Encana is the leading operator in the play with 355,000 net acres with exposure in both Louisiana and Mississippi. The company has more acreage and has drilled more wells than any other operator in the Tuscaloosa Marine Shale (TMS). Encana is betting big on the play and provides the most activity to track in the TMS. Eric Marsh, Executive VP of the Canadian corporation recently presented at the Barclays CEO Energy/Power Conference and the TMS was the hot topic of discussion.
One of the main strategies for Encana will be to establish commerciality through their “Resource Play Hub.” The RPH is when multiple horizontal wells are simultaneously drilled, completed, tied in and produced from a single surface location or well pad. The goal of the RPH is to minimize operating and capital costs while improving operating efficiency and reducing environmental impacts.
Thus far, Encana has drilled and completed 5 wells, shown below using Drillinginfo data. The company is shooting for a total of 7 wells to be drilled and completed this year. Taking into account subsurface and operational findings, the strategy to improve performance and production from the TMS involves the following:
– Longer laterals: Encana mentioned taking their natural gas exploration tactics from other plays and applying them to the TMS. The company plans for 10,000 foot laterals in the Haynesville, so I would not be surprised to eventually see that applied to the TMS. Here is a breakdown of Encana’s inventory of completed wells. You can see the correlation of longer laterals and production.
Once the play matures and more wells are drilled, it will be interesting to see if the reservor supports an optimal lateral length as seen in other liquids-rich plays like the Eagle Ford or the horizontal Wolfcamp.
– Improve EURs through enhanced completion design: According to Marsh, drilling is good going vertical or horizontally, but while drilling the bend there is an issue creating hole stability. Addressing the problem, Encana will drill a larger diameter and set a drilling liner through the curve of the wellbore. This kind of well structure along with other completion advancements can lead to a hefty well cost. Encana is attempting to take an $18 or $20 million well to $15 million short term and eventually get that down to about $12 million. This is still on the high side, Bakken well cost range, but hopefully once they have more production history and established some type curves, the economics will be favorable.
– Flowing wells under restricted rates: This should help maintain the structural integrity of the completion as well as prolong the decline rate of those ultra long laterals.
– Data sharing: Data sharing agreements are in place with other companies actively delineating the play.
– Joint Venture opportunity: Encana has partnered with Denbury Resources, but is searching for possibly another JV opportunity to accelerate liquids development and assist with the expensive drill and completions costs. Encana has a resource potential of 9.4 billion barrels in place, primarily Louisiana light sweet crude, which can sell at a premium of $15/bbl over WTI.
The bulk of Encana’s assets are built around natural gas. However, Encana is transferring the knowledge from natural gas development to liquids plays, like the TMS. The company has been a leading player in the nearby Haynesville Shale over the past few years and taking that experience, along with infrastructure already in place; Encana is in a good position to fully develop the TMS.