New Oil and Gas Plays to Watch
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The exploration and production industry continued to explore and test new oil and gas plays during the second quarter of 2012, with several operators reporting initial positions or results in these new areas.
Operators
Southwestern Energy (NYSE: SWN) categorizes the company’s emerging oil and gas plays in the New Ventures portfolio and reported several positions in this portfolio during its second quarter of 2012 earnings release. The company’s most promising play seems to be the Lower Smackover Brown Dense formation in Arkansas and Louisiana, where Southwestern Energy has drilled or completed six wells to date.
Southwestern Energy is exploring oil plays in the Denver Julesburg Basin and has drilled several wells into the Marmaton formation in eastern Colorado. Although the first well here produced negligible amounts of oil and natural gas, the company has drilled a second well and has leased 290,000 net acres.
Southwestern Energy also has 3.7 million net acres of exploration acreage in New Brunswick, Canada, but has suspended further activity here to allow additional time for permitting possible wells.
Investors might find it more intriguing that Southwestern Energy has an additional 385,000 net acres in its New Ventures portfolio in various undisclosed plays. Some of this acreage is in Montana where the company recently drilled its first well targeting the Bakken and Three Forks plays.
Abraxas Petroleum Corporation (NASDAQ: AXAS) is a small cap exploration and production company with operations in the Rocky Mountains and Texas. The company reported a 20,000 net acre position in an emerging oil shale position during its second quarter of 2012 earnings release.
Abraxas Petroleum Corporation did not disclose much detail on the new play except to say that it is located in Alberta, Canada, and has characteristics similar to the oil window of the Eagle Ford Shale in Texas. The company is still adding acreage and said that other operators have obtained three drilling permits in the play.
Magnum Hunter Resources (NYSE: MHR) recently drilled its first well into the Pearsall formation on the company’s acreage in South Texas. The Pearsall Shale lies 2500 feet below the Eagle Ford Shale and is approximately 500 to 600 feet thick. Magnum Hunter Resources has acquired additional acreage prospective for the Pearsall and estimates that it has 40 net locations in its core area in Atascosa County. The company believes that these locations are in the “wet gas to rich condensate window” of the Pearsall.
Halcon Resources has been exploring several undisclosed plays that produce crude oil and natural gas liquids and in early August 2012 disclosed the Midway/Navarro formation as one of these new areas.
The new play is located in southeast Texas and Halcon Resources plans to develop the formations with vertical drilling. The company recently started drilling its second well here and plans to spud between four and six wells in 2012.
Whiting Petroleum (NYSE: WLL) is developing the Red River play, a formation that extends over parts of North Dakota, South Dakota and Montana. The company has accumulated a 122,000 net acre position and reported the completion of five vertical wells here to date.
Whiting Petroleum expects wells here to cost approximately $3.5 million each and yield an estimated ultimate recovery (EUR) from 200,000 to 300,000 barrels of oil. The company’s first two wells in the Red River formation produced at initial rates of 283 and 480 BOE per day.
Continental Resources (NYSE: CLR) has been active in the Red River play for many years but has focused mostly on the Bakken and Three Forks plays in the Williston Basin and the Woodford Shale in Oklahoma. Despite this relative inattention, production from the company’s Red River units represented 16% of total production in the second quarter of 2012.
The oil and gas industry continues to scour North America for the next big shale play and moved forward with testing and leasehold acquisitions in many of these plays during the second quarter of 2012. This aggressive behavior is needed to ensure a future supply of oil and gas for consumers.
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