HOUSTON, Jan. 8 -- A handful of major and independent producers in West Texas are quietly using horizontal drilling technology to tap tight natural gas deposits in the Montoya and Devonian formations in what's shaping up as a potential boom in the Permian basin.
That activity is centered primarily in Pecos and Reeves counties but extends also into Ward County to the north, Upton County northeast of Pecos County, and Terrell County to the southeast.
Only a few wells have yet been drilled or are producing, and most of the operators aren't saying much about them. However, one mineral rights owner told OGJ Online, "I hear that if (production from) these horizontal Montoya and Devonian wells hold up, they may start a real boom and possibly 300 or more wells could be drilled."
Industry insiders say the deep, tight formations challenge current drilling technology. Wells are being drilled to depths exceeding 14,000 ft, with horizontal laterals of as much as 5,000 ft that must be stimulated. Industry sources put the cost of those wells in the neighborhood of $4.5 million each.
"It's a very large play for us. In the US, it will probably be the only significantly active area for us for 2002, " said Robert L. G. Watson, founder, president, CEO, and chairman of Abraxas Petroleum Corp., San Antonio, Tex.
A re-entry that Abraxas currently is drilling without partners in the Oates field about 20 miles south of Fort Stockton in Pecos County has the potential to increase by 15% the company's current total production of 57 MMcfd of gas equivalent, Watson said. "It's the first horizontal well to be drilled in that area," he told OGJ Online.
Watson was the only executive among six known participating companies who agreed to talk to OGJ Online about horizontal drilling in the Montoya and Devonian formations in the Permian basin. A couple more operators are reported to be considering or actually planning horizontal wells, and others may be maneuvering to pick up acreage.
ExxonMobil Corp., apparently the earliest and one of the most active participants in this horizontal play, did not respond to requests by OGJ Online for information about its operations.
In 1999, Mobil drilled what was reported to be the first horizontal well in the Montoya formation in the Block 16 field in Pecos County. That well tested at more than 17 MMcfd and produced more than 4 bcf of gas in less than a year. Ultimate recovery has been estimated at 20-30 bcf.
Mobil and BP subsequently drilled several successful wells in that area, offsetting leases held by Abraxas.
Abraxas then signed a farmout agreement with EOG Resources Inc., whereby EOG obtained a 75% working interest in Abraxas' Montoya rights through payment of $2.5 million and financing the full cost of the first five wells drilled under that program.
The first two wells are producing at a combined rate of 9 MMcfd, officials said. A third well is currently being drilled as that one-rig program continues into 2002 with Abraxas being carried on two more wells.
EOG Resources executives declined OGJ Online's requests for interviews. However, a company representative confirmed "positive results" from horizontal drilling in Devonian formations in the Permian basin, with 14 out of 15 wells recorded as successes.
During the first half of this year, company officials will determine "the most optimum drilling and completion procedures for that play prior to starting a drilling program," she said. EOG Resources holds 145,000 acres in the play, with a "large tight gas accumulation of 200 bcf to 1 tcf net reserves."
Meanwhile, Abraxas retains 100% working interest and 77% net revenue interest in its targeted sites in the Oates field. Vertical depths in that field average 13,400 ft to the Devonian and 13,500 ft to the Montoya.
The Oates field was discovered in 1981 and produced from the Montoya and Devonian formations through the mid-1990s. However, it was essentially abandoned before the concept of horizontal drilling both of those reservoir rocks was applied in other West Texas fields.
Abraxas acquired 38 sq miles of proprietary 3D seismic data over the Oates prospect last summer. Interpretation of seismic and vertical well data indicated sites for at least four horizontal Montoya wells and nine horizontal Devonian wells, said company officials.
Horizontal drilling of the Montoya formation has "huge potential," Watson said. Wedged between the Devonian and Ellenberger formations, the relatively tight Montoya was largely overlooked in the past by companies drilling through its gas shows to the more prolific Ellenberger, he said.
"Block 16 (field) has produced 1.6 tcf of gas out of the Devonian and Ellenberger," said Watson. Based on the relative thickness of each formation, he said, "there should be some 800 bcf" recoverable from the Montoya. Block 16 is some 40 miles north of the wholly owned well that Abraxas is drilling.
Although the porosity and quality of the Montoya reservoir appears more erratic than the Devonian, it's not nearly as tight as the Giddings chalk, nor does it have the severe faulting that made horizontal drilling mandatory for Giddings development.
"The Montoya is a cherty limestone with decent porosity," Watson said. Horizontal drilling helps maximize its production, he added.
Company officials said vertical Montoya wells in the Block 16 field that produced 1 bcf of gas or less are offset by horizontal wells in the same formation that are projected to produce 10-15 bcf each.
Abraxas had good success with horizontal drilling in South Texas and Wyoming. "So we're very comfortable with horizontal development of the Montoya," said Watson.
Some companies reportedly also are targeting the Wolfcamp formation in that area. However, Watson said the Wolfcamp "is harder to predict, with more problems with porosity and large initial production rates that rapidly decline. So we've decided to stick with the Montoya and the Devonian."
Pure Resources Inc., Midland, Tex., is another of the most active participants, with interests in more than 210,000 acres in the Montoya and Devonian plays and five rigs currently operating.
The Permian basin of West Texas and southeastern New Mexico is the largest of four core areas for Pure Resources, which was formed in May 2000 through the combination of Titan Exploration Inc. and the Permian basin business unit of Unocal Corp. Pure Resources controls 1 million acres in the Permian basin with ownership interests in more than 150 fields.
"We have identified a sizable number of high-impact opportunities to allow for significant growth should the company's exploration program prove successful," said Pure Resources Pres. and CEO Jack Hightower of those Permian basin operations. However, horizontal well projects in the Permian basin's Devonian and Montoya formations are of "particular interest," he said (OGJ, Oct. 22, 2001, p. 73).
The Devonian and Montoya acreage may account for nearly a quarter of Pure Resources' total Permian basin operations "in terms of reserves and maybe production, but we are spending the majority of our Permian capital dollars in this play," said a company spokesman.
The company has successfully drilled and completed one or more wells in each of four separate project areas and is evaluating a fifth potential project. Each project holds significant potential, and the company is improving its drilling and completion techniques with each new well, officials said.
Pure Resources' initial horizontal Devonian well, the Slaughter 26-2 in the Yucca Butte Project in Pecos County, was producing 5.3 MMcfd of gas equivalent in November after being drilled to a vertical depth of 9,200 ft with a 2,700-ft lateral. Officials said they planned to spud another well, the Slaughter 18-1. The company has 67% working interest in that project.
Pure Resources also holds 60% working interest in the Monty Project area in Pecos and Terrell counties, where its initial discovery well in the Monty horizontal Devonian play, the ACU 57 No. 1, was producing 1.6 MMcfd early last year.
The company applied knowledge gained from that well, including changes in the lateral orientation and stimulation procedure, to improve understanding of the reservoir characteristics and its performance in drilling two additional Devonian wells that it completed during the third quarter.
The Meade 1, a 13,800-ft vertical well with a 2,100-ft horizontal lateral, was producing 2.3 MMcfd with a flowing casing pressure of 2,300 psi. The ACU 34-2 produced 2.5 MMcfd from a natural vertical completion and was being evaluated for stimulation at the end of the year.
Last summer, Pure increased its lease interests, including options, to 20,000 acres in that project area, up from 10,300 gross acres previously.
Pure Resources reported in early November that it was in the process of completing the 4,000-ft lateral section of its first horizontal Montoya well, the Rape 14-1H, which was drilled to a vertical depth of 14,000 ft in Reeves County, Tex. The company was operator with a 25% working interest in that well.
Officials reported at the time that they were in the process of drilling two additional wells in its Montoya project area in Reeves and Pecos counties. Included were the Anthony-Forbush No. 1, then drilling horizontally after reaching a vertical depth of 15,600 ft. A third well, the Monsanto McKellar 2H, was drilling at some 8,500 ft. Pure had working interests of 100% in the second well and 86% in the third well.
At the same time, Pure Resources reported "very encouraging" initial results from its second horizontal Devonian well in the Gomez field southeast of Fort Stockton in Pecos County. The PBM No. 2 tested at 8.8 MMcfd on a 14/64-in. choke with 4,950 psi of flowing tubing pressure following fracture stimulation on 1,300 ft of the 2,600 ft horizontal lateral.
It was placed on production at 4.5 MMcfd with 5,500 psi of flowing tubing pressure. Officials said at the time that production from the well would gradually increase as it cleaned up.
Pure Resources holds a working interest in some 33,000 acres in the Gomez area, with "numerous potential exploitation opportunities," officials said.
Near the end of last year, Pure Resources had two rigs working its Blue Danube Project area in Upton County, Tex., where it holds working interests of 60%-100% on some 31,000 acres.
At the time, the company had five wells producing at a combined rate of 13.5 MMcfd of gas equivalent and four wells in drilling or completion phases.
Company officials earlier estimated as many as 40 potential drilling locations in that project area.
Tom Brown Inc.
Last February, Tom Brown Inc., Denver, entered into a mutual interest and joint development agreement with Chevron USA Inc. to develop via horizontal drilling the "potential large natural gas resource" of the Montoya trend in Reeves County.
Each company contributed 8,000 acres to the joint venture, which targeted tight gas reservoirs in the Montoya and Devonian horizons. Costs were to be shared equally, with Tom Brown as operator through the drilling and completion phase.
Tom Brown officials reported in August that the G. Lyda No. 1 horizontal well at its Deep Valley prospect in the Permian basin tested non-commercial in the Montoya formation. They said the well would be abandoned temporarily, pending a possible re-entry to drill horizontally into the Devonian formation.
In November, Tom Brown announced plans to drill a horizontal test of the Devonian formation in further exploration of its Deep Valley-Horizontal Devonian/Montoya prospect in the Permian basin. Officials said the company had started a 3D seismic survey covering more than 240 sq miles.
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