It seems like I always want to start a Granite Wash entry by saying something along the lines of “the Granite Wash continues to impress…” Such is the case again. I looked over the Forest Oil quarterly stuff recently and was impressed with the E&P update. First, I will post a slide I have posted a few times earlier. I feel it sets the stage for Granite Wash discussions.
$300MM of the about $600MM CAPEX budget is going to the Granite Wash where they will operate 6 rigs. Forest mentioned a rebound in ethane prices to 40% of WTI. Positive ethane demand is a real help in this play due to the strong presence of NGLs in the gas stream. Speaking to the upside of Granite Wash RORs, Forest stated their 3Q GW wells have already paid out. At $7MM well costs, payouts that quick are impressive. Another nice data point is Forest experienced a well cost breakdown of 60% completion, 40% drilling, at points 70% completion. Pressure pumping services continue to be a problem in all the main unconventional plays.
Forest will continue to experiment and test different development techniques and pay zones. They mentioned they will experiment with a sidetrack off an existing vertical well. One interesting discussion on the earnings call spoke to the heterogeneity of the play as a whole. If I understand correctly, the company had drilled an offset horizontal well and experienced less than stellar results due to drainage. Apparently the offset well had drained a larger area than expected, higher permeability I guess, and caused Forest to rethink the spacing in this area.
Here is a map of 2010 horizontal Granite Wash producers in Wheeler and Hemphill counties. The sweet spot in Wheeler is operated by the usual unconventional suspects with maximum monthly production (excluding NGLs) ranging from 20 – 60 Mcfe/d at 15:1. Figures like this can blow most of the Eagle Ford wells out of the water.
Forest mentioned some encouraging Eagle Ford results as well, I will blog on the Eagle Ford page in the next couple days.
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