2006 New Albany Shale update by djwOO1l1

VIEWS: 130 PAGES: 34

									2006 New Albany Shale
       update
          Bob Cluff
   The Discovery Group Inc.
      Denver, Colorado
    Presentation to IOGA Annual meeting
             Evansville, Indiana
               2 March 2006
                 Outline
• Why the sudden buzz?
• How does the New Albany compare to
  other shale gas plays?
• Why is the action in Indiana and Kentucky
  instead of Illinois?
• What’s in this for me?
                The Buzz
• What has changed…………
  – Gas prices rose dramatically
  – Technology advanced in the Barnett play
  – Better reserves than ever expected
• Result: a huge interest in “resource plays”
  built up in Denver, Calgary, Tulsa, Ft
  Worth & Houston
                                                25 well program economics
                                   fully loaded with gathering system, gas plant, line tap
                           6000


                           5000
EUR to breakeven (MMCFG)


                                                                             shallow east flank well
                                                                             deep vertical well
                                                                             deep horizontal well
                           4000
                                           improbable
                                           reserve
                           3000
                                           outcomes


                           2000

                                                             plausible reserve outcomes
                           1000


                              0
                              $-         $2.00     $4.00      $6.00      $8.00            $10.00       $12.00

                                                        wellhead gas price
          Some conversions
• 1 BCF = 1,000 MMCF = 1,000,000 MCF
• ~6 MCF:BO on BTU basis
• Currently 5 to 7 MCF per bbl on wellhead
  $ basis
  – historically closer to 8 to 10:1
• For back of the envelope economics, a 40
  MBO oil well is worth about the same as a
  250 MMCF gas well
            Resource plays
• Tight gas sands, coal bed methane, and
  shale gas all considered “resource plays”
  – Repeatable, predictable & blanket-like
  – “Gas Factory” model for development
• Thought to be primarily engineering driven
  as opposed to geology driven
Southern margin shale plays




                Schlumberger, Shale Gas white paper
Southern PZ margin
          Resource players
• EnCana, Devon, Chesapeake, Anadarko,
  Southwestern Energy, Vintage, & others
• Shell, ExxonMobil are watching or
  currently testing the water
  – BP, ConocoPhillips, & Chevron appear to be
    sitting it out (for now)
• Shale gas is the hottest thing going in
  2006!
       Technology advances
• Huge water fracs
  – Work in Barnett as well or better than gel fracs
  – Substantially lower total cost
  – Open up enormous drainage areas to well
    bore
• Horizontal wells
  – Can now drill, steer, & frac a horizontal well in
    shale; shale is competent and stays open
  – Almost 2X deliverability of vertical well
           Barnett water frac
• HUGE water fracs with a light sand load
     >1,000,000 gallons H2O + 50,000 # sd
• Object is not to place a conductive sand pack in
  the fracture, but rather to open up a very large
  area of natural fractures (joints)
• Sand might be acting like an abrasive to improve
  natural asperities
• Fm is so tight (nanodarcies) that ANY fracture
  will be orders of magnitude better
   Barnett Shale- the big hitter
• Started slow, fewer than 100 wells in first
  15 years
• Late 1990’s, figured out GIP was much
  greater than previously thought
• 1999 discovered water fracs
• ~2002 figured out how to drill and frac
  horizontal shale wells
AAPG Explorer, Feb 2005
        Barnett vs. New Albany
                         Barnett       New Albany
Net tk “hot” shale   300-600 ft       100-350 ft

TOC                  1-12, avg 4%     1-25, avg 8%

Maturity (Ro)        0.6-1.6 %        0.5-1.0 %

Vquartz              ~ 50%            ~ 50%

Depth                6000 - 9000 ft   500 – 5000 ft

Pressure             Overpressured    Normal press.

Avg reserves/well    1.0-2.5 BCF      0.15 - ? BCF
Barnett
structure




                                                                                           - 70 0 0
                                                                          -6 0 0 0
                              - 30 0
                                0




                                                            - 50
                                        -4
                                          00 0



                                                             00
     Discovery Group, 1994,




                                                                                                       00
                                                                                              00
                                                                                                      - 90
     Proprietary report




                                                                                         -80
                                                                                     - 7 00 0
                                                 -3 0 0 0




                                                                          - 6 0 00
                                       -2
                                            0
                                            00




                                                               - 40 0 0
                                                             - 5 0 00
                                                                                      ILLINIOS BASIN - GRI -New Albany Shale




New Albany
structure
                                                                                                  0
                                                                                                                      0


                                                                                              - 10
                                                                                                      00




                                                          0




                                                                                                           - 10
                                                                                                              0




                                                                                                              0
                                                                                                            -2
                                                                                                                  0
                                                                                                                  0




                                                                                                              0




                                                                                                                                       0
                                                                                                                      -3
                                                                          00
                                                                                                                           0




                                                                                                                       0
                                                                     - 20
                                                                               3 00




                                                                               -0




                                                                                                                           0
                                                              10 0
                                                               0




                                                                                                                               -2
                                                                -
                                                                                              0




                                                                                                                                00 0
                                                                                      00




                                                                                                                                           0
                                                                                          4




                                                                                      -
  GRI-00-0068, after maps
  constructed in 1976-1981
  by ISGS, IGS, & KGS
                                                                                                                                               0            52,912

                                                                                                                                                   METERS

                             PETRA 2/27/2006 9:49:53 AM
                                            60




                                                0
                                                50

Lower Barnett                                        0




                                      00
                                       3

                                                         40
                                                              0
thickness                     200




                                                          30
                                            FW                    D




                                                             0
                               20 0




                                                              0
                                                          20
                                                         20
     Discovery Group, 1994,




                                                         0
     Proprietary report




                                           10
                                            0
                                                                           ILLINIOS BASIN - GRI -New Albany Shale




New Albany
thickness
                                                                   20




                                                                    0
                                                                                                           10




                                                                                                                0
                                                   00
                                                  2




                                                                                               1
                                                                                          0




                                                                                         0




                                                                                                                1 00
                                                              00




                                                          2




                                                                                                                           20
                                                                                                                            0




                                                                                                                                0
                                                                                                                                10
                                                                                                                  0




                                                                        1 00
                                                                                   00                           30




                                                                                        3 00
                                                                               2
  GRI-00-0068, after maps




                                                                                                   40 0
  constructed in 1976-1981
                                                                                                          200
  by ISGS, IGS, & KGS                                                                                               10 0

                                                                                                                                     0            52,912

                                                                                                                                         METERS

                             PETRA 2/27/2006 9:13:57 AM
Barnett
maturity
(% Ro)




Humble Geochemical
www.humble-inc.com
                                                                                    ILLINIOS BASIN - GRI -New Albany Shale




New Albany
maturity
(% Ro)
                                                                             5




                                                                        0.
                                                                                                                                                    0.
                                                                                                                                                         5




                                                                                                          0.
                                                                                                           5


                                                          0. 5




                                                                                                                               0.
                                                                                                                                6
                                                                                                   .6
                                                                                                   0




                                                                 0 .5
                                                                                                          0.
                                                                                        0 .7




                                                                                                        7
                                                                                                                                               .6




                                                                                                                                           0
                                                                                                                 .6
                                                                                                                 0




                                                                                               1
                                                                                 0. 9




                                                                                                                                                             6
                                                                                                   1. 1                                                      0.


     GRI-00-0068; after                                                                                        0. 7


     Barrows & Cluff, 1984                                                                                            0.
                                                                                                                           6
                                                                                                                                    0. 6



                                                                                                                                                                  0            52,912

                                                                                                                                                                      METERS

                             PETRA 2/27/2006 9:10:56 AM
        New Albany RhoB vs TOC
          18

          16

          14

          12

          10

           8

           6
                                                                     Typical
                                                                     Barnett TOC
           4

           2

           0
           2.00   2.10   2.20   2.30    2.40       2.50      2.60   2.70   2.80   2.90
                                       Bulk density (g/cc)



EGSP data, 1976-1979
Barnett Shale type curve
                  n = 925, EUR > 1.4 BCF




 IP30 ~660 MCFD
New Albany (Corydon area)
       type curve


  IP30 ~90 MCFD
 Why so much activity on the east
       side of the basin?
• Historic NAS production has all been in
  Indiana and Kentucky
  – Biggest are Shrewsbury, Corydon, Laconia
  – Lots of small fields in IN reef trend, e.g.
    Loogootee, with high reported gas rates
  – Several small fields south of Pennyrile fault
    zone in KY
• Thick section of black shale in Kentucky
• High maturies to the west, approach the
  Barnett analog in places
• Extensive faulting might mean better
  fracturing & higher perm
• Open acreage, reasonable terms
• Major pipelines cross the area
        And why not Illinois?
• Shawneetown N.F. blocks out a large
  prospective area
• More problems with HBP lands & shallow
  production- hard to build large blocks
• Less attractive lease terms
• Fewer shows, less encouragement from
  historic activity, only one small gas field
  discovered
2005
activity                                                                                  El Paso,
                                                                                          Aurora




                                                                                                        Quicksilver,
                                  Forest,                                                               others
                                  Vintage            Forest Oil


                                     Vintage Petr.
                                                                  Continental Resources




                                                                                          Continental

    PETRA 2/27/2006 11:51:38 AM
    New Albany reserves & reserve
            expectations
• Corydon-Laconia         0.1 to 0.3 BCF/well
• Maple Branch            unknown, probably similar
                          to Corydon
•   Shrewsbury            unknown, but small
•   Daviess Cty, IN       0.5 BCF/well??
•   Union-Crittenden Cty, KY 0.6-1.0 BCF/well
•   Horizontal wells are a wildcard- generally hope
    to get about 2X vertical well reserves or better
          What’s in it for me?
• If you are in the southern part of the basin,
  you’ve got mature New Albany under you
• Gas is probably there in significant
  quantities
  – Opinion: the NA is fully saturated with gas
• Deliverability is the big question/risk
  – Lots of historically tight tests of the shale
  – Current testing not far enough along
        What should you do?
• Adopt a wait, watch, & learn approach
• Partner up with other local operators and
  drill a “science well” to test your area
  – Objectives are to
     • prove up gas content & get data to map GIP
     • determine fracture & stress orientations for
       horizontal drilling
     • test deliverablity with modern gas shale frac
     • provide an economic baseline to evaluate vertical
       well performance
             Coring program
•   Full diameter core
•   Lithology & fracture description
•   Sample on site for gas desorption
•   Lab protocol includes porosity, bulk
    density, TOC, maturity, minerology, &
    methane adsorption isotherms
          Logging program
• “Triple combo” of resistivity, density,
  neutron, & a spectral gamma ray
• Dipole sonic for stress and frac design
• Imaging logs to determine fracture density
  and orientation
• NMR & other specialty logs have not
  proven very useful
                Completion
• If you have a lot of gas in place,
• Then frac the bejeepers out of it
  (per Kent Bowker)
• “Proof of concept” well gives you the backup you
  will need to promote your position to a larger
  independent
                The future
• Future of the New Albany play is still
  uncertain
• Deliverability & reserves are unknown
• Activity in 2006 will be more big acreage
  plays, drilling & completion of “science
  wells”, and horizontal wells to test the play
• It will probably take 50 to 100 wells before
  we really know if it will work

								
To top