many of its leases were lightly drilled with only two to three wells per section. Cimarex figures its Granite Wash wells recover between 1- and 2.5 Bcfe apiece, at a completed well cost of $2.2 million. It fracture-stimulates three to five stages in each well, so completions account for half of the total cost. The risk of drilling a dry hole is minimal, with the success rate close to 100%. Naturally, making a completion and making a commercial well can be different. In the Granite Wash, this was often the case in the past. For years, operators targeted only the upper Des Moines portion of the Granite Wash section, and avoided the deeper Atoka zones because they were often tighter and misinterpreted as being wet. That's changed. "The use of slick-water fracs has given us much more economic completions than the older borate fluid completions," says Stone. The older fracs were expensive, so operators selected only the highest-quality reservoirs for treatment. Additionally, improvements in fracturing methods have encouraged operators to drill deeper into the Granite Wash, opening more section. "It's a very thick, low-permeability reservoir with many stacked pays, and today's completions make the wells very economic. These days, we can frac the entire Granite Wash interval, including the Atoka, in four or five stages for a reasonable cost." Although today's wells look at more Granite Wash, drilling times have actually decreased thanks to PDC bits. Wells can now reach their total depths in an average of 20 days, versus the previous average of 35 days. "Operational efficiencies are crucial in this play, and we believe that if prices turn around, the improvements we have made in our efficiencies will keep the play economic." Cimarex prefers to drill its wells normal to underbalanced, to minimize up-hole fluid loss and maximize geologic data. It likes the resulting shows, which it uses to help design stimulations. "Although the Granite Wash is very thick, there definitely are sweet spots," says Stone. The company also drills about 20% of its Granite Wash tests deep enough to look at the Lower Morrow interval, particularly in the Red Deer Creek area in Roberts County. There, the Morrow lies 500 to 700 feet below the Granite Wash and is normally pressured, so additional casing is not required. The interval is only 20 to 40 feet thick, but is a fine, high-permeability reservoir. "It's certainly higher-risk than the Granite Wash, but the Morrow delivers bigger wells. Where we think it's prospective, we can add a tail onto a Granite Wash well for a minimal cost." The principal issue Cimarex faces in the Panhandle is the lack of services. Not only is every operator looking for rigs, everyone is struggling to secure services for each step of the drilling and completion process. "We have challenges from getting locations ready, to obtaining pumping services to hiring welders. There are shortages of labor and equipment, and the infrastructure is not as well developed in the Texas Panhandle as it is in western Oklahoma." Nonetheless, these are the kinds of problems that come hand-in-hand with a red-hot play. "We're excited about the Texas Panhandle. So are a lot of other people-there's plenty of competition out there." Indeed, the Granite Wash appeals to a wide range of operators. Austin-based Brigham Exploration Co. focuses on drilling seismically controlled, high-potential prospects. In the Granite Wash, however, it sees a low-risk development play that can balance its exploratory efforts. The company initially acquired acreage in Hemphill County as part of a deeper Morrow program. As commodity prices rose during the past few years, however, it began to turn its attention to the tight-sand objective, which it had once regarded solely as a bailout zone. Brigham started drilling Granite Wash wells two years ago. At present, it has 10 operated and 16 nonoperated Granite Wash producers, says Lance Langford, executive vice president of operations. Based on 40-acre spacing, the company has approximately 80 potential locations on its contiguous block of 4,000 gross acres, which lies between Hemphill and Buffalo Wallow fields. The field rules covering its leases allow for optional 20-acre spacing, but the company hasn't yet determined if it will infill that tightly. "At some price, it is reasonable to go to 20-acre spacing, but now we are concentrating on 40-acre development," says Langford. "We have enough locations on 40s for a multi-year drilling program." Where Brigham is drilling, the Granite Wash occurs at between 10,000 and 13,000 feet, and the company targets two to five zones for completion in each well. Well costs range from $1.2- to $1.6 million, depending on depth, and recoveries are between 600 million cubic feet and 1.1 Bcfe each. As in other areas, the recent trend has been to drill deeper into the Granite Wash section. "In our acreage position, we have found that in some areas the deep zones really are additive, and in some areas they are not," he says. One of the agreeable features of the play is that Brigham's well results have been steadily improving as it drills more holes: "We're going down the learning curve, figuring out what works in our area." Operationally, Brigham finds the play straightforward. The Granite Wash wells are shallower and easier to drill than those it typically operates, although the reserves and margins per well are also lower. High line pressures are a concern that Brigham shares with other Granite Wash producers. The firm strives to get the lowest delivered line pressure possible, because pressure affects the ultimate recovery from the wells. Brigham expects to bring a rig into the play during the fourth quarter, and add two to three more wells to the six it has already drilled or participated in this year. Next year, its preliminary plans are to drill between six and 12 wells. The big picture Although Buffalo Wallow was one of the first areas to see a spike in Granite Wash drilling, the reservoir is found throughout a broad portion of the Panhandle and even reaches into western Oklahoma. In fact, Buffalo Wallow lies on the northwestern edge of a much broader trend. Active operators include such firms as Dominion Exploration & Production, Apache Corp., Chesapeake Energy, Latigo Petroleum, Kaiser-Francis Oil Co., Samson Resources, Crest Resources Inc. and Bluegrass Energy Inc., according to IHS Energy. Houston independent Newfield Exploration Co. is a major player in the Granite Wash, and it has expanded the concept to include four wash sequences that extend eastward into Oklahoma. At present, Newfield controls more than 50,000 net acres and is producing more than 40 million cubic feet of gross operated gas per day from the play. During the past two years, it has drilled 77 wells in its Mountain Front Wash program, and expects to close out 2005 at more than 80 wells. It is running six rigs, and plans to add a couple more prior to year-end. "We started in the play in 2002 with 4,000 acres," says Lee K. Boothby, Tulsa-based president of Newfield Midcontinent. The company has been pursuing a gas-mining strategy in the Midcontinent region since 2003, and it saw an impressive opportunity in the western Anadarko Basin's wash sequences. Newfield prospects in four major intervals: the Upper Granite Wash (Marmaton), Cherokee, Red Fork, and Atoka washes. It launched its drilling program in the traditional Granite Wash in the Buffalo Wallow area, but shortly thereafter moved its focus to Stiles Ranch Field in eastern Wheeler County, Texas, because each of the wash intervals tends to thicken in that direction. At Stiles Ranch, it drills wells that intersect all four of the wash sequences. Multi-stage, multi-zone completions are key to Newfield's strategy, and about half of the wells it has drilled to date test all four of the wash intervals. Recoverable reserves in the Stiles Ranch area are typically 2.5- to 3 Bcfe per well. The 15,000-foot wells are completed in three to four wash intervals between 12,500 feet and total depth. In the deeper washes, the company has found that the intervals thicken and develop better reservoir characteristics in varying directions than in the conventional upper Granite Wash pay. "The sections we are interested in have resource potential in excess of 100 Bcfe of gas-in-place each, and that's in the game with any of the other big resource plays," says Boothby. "And the washes sit in a fabulous basin." Currently, Newfield is shifting its attention even farther east into the heart of the Anadarko Basin, to areas in Roger Mills County, Oklahoma, where the wash intervals achieve their maximum thickness and stack together. Here, the prospective section expands to 2,500 feet thick and is found at depths between 12,000 to 16,500 feet. Short-term, Newfield plans to finish its assessment program in western Oklahoma, where it faces some leasehold deadlines. Subsequently, it will move rigs back to the Panhandle, where most of its acreage is held by production. There is much work to do, as it is still drilling deeper wash intervals at Stiles Ranch at 160-acre spacing. "We have a long ways to go."