Encana to Sell Barnett Shale Assets

- Encana to Sell Barnett Shale Assets

Thursday, August 25, 2011
Encana Corp.

Encana has initiated a process to divest of its North Texas natural gas producing assets in the Fort Worth Basin located in the Barnett Shale play. Scotia Waterous (USA) Inc. has been retained as advisor to assist in the process.

"The initiation of the process to sell Encana's North Texas assets is a continuation of the company's ongoing divestiture program, which is well underway and is targeting net divestitures of between US $1 billion and $2 billion for 2011. Encana continuously looks for opportunities to manage its portfolio of producing assets and improve the long-term value creation capacity of its vast resource portfolio. These North Texas assets are high-quality, relatively mature producing properties that hold strong potential for future development. The assets currently produce about 125 million cubic feet equivalent per day (MMcfe/d) and include the associated processing and pipeline facilities on about 52,000 net acres of land in the Fort Worth Basin. We would expect this divestiture to be completed in late 2011 or early 2012," said Jeff Wojahn, Encana's Executive Vice-President & President, USA Division.

"We acquired our core position in the Barnett Shale play in 2004 as a result of a corporate acquisition that was focused on building a major land and production position in the U.S. Rockies. Alongside developing this strong asset, over the years we built a suite of high-growth, early-life resource plays in the Mid-Continent, led by about 295,000 net acres of land in the Haynesville Shale play, where our production is now more than 500 MMcfe/d. In East Texas, our production is about 250 MMcfe/d and our 240,000 net acres hold strong growth potential. Our Mid-Continent resource play teams and operations, based in Dallas, will continue to be a leading contributor to Encana's long-term growth strategy," Wojahn said.

As a leading North American natural gas shale property, the Barnett Shale has provided Encana with high-quality natural gas growth and foundational knowledge which the company has applied across its U.S. and Canadian portfolio of newer resource plays. That foundational knowledge will continue to provide Encana with operational expertise as the company applies multiple advanced technologies to manage costs over the long term and pursue maximizing the margins from all of its natural gas production.

A sale of Encana's North Texas assets would be subject to receiving an acceptable bid, the approval of the companies' boards of directors, normal closing conditions as well as regulatory approvals.

On other fronts, Encana is actively engaged with a number of parties in a competitive process to divest of midstream and producing assets in the U.S. and Canada that no longer fit with its development plans. The company is also in discussions with a number of potential partners looking to make third-party investments aimed at accelerating the value recognition of Encana's enormous resource potential on its undeveloped lands. Proceeds from these transactions are expected to supplement cash flow generation and strengthen the company's balance sheet, providing financial flexibility going into 2012.

Tremendous resource potential across Encana lands

Across North America, Encana has about 7 million net acres of undeveloped land holding tremendous resource potential. Based on an independent assessment of Encana's proved reserves and low estimate economic contingent resources, as of December 31, 2010, this natural gas inventory would last approximately 30 years based on 2010 annualized production.

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Devon Energy's Barnett Shale Bet Pays Off

- Devon Energy's Barnett Shale Bet Pays Off

Monday, August 15, 2011
Fort Worth Star-Telegram, Texas
by Jack Z. Smith

Ten years ago Sunday, Devon Energy made a multibillion-dollar bet on the Barnett Shale.

On Aug. 14, 2001, the Oklahoma City-based oil and gas company announced a deal to acquire Mitchell Energy & Development of Houston for $3.5 billion.

Mitchell Energy, led by legendary oilman George Mitchell, was the pioneering company that cracked the code of the Barnett's dense shale rock by using new hydraulic fracturing techniques and experimenting with horizontal drilling. At the time, it had drilled about 400 wells in the Barnett, and executives saw the potential for 1,200.

But over the decade, Devon would advance the ball significantly with improved horizontal drilling and an expansion of drilling far beyond areas north of Fort Worth where Mitchell Energy had focused. The result would be a drilling boom that by 2008 would draw numerous rivals into the field and make the Barnett the biggest gas-producing area in the U.S. Tarrant and Johnson counties would emerge as the top two gas-producing counties in Texas.

Today, Devon has drilled more than 4,700 wells in the Barnett. The field now accounts for 39 percent of the company's total production, which includes operations that stretch to the Rocky Mountains and into Canada.

In the Barnett, "our drilling costs are down, our production is up and our efficiencies are increasing," said Brad Foster, senior vice president of Devon's Central Division, which includes Barnett operations.

Devon has achieved, or is on the verge of, several Barnett milestones:

It posted record production in this year's second quarter, averaging the equivalent of 1.28 billion cubic feet of gas per day, even while keeping only 12 drilling rigs busy. That's less than a third as many as it ran in 2008, before gas prices cratered.

Devon's total Barnett production since the Mitchell acquisition is expected to hit the equivalent of 3 trillion cubic feet by year's end, spokesman Chip Minty said. It's at 2.8 trillion now.

Despite weak gas prices, now about $4 per 1,000 cubic feet, Devon is realizing solid returns from the Barnett because "our ability to drill wells economically just gets better every year," said Chairman Larry Nichols, who was CEO during the Mitchell acquisition.

A 35-well pad site

Devon's advances in the Barnett are exemplified at a rural 12-acre drilling site in far southwest Tarrant County. The 31st well there was drilled last week by contractor Patterson-UTI Drilling Co.

Devon expects to have 35 producing wells at the site by March, said Jay Ewing, its manager of Barnett well completions.

That will be the most wells ever on a single Barnett Shale pad site, but the project development has "been pretty routine. ... It's been pretty close to plan," Ewing said. Horizontal legs of the wells, called "laterals," will be steered thousands of feet under Benbrook Lake.

Devon estimates that the 350 Barnett wells it drills this year will yield, on average, the equivalent of 3.2 billion cubic feet of gas apiece over their producing lifetimes. By that measure, the 35 at the southwest Tarrant pad site cumulatively would produce 112 billion cubic feet.

That's enough fuel for gas heating and cooking at more than 1.5 million homes for a year, based on American Gas Association data.

If Devon maintains its current drilling pace, it will drill its 5,000th well next year. Less than 1 percent of Devon's Barnett wells have been dry or otherwise not worth putting into production.

Devon, which has more than 600 Barnett employees and an office in downtown Fort Worth, has boosted its Barnett reserves for seven straight years. Proven reserves are now the equivalent of 6.7 trillion cubic feet.

Drilling time slashed

When Devon began drilling in the Barnett in 2002, it took three to six weeks to drill a single horizontal well, said David Fortenberry, Devon vice president of technology.

"The rigs we used were really too small and underpowered for horizontal wells," he said.

Now, with higher-efficiency rigs and much more experience, Devon averages only about 12 days to drill a Barnett well, and "we've actually drilled some wells down in southwest Johnson County in about six days," Foster said.

Drilling-rig design "has improved dramatically in the past 10 years," with rigs now "ideally suited to drill these horizontal wells," Nichols said.

Devon uses a "walking rig" device to scoot a 156-foot-high rig between surface well bores at its southwest Tarrant pad site. If well bores are 20 feet apart, the rig can move that far in just an hour. Without the walking device, it could take two days to disassemble a rig and set it up 20 feet away.

The Barnett wells that Devon has drilled this year have provided "some of the best results we've ever gotten," Nichols said.

Supply rises, prices fall

Ample supplies from dramatic increases in U.S. shale-gas production have kept prices low, as the industry has become "in part ... a victim of our own success," Nichols said.

Devon has dropped to 12 drilling rigs because it can keep production at least flat at that level of activity and because "at this time, the country just doesn't need any more natural gas," Nichols said.

Production declines have been lower than expected in Barnett wells, he said. There will be "steep declines in the first year, but it flattens out a lot sooner than we originally thought" -- often after 12 to 18 months of production, he said.

The Barnett may soon lose its spot as the top gas-producing area, if it hasn't been already, to the Haynesville Shale in northwest Louisiana and East Texas. But Devon has lots more drilling to do in the Barnett.

7,500 drill sites left

Foster said Devon still has "7,500 potential drilling locations," which represent "probably over 20 years of inventory" for future drilling.

About 2,500 are in "the liquids-rich portion of the play," Foster said. Natural gas liquids such as ethane, propane and butane generate higher profit margins.

Future gas prices will determine how many of the 7,500 locations are eventually drilled, he said.

On average, drilling and completing a Barnett well costs Devon $2.8 million. Wells are 6,500 to 9,200 feet deep, and the average lateral length is more than 4,000 feet.

Devon's Barnett production is 78 percent natural gas, 21 percent natural gas liquids, and 1 percent oil.

In announcing Devon's purchase of Mitchell Energy 10 years ago, Nichols said the Mitchell properties "fit perfectly with our long-term objectives."

That appears perhaps even more so now, as Devon has sold international and Gulf of Mexico properties in the last two years as it embraces a new focus on onshore production in North America.

Copyright (c) 2011, Fort Worth Star-Telegram, Texas

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Range Production Up Despite Barnett Sale

- Range Production Up Despite Barnett Sale

Wednesday, July 20, 2011
Fort Worth Star-Telegram, Texas
by Jack Z. Smith

Despite selling virtually all its Barnett Shale properties in North Texas in April, Range Resources expects to "have fully replaced all of the Barnett production" by the end of the third quarter, CEO John Pinkerton said in an update released in advance of the company's second-quarter earnings report.

Pinkerton said the Fort Worth-based natural gas and oil producer can boost production because of "excellent drilling results in the Marcellus Shale and Mid-Continent regions."

The company has been among the leading producers in the Marcellus natural gas field in Pennsylvania and has benefited from robust oil and gas production in the Mid-Continent region, which includes Texas and Oklahoma.

Range lost production equivalent to more than 100 million cubic feet of natural gas per day by selling its Barnett Shale properties effective April 29. But Range said its second-quarter production volume still averaged the equivalent of 508 million cubic feet of natural gas per day, an 8 percent increase over the second quarter of 2010.

Production for the second quarter of this year was 76 percent natural gas, 17 percent natural gas liquids and 7 percent crude oil, Range said in the operations update issued late Monday. The company is scheduled to report second-quarter results Monday.

Range said it received an average price equivalent to $5.63 per 1,000 cubic feet of natural gas for its second-quarter production, an 11 percent increase over a year earlier. Average prices were $4.63 per 1,000 cubic feet for natural gas, $50.07 per barrel for natural gas liquids and $80.42 per barrel for oil.

Pinkerton said Range is on track to achieve its goal of achieving net production equivalent to 400 million cubic feet of natural gas per day in the Marcellus Shale by year's end.

Based on the performance of 103 Marcellus Shale horizontal wells that began producing in 2009 and 2010, Range is projecting that the estimated ultimate recovery, or lifetime production, from these wells will average the equivalent of 5.7 billion cubic feet of natural gas per well, including about 4 billion cubic feet of gas and 281,000 barrels of liquids (natural gas liquids and crude oil).

The estimated recovery per Marcellus horizontal well is two to three times the estimated lifetime production of many typical wells in the Barnett Shale.

Copyright (c) 2011

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Eagle Ford Production Could Overtake Barnett, Haynesville

- Eagle Ford Production Could Overtake Barnett, Haynesville

Thursday, May 19, 2011
Rigzone Staff
by Karen Boman

The liquids rich Eagle Ford shale play in southwest Texas may overtake the Barnett and Haynesville shale gas plays in Texas and Louisiana in terms of production, potentially becoming the largest producing shale play in Texas and the entire U.S., according to a recent report by London-based Evaluate Energy.

The Eagle Ford is currently dwarfed by its neighbors in terms of production, with the Barnett producing 877,000 BOE/d, the Haynesville producing 708,000 BOE/d and Eagle Ford producing 66,000 BOE/d in the fourth quarter of 2010. However, a recent surge in new wells suggests this all about the change, with horizontal drilling for both oil and gas in the Eagle Ford growing rapidly.

Source : Evaluate Energy

Drilling activity in the 22 Texas counties that Eagle Ford formation encompasses has been growing dramatically for the past year, and at the end of first quarter 2011, the area had the most new wells being drilled in Texas. In comparison, the number of new horizontal wells in Barnett Shale counties has fallen to a much lower level than its mid-2008 peak. The number of new wells in Haynesville counties in Texas and Louisiana also has slipped into a slight decline following a two-year increase up to the second quarter of 2010.

Like its Texas counterparts, Eagle Ford drilling activity is now mostly development drilling, which suggests that Eagle Ford production may overtake Barnett and Haynesville production sooner rather than later, Evaluate noted.

EIA Shale Gas Estimate Jumps 134 Percent

Oil and gas producers have increasingly switched their focus from drilling shale gas plays to oil shale plays after the U.S. shale gas drilling boom significantly increased U.S. gas supply and depressed U.S. gas prices.

The supply increase has prompted the U.S. Energy Information Administration (EIA) to raise its estimate of technically recoverable shale gas resources by 134 percent. In its Annual Energy Outlook 2010, technically recoverable shale gas resources were estimated at 368 Tcf. For its Annual Energy Outlook 2011, EIA's estimate rose to 862 Tcf, bringing total U.S. recoverable gas resources to 2,629 Tcf.

EIA attributed the increase in gas resources to technological advances in horizontal drilling and hydraulic fracturing. "This is a welcome change because as little as 10 years ago, analysts and politicians said that the United States could not drill its way out of a natural gas shortage," EIA said.

U.S. shale gas produced 2.3 Tcf of natural gas in 2008, or 11 percent of the U.S. gas market share, and is expected to produce 12.3 Tcf by 2035, a 47 percent share of the gas market. U.S. shale gas resources are the second largest in the world behind China, according to a study EIA commissioned with ARI International.

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KKR to Buy Barnett Shale Properties from Carrizo

KKR to Buy Barnett Shale Properties from Carrizo

Wednesday, April 27, 2011
Kohlberg Kravis Roberts & Co. L.P.

Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, KKR) announced that KKR has entered into a definitive agreement to acquire certain Barnett Shale properties from Carrizo O&G for $104 million. The transaction, which is expected to close in mid-May, is being made through KKR Natural Resources (KNR), KKR's partnership with Premier Natural to pursue investments in North American oil and gas properties. The transaction is the third investment made by KNR and, following the acquisition of certain properties from ConocoPhillips in January, the second investment made by KNR in the Barnett Shale.

Located in North Central Texas and producing out of the Barnett Shale formation, the Assets contain 122.4bcfe of total net proved reserves (based on a third party estimate) and comprise 75 gross (58.5 net) wells currently producing at a gross rate of 15.7mmcfe/d (8.3 mmcfe/d net).

"With their significant proved developed producing reserve component in a reservoir we know well through our current operations in the region, the assets are a great fit for our KKR Natural Resources platform. We are pleased to add these assets to our oil and gas portfolio and remain excited about the opportunity to grow the KNR platform through the acquisition of additional oil and gas properties in North America," said Jonathan Smidt, a Member at KKR and a senior member of KKR's Energy and Infrastructure business.

KKR announced its partnership with Premier in February, 2010. Founded in June 2006 by former executives of Vintage Petroleum, Inc., Premier currently operates a portfolio of assets located in the Barnett Shale, the Texas Gulf Coast and the Permian Basin and has experience operating assets in most of the major producing basins in the United States.

Devon Chairman Sees Plenty of Barnett Drilling

Devon Chairman Sees Plenty of Barnett Drilling

Thursday, March 31, 2011
Fort Worth Star-Telegram, Texas

by  Jack Z. Smith

Devon Energy, the largest producer in North Texas' Barnett Shale, has lots of drilling ahead of it in the big natural gas play, Executive Chairman Larry Nichols told the Star-Telegram in a telephone interview.

"We have at least 7,500 undrilled locations," said Nichols, who last year gave up his CEO title after 30 years in the job. Devon plans to keep about a dozen drilling rigs busy in the Barnett this year and will drill perhaps 325 wells, he said.

The Oklahoma City-based company has an office in downtown Fort Worth and 550 employees involved in Barnett Shale operations.

Devon's net Barnett production peaked at the equivalent of 1.2 billion cubic feet of natural gas per day in the fourth quarter last year. As a result of weak gas prices and limited demand, the company will probably maintain production at about that level this year, but it has the capability to increase output to at least 1.5 billion cubic feet Nichols said.

While current natural gas prices of slightly more than $4 per million British thermal units are not sufficiently high for sustaining production levels for "dry gas," it can be sufficient for "wet gas" production, which includes natural gas liquids that generate additional revenue, Nichols said. Devon's Barnett production is a mix of dry and wet gas, he said.

A geologist and lawyer by training, Nichols said he expects continued technological advances in drilling and completion of wells that will result in greater recovery of oil and natural gas.

As an example, he cited major technological advances in horizontal drilling and hydraulic fracturing that -- along with higher oil prices -- have revived activity in West Texas' heavily drilled Permian Basin.

Devon currently has 17 drilling rigs running in the Permian, where the company has about one million acres under lease, Nichols said.

He said he's "very excited" about the company's new 50-story corporate headquarters under construction in Oklahoma City. It will allow the company to consolidate its approximately 1,700 workers in Oklahoma City into a single building. They presently are scattered among five buildings, he said.

All the Devon employees are expected to be in the new building by the end of 2012. 

Another Expert Says Haynesville Not Bigger than Shale

Another Expert Says Haynesville Not Bigger than Shale

Friday, March 25, 2011

by  Jack Z. Smith

Fort Worth Star-Telegram, Texas

 

There's a new voice in the debate over whether North Texas' Barnett Shale has been eclipsed by the Haynesville Shale as the No. 1 natural gas field in America.

Lippman Consulting, an El Paso-based natural gas consulting firm, is taking issue with a recent U.S. Energy Information Administration website posting that said the Haynesville in northwest Louisiana and Northeast Texas is the new leader in production among U.S. shales. The administration cited data from Bentek Energy, an Evergreen, Colo.-based consulting firm.

George Lippman, president of Lippman Consulting, has joined those questioning the assumption that Haynesville is the new top dog.

"Our data clearly shows that the Barnett production is still greater than the Haynesville production," Lippman said in an e-mail to the Star-Telegram after reading an article the newspaper published Tuesday on the subject.

Lippman said his firm's estimates show Barnett production averaging 5.52 billion cubic feet per day in February, easily exceeding the output of 5.03 billion cubic feet daily from Haynesville.

He said his company's calculations were derived from Texas Railroad Commission data, "plus the most-recent data from our Gas Processing Plant database that collects daily volumes at the outlet of all gas-processing plants in each region and then extrapolates that data back to wellhead volumes."

Steven Grape, the Dallas-based domestic reserves project manager for the Energy Information Administration, and Gene Powell, publisher of the Fort Worth-based Powell Shale Digest, said Monday that they need further clarification and confirming data before they can be assured that the Haynesville is the new No. 1.

Lippman said he expects that Haynesville will surpass the Barnett in production "in the months ahead ... but that has not happened yet."

Haynesville Surpasses Barnett as Largest Shale Gas-Producer in US

Tuesday, March 22, 2011

by  Jack Z. Smith

Fort Worth Star-Telegram, Texas

 

The Haynesville Shale play in Northwest Louisiana and East Texas has surpassed North Texas' Barnett Shale as the No. 1 natural gas producer among U.S. shale plays, according to the U.S. Energy Information Administration website and an energy consulting firm.

But there's still some debate as to whether Haynesville is the clear-cut No. 1.

Among those wanting further clarification and more detailed confirming data Monday were Steven Grape, the Dallas-based domestic reserves project manager for the EIA, and Gene Powell, publisher of the Fort Worth-based Powell Shale Digest, widely considered an authority on U.S. shale-gas plays and especially the Barnett Shale, which underlies more than 20 North Texas counties.

 

The EIA had posted on its website Monday an item headlined "Haynesville surpasses Barnett as the Nation's leading shale play," based on "reported pipeline flows" of natural gas from the two regions.

It cited as its source Bentek Energy of Evergreen, Colo., a well-known energy consulting firm.

The EIA website included a Bentek chart showing that the Haynesville Shale area had production of an estimated 5.5 billion cubic feet of natural gas per day, compared to 5.25 billion for Barnett. It said Haynesville surpassed Barnett in output even after the North Texas field had recovered fully from "freeze-offs" at wellsites that had briefly reduced production during bitterly cold weather in early February.

Matt Marshall, a senior energy analyst for Bentek, told the Star-Telegram in a telephone interview Monday afternoon that company estimates, updated through Sunday, showed output in the Haynesville production area in Louisiana had jumped to 5.6 billion cubic feet per day.

However, that number includes an estimated 950 million cubic feet of output that, while in the general Haynesville production area, actually comes from geological formations other than the Haynesville Shale itself, Marshall said. But the 5.6 billion does not include roughly "several hundred million" cubic feet of daily gas production from the East Texas portion of the Haynesville Shale, he said.

Marshall said Bentek's latest estimates show that production in the Fort Worth Basin, home to the Barnett Shale, is 5.44 billion cubic feet per day. But that figure includes about 790 million cubic feet that actually is from formations other than the Barnett, he said.

Actual production from the entire Barnett Shale per se and the Haynesville Shale per se in Louisiana is virtually tied at about 4.65 billion cubic feet per day, Marshall said. But if you add in the Haynesville Shale production from East Texas, Haynesville is the clear-cut leader, based on estimates of flows through gas pipelines, Marshall said.

Both Powell and Grape said Monday that they want more information about the Bentek analysis before they can be assured that Haynesville is the new No. 1 shale play in gas production.

Powell said the most-accurate measurement of production from each shale play is actual well production data, rather than estimates based on reported pipeline flows. But there can be a time lag of several months before firm well-production data can be assembled. Grape, the EIA official, stressed that the Bentek information represents "estimates" based on pipeline flows. He said he needed more information before being able to say firmly whether Haynesville or Barnett is now the top producer.

EIA data for 2009, based considerably on natural gas reserves, showed the Barnett Shale as the leading gas-producing area in the nation, with nearly 1.8 trillion cubic feet of output. Grape said earlier this month that he thought Barnett also was the leading producer last year, although the EIA hasn't published final 2010 figures.

 

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