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This Month in Shale Oil – January 2013


Each month, the national conversation around shale oil and horizontal drilling seems to climb to new heights. In like manner, so do the successes of operators working these plays.

The players keep getting bigger and the stakes keep getting higher. January saw a continued expansion of interest and presence among international players, as well as some impressive gains by familiar faces. It was a lot to cover in detail, so it was a challenge breaking it down to the basics here. If you would like to read the full article behind each summary, just click the title link.

That being said, let’s jump right into it and take a look at This Month in Shale Oil – January 2013.

Statoil Expands in the Marcellus, Becomes Operator

Statoil recently announced the acquisition of 70,000 net acres in the liquids-rich area of the Marcellus Shale in Ohio and West Virginia. The total price of the deal was $590 million. The company entered the Marcellus back in 2008 through a partnership with Chesapeake, but this recent purchase entitles the Norwegian E&P company operatorship in the play. The Marcellus is not their sole focus, though. This year Statoil will become operator of 50% of the Eagle Ford acreage acquired through the agreement with Talisman Energy in 2010. Through the acquisition of Brigham Exploration in 2011, the company also became sole owner/operator in the Bakken/Three Forks plays of North Dakota and Montana. According to Torstein Hole, senior VP for U.S. onshore, the recent Marcellus transaction means Statoil is now an operator in all of their significant U.S. shale plays. This is an important milestone for the company.

The risked resource base is estimated to be between 300 to 500 MMBOE and current equity production is about 5 MBOED. The companies that sold assets to Statoil were Grenadier Energy Partners LLC, PetroEdge Energy LLC, and Protégé Energy LLC. Here is a look at the current well production trends in the area taken from Drillinginfo.

We will keep our eyes on this to see how things develop throughout the year. Given their aggressive acquisition strategy so far, 2013 looks to be a critical year for Statoil’s overall American shale strategy.

Forest Selling Non-Core Gas-Weighted Assets

Forest Oil kicked off the New Year with a bang when the company announced it was selling all of its properties in South Texas for after-tax proceeds of $375 million to an undisclosed buyer. The properties produced 66 MMcfe/d (86% natural gas) in the third quarter last year. As of December 31, 2011 estimated proved reserves were 272 Bcfe (85% natural gas) and generated roughly $60 million of lease level income in 2012.

I wanted to see if anything in this divestiture could be prospective to the condensate or dry gas windows of the Eagle Ford. To get an accurate picture of all Forest’s properties, I used DI Desktop and Drillinginfo to create shapefiles of all of the company’s currently producing wells in South Texas and all leases filed in the past 3 years then plugged it into QGIS software. Here’s what I came up with:

It turns out, Forest does not have any property in the other windows of the Eagle Ford Shale. So it appears the company was trimming some fat by unloading conventional wells and using the funds to pay down some debt. I’m looking forward to seeing Forest’s Eagle Ford drilling plan for 2013 and will keep you updated with any of the latest news I hear.

General Overview of Permian Strata of the Delaware Basin and NW Shelf

I wrote this piece in an effort to gain a better understanding of the Permian-aged strata of the Delaware Basin and Northwest Shelf, get a spatial idea of oil-rich hot spot trends and dive deeper into some reservoir rock characteristics. Here is a generalized stratigraphic column and cross section of the Northern Delaware Basin we discussed.

From there, it was a matter of looking at the characteristics of each rock layer, including the Delaware Wolfcamp (Wolfcampian), Avalon Shale (Leonardian), Bone Spring (Leonardian), Yeso (Leonardian) and Abo (Wolfcampian-Leonardian). It would be too lengthy to discuss them all in the limited space we have here, but the exercise produced some interesting findings. For instance, the entire Bone Spring group averages roughly 3,500 feet thick, while the entire Yeso formation consists of 1000 feet of shales, sandstones, reddish colored siltstones and thin beds of limestone and gypsum.

After discussing each of the layers in the play, we took a look at a series of maps generated with data from DI Analytics and DI Desktop to get some spatial insight on the geology, productivity and operator activity. Click the title above to see the full post.

An Observation of Growth Faults in the Eagle Ford

Of course, our time would be incomplete without at least some mention of the Eagle Ford. As most folks know at this stage of development, the Eagle Ford Shale play is hardly homogenous. Localized, subsurface properties separate themselves from other areas by their unique reservoir features; thus creating this sort of multi play – play.

Here is a map showing the Eagle Ford Shale play extent combined with Eagle Ford wells, both supplied from the DI Analytics. The faults shapefile is provided by the USGS Mineral Resources On-Line Spatial Data website and I’ve pointed out the basic tectonic elements behind these fault zones. The key objective here is to observe the well locations in respect to the faults. I’ve made the well spots a bit more opaque so that the fault lines show up on top clearly.

Diving deeper, I wanted to investigate specific well production on both sides of the fault trend. This map shows Eagle Ford wells by max month of production in barrels of oil equivalent per day. This is a good indicator of sweet spot areas. However, here I wanted to show that regardless of lateral length productivity is influenced by structural deformation by growth faults in the Eagle Ford.

Of course there are plenty of other factors that influence productivity. However, I felt that faulting deserved a bit of investigation and the role it can play on thickness.

Well, that about does it for This Month in Shale Oil. If you enjoy these updates, be sure to Like us on Facebook and follow us on Twitter so you can know all of the latest as it happens.

And now it’s your turn. What major developments did you see in the shale oil field for the month of January we didn’t discuss here? Please leave your thoughts in the comments below.

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Matt Menchaca

Matthew Menchaca is a Research Analyst at Drillinginfo. He is a key member of the Data Management Department and the DI Analytics group. He performs industry research, tracks play development and provides various types of analysis on unconventional resource plays in the U.S. Matthew graduated from the University of Texas at Austin in 2010 after studying Geography and Geological Sciences.