With WTI oil prices staying above $60 a barrel for several months, U.S. drillers are breaking production records each week, mostly thanks to the Permian in West Texas and New Mexico.
In recent months, however, some companies have started to test their fracking capabilities on oil fields that most agree reached their peak production decades ago.
Drillers believe that it’s a winning bet. Analysts say it could be a breakthrough for the more challenging chalk formations in East Texas and Louisiana. Authorities and industry officials in Louisiana believe there’s a resurgence in one of the old oil-producing areas in the state and want to support investment in the region.
The Austin Chalk, which stretches from Texas to the Gulf of Mexico and cuts through much of central Louisiana, is one of those formations that was ‘hot’ back in the 1990s, but has been forgotten since then, especially after hydraulic fracturing shifted the industry attention to other areas in the United States—the Bakken in the north and the Eagle Ford and the Permian in Texas.
Companies have started to drill frac wells in the Austin Chalk, where the number of drilling rigs has doubled over the past six months to 14, and oil production surged to 57,000 bpd last year from just 3,000 bpd five years ago.
The Austin Chalk play is going through a resurgence in activity, and new horizontal drilling and completion techniques have resulted in substantial production rates, according to the State of Louisiana’s Department of Natural Resources. The eastern portion of the Austin Chalk play has unexplored and underexplored areas with significant open acreage available, the department said in March this year.
Historically, the majority of the production has occurred in the western half of the state, while new permitting and leasing activity is concentrated in the central and eastern portions of the play in Rapides, Avoyelles, and Pointe Coupee parishes.
Marathon Oil Corporation, for example, bought a largely contiguous position in the emerging Louisiana Austin Chalk play last year at a cost of less than $900 per acre. Related: 3 Possible Outcomes From The OPEC Meeting
“Critical to our long-term value creation and full-cycle returns, we captured future potential opportunities through low-cost exploration acreage additions, including a material position in the emerging Louisiana Austin Chalk play,” Marathon Oil president and CEO Lee Tillman said at the Q1 2018 results release.
ConocoPhillips announced in April its entry into the central Louisiana Austin Chalk.
“What we were seeing with some of the newer technologies work really well in the Austin Chalk,” ConocoPhillips’ CEO Ryan Lance told Reuters.
WildHorse Resource Development Corporation brought four Austin Chalk wells online in the first quarter of 2018.
EOG Resources also has a new horizontal production well in the eastern part of the Austin Chalk.
The Austin Chalk fracking has yielded some success in Texas, but it hasn’t been extensively tested in Louisiana, according to Wood Mackenzie.
“EOG is trying, drilling the Eagles Ranch 14H – the first modern completion in this portion of the Austin Chalk. Early results suggest it could be a breakthrough for Louisiana acreage,” the analysts said last week.
“While natural fracturing has generated impressive initial production rates in Texas, the Louisiana landscape is more complex. Economic wells will require a complex interplay of natural fractures and matrix production in just the right balance. The rock is challenging, so completions will need to be aggressive and costs will be high,” says WoodMac.
EOG’s Eagles Ranch 14H well will likely be the benchmark for subsequent tests this year, the analysts reckon—at US$12.3 million, including one-time expenses for scientific testing, the well suggests future non-exploratory well costs between US$9 and US$10 million. However, decline rates have been steep in the first three months, the analysts note. Related: The Unlikely Solution To The Battery Bottleneck
“We expect 2018 to be a pivotal year in the ongoing evolution of Austin Chalk exploration, particularly in Louisiana. It will be somewhat slow-moving though, but if WTI prices stay above US$60 per barrel, exploration activity will no doubt continue to build,” WoodMac said.
While companies test the geology and production/decline rates of old fields drilled with new technology, Louisiana hopes that the Austin Chalk resurgence could revive its economy.
“Anytime you mention the Austin Chalk, the committee room lights up,” the Chairman of the House Natural Resources and Environmental Committee, State Representative Stuart Bishop of Lafayette, said in an April article by Gifford Briggs, President of the Louisiana Oil & Gas Association (LOGA).
“My community was brought to their knees in the recent oil down turn, and the uptick in Texas activity has many of our families heading to work in the Permian. The Austin Chalk will bring much needed relief and opportunity for my constituents. I would rather send our workforce somewhere in Louisiana than anywhere in Texas,” Rep. Bishop says.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- OPEC Back “In the Driver’s Seat”
- Iranian Influence In Iraq Grows
- Venezuela Forced To Shut Down Production As Operations Fall Apart