Westmont buys into Marcellus-Chattanooga oil, gas play

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 30 -- Westmont Resources Inc. has completed an agreement to acquire 92 wells in Tennessee’s Chattanooga shale region, currently operated by AG Oil & Gas, a division of Domestic Energy Corp. Terms of the agreement were not disclosed.

“This is a strategic step and a natural extension into the Chattanooga," said Westmont Pres. Glenn McQuiston.

AGOG said its operations are centered on the emerging Chattanooga shale play in the southern Appalachian basin, near the CNX X horizontal discovery well, which was reported to have an initial production rate of 3.9 MMcfd and sustained production in the range of 300-400 Mcfd.

AGOG said it earlier acquired the rights to 90 existing wells in Scott and Morgan counties of Tennessee that cover about 30,000 acres.

“Within this block the Chattanooga shale lies at a depth between 1,000 ft and 2,000 ft and is between 20-50 ft thick,” AGOG said. “Most of the acquired wells suspended drilling operations well above the top of the Chattanooga shale,” it said.

Westmont agreed with that assessment, saying that “most of these wells suspended drilling operations well before the now known pay zones which sit on top of and include the Chattanooga and Marcellus shale deposits.”

AGOG said it originally intended “to reenter the wells and deepen them for vertical completion in the shale by using the most advanced technologies in vertical and horizontal drilling linked with modern fracturing methods.”

McQuiston agreed with that, saying it is the right time for his firm to take over the acreage “because recent advances in seismic technology and continued enhancements in facilities design have reduced the risks in one of the world's oldest basins which is now showing significant renewed potential."

Westmont management, which will conduct an audit of the 92 oil and gas wells in the Chattanooga basin, currently estimates the potential and probable reserves associated with the acquisition to be valued “in excess of $200 million.”

Meanwhile, Westmont has developed a three-phase plan of development for the region. Phase 1, to take place in the first 6 months, will include placing all wells back into production at current well depth by repairing well equipment, lines, and cleaning well casing. Estimated production levels 25-40 Mcf/well/day and 3 b/d of oil.

Phase 2, to occur at the 7-18 month point, will involve redeveloping all wells to an estimated 1,500-2,000 ft vertical depth to take advantage of the three known pay zones in the region (Monteagle limestone; Fort Payne limestone; Chattanooga shale). Estimated production levels are to increase to 75-120 Mcf/well/day and in excess of 6 b/d of oil. These levels have been demonstrated in several completed vertical wells in the area.

Phase three, during months 19-24, will include redeveloping all wells using the most advanced technologies in vertical and horizontal drilling linked with modern fracturing methods to take advantage of the higher yielding Chattanooga shale zones. Estimated production levels are anticipated to increase to 150-300 Mcf/well/day and 9 b/d of oil.

Contact Eric Watkins at hippalus@yahoo.com.

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