The famed Vicksburg Fault Zone fields stretch along a northeast trend from the Mexican border through Kleberg and Nueces counties, South Texas. They produce from hundreds of compartmentalized reservoirs trapped in an array of anticlines, faults, unconformities and stratigraphic pinch-outs. Garcia, Rincon, Sun and Kelsey fields are in the southern part of the trend; La Gloria, Tijerina-Canales-Blucher, Seeligson, Agua Dulce, Richard King and Wade City fields lie in the northern part. Production in the middle slice of the fault trend is conspicuous by its absence. Both oil and gas occur in Oligocene Vicksburg and Frio reservoirs in the play, with production from huge anticlines in the southern, shallow portion of the trend giving way to accumulations trapped in complexly faulted structures in the deeper parts to the north. The first major field found on the Vicksburg Fault trend was Agua Dulce, discovered in 1928 in Nueces County. Additional drilling uncovered other pools in the area, and fields were discovered in the southern end of the trend in 1938. The Vicksburg Fault Zone was recognized as a regional play shortly afterward. By the close of the 1940s, most of the prolific oil fields had been discovered, although exploitation and extension drilling continued to yield new reserves. The emphasis then shifted to natural gas and more than two dozen major gas fields were subsequently found along the trend. Forming an alliance The Vicksburg ranks as one of the prime reservoirs of South Texas, but despite its lengthy history of production, it remains enigmatic. It is a subtle reservoir, with complex petrology, extreme compartmentalization and unpredictable well results. Well logs often do not accurately predict reservoir performance, and disappointing completions cannot always be satisfactorily explained. It is a maddeningly intricate puzzle, with myriad prospective intervals scattered throughout several thousand feet of sediments. Kerr-McGee Corp. has owned assets in South Texas since the 1930s, and these continue to be consequential to the Oklahoma City-based company. Indeed, about a third of its worldwide 2003 natural gas production flowed from tight-sand reservoirs in Colorado and South Texas. The firm likes the balance that the steady production, with its predictable cash-flow generation and low unit costs, offers to its overall production portfolio. "These are long-life assets, and we have been there almost since there was an oil and gas industry in South Texas," says David Kimes, vice president, Midcontinent and Gulf Coast region. Kerr-McGee has mounted an active infill- and development-drilling program on its South Texas properties for many years, and also operated hundreds of vintage Vicksburg wells. After Kerr-McGee in 2001 acquired HS Resources, a Denver-based E&P company with an extensive and successful restimulation program in Wattenberg Field in the Denver-Julesburg Basin of Colorado, it started to consider other regions where this approach might work. The firm became intrigued with the potential for refracturing reservoirs in South Texas. Some of its existing wells there produced at very low rates, or didn't produce at all. At the same time, Schlumberger, through its Data Consulting Services unit, was engaged in an effort to capture its knowledge across all of its various products and technologies in major U.S. basins. Having completed a large basin study of the Vicksburg reservoir, the service company approached Kerr-McGee and proposed an alliance. It wanted to collaboratively evaluate the standing Vicksburg wells for a second round of stimulation treatments. "We talked to several other companies as well, but we felt that Schlumberger had the best overall financial and technical package for us," says Del Wisler, Rincon asset team manager. A formal three-year alliance between Kerr-McGee and Schlumberger was launched in April 2002. It's still in force, and can be renewed on a year-to-year basis at the end of its primary term. "By bringing in a service company in this type of arrangement, we created value by accelerating the Vicksburg potential into near-term volumes, rather than something we wouldn't get to for two or three years down the road," says Kimes. For Schlumberger, this was the first such alliance in North America. "Of any of our customers, we have taken the level of this business relationship-in terms of the depth of collaboration and integration-the farthest with Kerr-McGee," says Jeff Gorski, global account director. Redevelopment program Kerr-McGee's Vicksburg assets are mainly in Hidalgo, Starr, Kleberg and Jim Wells counties, where the Vicksburg is a gas-bearing reservoir generally occurring at depths between 10,000 and 12,500 feet. Typically, a Vicksburg well targets one or two horizons and recovers 2.5- to 5 billion cubic feet of gas. Because most of the reservoirs are highly faulted, some wells recover much greater volumes. But at today's gas prices, wells that make less gas are still economic. To date, the alliance has evaluated 220 existing wells for restimulation, ranging in age from recent completions to those dating from the 1950s. Kerr-McGee has completed 22 restimulations, mainly in Flores Field in Starr County and Tijerina-Canales-Blucher (TCB) Field in Kleberg County. The refracs have added 16 million cubic feet per day of incremental production, increased the company's proved reserves and enhanced its cash flow. Thirteen additional opportunities have been identified as well. "With field and mechanical conditions in the wellbores, probably half of those will drop out," says Kimes. "We will have five or six solid refrac candidates for the rest of the year." Candidate wells are identified through a collaborative effort between the alliance partners. Schlumberger reviews production histories for Kerr-McGee's Vicksburg wells, measuring actual production against what it calculates cumulative production should be for reservoirs with various porosities and permeabilities and feet of pay. This screen identifies wells that have potential reserves left in the ground. The selected wells are then assessed for mechanical feasibility, and those that pass this muster are proposed to Kerr-McGee as refrac candidates. The operator then takes a detailed look at each well, preparing a cost estimate and an independent reserve estimate. Kerr-McGee's engineers prepare the AFEs (authorization for expenditure) and submit the candidates for management approval and the regulatory permitting process. Schlumberger and Kerr-McGee mutually agree on the resources that are expected from the restimulation. "Based on how the well performs, Schlumberger can earn a bonus based on success, or assume some financial risk if results are less than expected," says Kimes. Most of the wells selected for restimulation were initially fractured in the 1980s; the refracs work because stimulation fluids are far cleaner now than they were 15 to 20 years ago. "There is less reservoir damage from the frac fluid," says Wisler. Additionally, the ceramic or bauxite proppants used today can withstand the closure stress in the reservoir. "Many jobs that were pumped back in the 1980s used Ottawa or Brady sand, and these proppants couldn't withstand the reservoir pressures and just crushed. They didn't provide sufficient conduits from the wellbore to the reservoir." A high percentage of the 22 reservoirs that were refrac'ed were below cast-iron bridge plugs and cement, and through the years, Kerr-McGee had moved uphole and produced these wells from shallower zones. Some reservoirs were abandoned 15 to 20 years ago. "We would not get these reserves out without these restimulations. The program was designed specifically to add reserves, and that's what we have accomplished," says Kimes. Service company benefits From its perspective, Schlumberger saw several advantages to the alliance concept. "We're bringing something other than just well-services technology to the alliance," says Gorski. "We are putting process, intellectual property and experience on the table." Schlumberger viewed the Vicksburg alliance as a way to leverage its intellectual capital in its business relationship with Kerr-McGee. Another plus: the collaborative environment allows the service company to fully understand the goals and objectives of the client. Instead of being hired on a job-to-job basis, Schlumberger sees the big picture and can bring its very formidable resources to bear on a program. Greater efficiency is an offshoot of this perspective. People and equipment can be scheduled on a long-term plan, allowing a smoother workflow and reducing over-capacity. "We always have a general understanding of who's working where, so we're always making educated guesses about where and when our services will be needed. But when we work collaboratively, the improvements in scheduling and the handling of resources are substantial." The joint relationship also fosters development of new technology. The customer's needs in specific fields and reservoirs are problems the service company is actively researching, so the customer gets early access to fresh approaches and procedures. And obviously, if Schlumberger can surpass the benchmarks that are set for each job under the alliance structure, it receives a better-than-market value for its services. Expanding the program Kerr-McGee focused on the Vicksburg for its initial refrac efforts because that reservoir accounted for the majority of its South Texas production at the time. "Our expectations for the refracs have been met or exceeded, and that's why we feel confident to expand this concept outside of South Texas and outside of the Vicksburg," says Kimes. "There are wells that were failures, but we learned as we went along, and the concept has held up well." The company has already expanded the model to fields in the Panhandle of Texas and Oklahoma, executing another alliance with Schlumberger in that region. "It's a similar arrangement in that there is risk and reward, although the terms are different," he says. And, in light of its merger with Westport Resources, Kerr-McGee is looking at extending its refracing program to other reservoirs in South Texas. The company now has a significant position in the Wilcox and Lobo sands. Schlumberger also would like to expand the scope of the alliances, to ultimately look at full field-rejuvenation projects. "Right now, we're going after the lower-risk opportunities," says Gorski. "The next step would be to mature the relationship to include the drilling of new wells. This could take on many different types of operations."