Zapata County, the west flank of South Texas, produces more natural gas each year than any other Texas county. Its neighbor, Webb County, ranks fourth in annual gas production in the Lone Star State. The two counties alone push 1.5 billion cubic feet (Bcf) of gas into pipelines each day. The wells that make a considerable part of this tremendous volume tap Eocene Wilcox reservoirs, most particularly the Lower Wilcox Lobo. The Lobo trend has been producing for more than 30 years but appears far from exhausted. Its overpressured, low-permeability sandstones are riddled with faults and highly compartmentalized. "The Lobo play is very active, and it doesn't seem to change much whether gas prices are down or up," says Glenn Hart, president of privately held Houston-based Laredo Energy LP. Initially, TransTexas Gas Corp. and majors Chevron, Conoco and Mobil dominated the under-appreciated Lobo. In 1997, Conoco acquired TransTexas for more than $1 billion, and the play gained industry-wide notice. Since then, several companies have joined in, including Houston Exploration, EOG Resources, Chesapeake Energy, Pogo Producing, Chevron, Kerr-McGee, Devon Energy, Dominion E&P and Edge Petroleum. ConocoPhillips continues as the largest producer and acreage-holder. Since 1997, it has drilled more than 900 wells, although lately it has been ramping down activity as it nears the end of its development cycle. During 2004, ConocoPhillips' net daily production from the play averaged 291 million cubic feet of gas, and it drilled 73 wells. This year, the major has budgeted 64 Lobo wells. A prime focus For The Houston Exploration Co., the Lobo is a core area, says chief operating officer Steve Mueller. From 600 operated wells, the company makes 190 million cubic feet of gross gas per day, making it the No. 2 Lobo producer. During 2004-05, the company has had several rigs running there, drilling between 70 and 80 wells a year. Next year, it expects to add a fifth rig and drill more wells. It has three to four years of inventory ahead, it believes. "Less than 10% of the wells we drill have any kind of depletion aspect, even when we are inside a field, because the Lobo is so complicated both structurally and stratigraphically," Mueller says. Its locations are a mixture of infill wells targeting new reservoir compartments, stepouts to existing fields, and exploratory tests. This year, the company's North Roleta wildcat, in southern Zapata County, was a success. That find could eventually support about 10 wells. The play is clearly maturing. While Houston Exploration has been working the Lobo, estimated ultimate recoveries have declined. "When we started in the Lobo in 1996, 60% to 70% of our wells were 3 Bcf or larger," says Mueller. "Today we are finding wells between 1.5 and 2 Bcf." Higher initial rates are offsetting that. Today's Lobo wells exhibit steeper declines but produce faster. A typical well once came on at 2 million per day; now it's common for wells to make more than 3 million and as much as 7 million per day. Improved fracturing techniques, albeit subtle, are partly responsible for the augmented rates. Changed frac fluids allow better frac placement, and multiple fracs can be performed quickly. "There are a lot of little things that make the fracs better today, and in turn these wells are economic." In addition to the six traditional Lobo sands, Houston Exploration works the Perdido sand, a reservoir sandwiched between an unconformity in the Middle Wilcox and the Lobo. The Perdido, the main objective in the company's Charco Field, consists of small sand lenses that typically cover between 20 and 40 acres. A deep Lobo well, to depths between 12,000 and 14,000 feet, requires about 22 days to drill and costs from $1.8- to $2.7 million completed. A Perdido or shallow Lobo well can reach depths between 9,500 and 11,000 feet in about 15 days, and costs around $1.5 million. The paramount challenge in the Lobo is achieving efficiency in infrastructure. "Logistics are the issue, making sure we don't spend too much money on roads or move the rigs too many times." Laying pipelines quickly and sizing compressors properly are also crucial. For Houston Exploration, the future of the Lobo is bright. The firm recently acquired several South Texas properties from Kerr-McGee, including some Lobo acreage, and expects to increase its production there between 8% and 10% next year. "Our goal is to continue to be a major player in South Texas." An influential newcomer Oklahoma City-based Chesapeake Energy Corp. became a serious Lobo player in October 2003 when it acquired properties from Laredo Energy and partners. Chesapeake was building a position in Zapata County prior to this and was very attracted to the Laredo properties in particular. The $200-million purchase included 108 Bcf equivalent of proved and 88 billion of probable or possible reserves; the properties were making 30 million cubic feet of gas per day. Laredo's wells showed greater potential than typical Lobo producers, says Tom Price, Chesapeake vice president. After that purchase, Chesapeake added staff and acquired additional assets in the play, including from Legend Natural Gas in mid-2004 and from Laredo II this spring, and from Laredo II's partners. The Legend properties included 18,000 net acres of leases and the Laredo II assets included 28,000 net acres, both mainly in Zapata County. Laredo II's gross operated production at exit was 40 million cubic feet per day. 3-D seismic technology proffers a distinct advantage in the Lobo, where Chesapeake is targeting high-rate, high-potential wells. "The Lobo/Wilcox trend in Zapata County has been very important to us in meeting our production growth for the last two years," says Price. At present, Chesapeake makes 149 million cubic feet per day from the play and runs four rigs in Zapata County. "Our main challenge is to continue to be able to high-grade prospects to repeat the success," says Price. The play requires very good geological and geophysical staff, so drilling locations take longer to develop than in a more statistical area. Private firms flourish Laredo Energy was formed in 2001 by ex-managers of Michael Petroleum Corp., a Lobo player that was sold to Calpine Natural Gas Corp. After two sales to Chesapeake, the management launched a third firm. Laredo now owns 20,000 acres, mainly in new leases. "A big key to our success is our relationships with the landowners," says Hart, who has worked the Lobo for 20 years with his colleagues. The hallmark of the Lobo is its high degree of faulting, and the fields are essentially small, rotated fault blocks. The average fault block discovered these days spans about 60 acres, and can support a couple of wells; blocks in the 1,000-acre range are still occasionally found. Laredo mainly targets new fault blocks with its drilling. Improved 3-D seismic processing and attribute analyses have made current Lobo drilling very successful, he adds. In particular, seismic stratigraphy works well in the Perdido play, which has expanded from its historical area in Zapata County up into east-central Webb County. Although trapping styles differ between the Lobo and Perdido reservoirs, completion strategies are similar. Most operators commingle multiple zones, and reservoirs are fracture-stimulated. A shortage of rigs has challenged the Lobo drillers, and companies with rigs are receiving joint-venture proposals from firms that need to drill leases. "It's become a new source of opportunity for us," says Hart, as Laredo has two rigs under contract. Another independent, privately held Reichmann Petroleum Corp., also works the Lobo in Zapata County. The Grapevine, Texas-based company entered South Texas about three years ago, and currently owns about 25,000 acres there. "We built our company drilling in South Texas, and it's a core area for us," says senior vice president Dan Peters. A strong relationship with landowners is important. "When we take a lease, we are not adverse to giving a drilling commitment," he says. "And we have the tenacity to put it in writing. People negotiating leases for the bigger companies don't have authority to commit to wells, but we can and we do." The firm uses air gravity surveys to high-grade hot spots. "We believe that the gravity surveys help us find the better trends," he says. If a particular anomaly is not leased, Reichmann will buy 3-D seismic off the shelf to determine its geological and geophysical merits. The company sells between 30- and 35 million cubic feet of gas per day in South Texas, from about 20 wells. At press time, it was drilling its Volpe prospect, with ConocoPhillips as a partner. The Lobo wells in Reichmann's area cost between $2.2- and $2.4 million completed, and come onstream at rates between 5- and 7 million per day. "South Texas is exciting. It's not a cookie-cutter play; it's still a good old play that you have to hunt for."