The Barnett shale of North Texas is one of the hottest areas of drilling activity in the continental US. The area of interest is expanding well beyond the core area in Denton and Wise counties.
Barnett wells are prized for long-lasting production and a very high drilling success rate. High gas prices intensify the action. Properties and leases are changing hands, and permits are being issued faster than ever, thanks to new state and federal permitting systems.
The discovery well for the Newark, East field (Barnett) was drilled in 1982. About 10 wells were drilled each year, until 1992, when there were 99 producing wells. Another 10 years later, at the end of 2002, there were 1,870 wells, producing 600 MMcfd. Now there are more than 30 rigs actively drilling the Barnett, and the play is producing about 650 MMcfd.
The US Geological Survey classifies the Barnett as an unconventional gas play. It may be the source rock for overlying Mississippian and Pennsylvanian-age fields. The Mississippian Barnett shale sits unconformably atop the Ordovician Viola/Simpson limestone and is conformably overlain by the Pennsylvanian Marble Falls conglomerate.
The Barnett is a black, organic-rich, marine shale with upper and lower units separated by the Forestburg limestone, and it reaches a maximum thickness of nearly 1,000 ft at the northern margin of the Fort Worth basin.
W-1 drilling permits
On May 11, 2000, the Texas Railroad Commission (RRC) introduced an internet-based permit process, the Electronic Compliance and Approval Process (ECAP; OGJ, May 8, 2000, p. 42). Through the end of 2003, 392 Barnett drilling permit applications (W-1 and W-1H) had been filed online with ECAP, for five Texas counties: Denton (271), Wise (87), Tarrant (30), Johnson (4), and Bosque (1). Operators filed 51 applications online in 2001, 78 in 2002, and 263 in 2003. The database for this system is web-searchable but only contains information for permits filed electronically.
The majority of drilling permits in Texas are still filed on paper; the RRC issued 1,037 drilling permits statewide in November 2003,148 of which were filed electronically (14%).
As of Dec. 12, Fort Worth-based RigData reported 581 rigs working in Texas, with 46 distributed among four of the Barnett shale counties in RRC District 5: Johnson County (5 rigs) and Tarrant County (11 rigs); and in RRC District 9: Denton County (22 rigs) and Wise County (8 rigs).
Small operators
Dozens of small operating companies have been drilling in the Barnett shale, among them Angus Energy Corp., Antero Resources I LP, Aruba Petroleum Inc., Barnett Energy Corp. (Dallas), Canan Operating Inc. (Wichita Falls, Tex.), Chief Oil & Gas LLC, Hallwood Energy Corp., HEP Oil Co. Ltd., Jerry Hess Operating Co. (see accompanying article on this page), London Production Corp. (Dallas), Merit Energy Co., Merritt Operating Inc., Rife Oil Properties Inc. (Fort Worth), Texahoma Oil & Gas Corp., US Operating Co. (Dallas), and Winchester Production Co. (Shreveport, La.).
Dallas-based Angus Energy Corp., newly organized in mid-2003, acquired extensive acreage in the southern margin of the Barnett, including all drilling rights and operating interests on the Stanton Powell Ranch in northern Bosque County (OGJ Online, Oct. 10, 2003). Angus now holds more than 17,000 acres of mineral interests and options on 141,500 additional acres. The horizontal drilling permit for the company's first well, the S. Powell Ranch No. 1, was approved in late October, and the well spud in early December.
Brent Mulliniks became president of Angus Energy Corp. on Dec. 5, replacing Sanford Dvorin. Mulliniks was on the team that discovered and developed the Dallas County Barnett shale and later helped conceive and implement the first light-sand water frac in the Barnett.
Angus Energy's drilling operations are conducted by Angus Operating Inc., a wholly owned subsidiary. Former Pres. Sanford Dvorin, now a technical consultant for Angus, sees a "huge potential" for the Barnett in Bosque County now that several horizontal completions in neighboring Johnson County (Antioch field) have been successful.
Denver-based Antero Resources Corp. has filed 19 Barnett drilling permits with the ECAP system, including several directional wells drilled in Wise and Tarrant counties. The company uses Cheyenne Drilling Inc. for Tarrant County wells. Antero secured a $260 million equity-funding program earlier this year (OGJ Online, Feb. 19, 2003).
Plano, Tex.-based Aruba Petroleum Inc. drilled 13 Barnett shale wells in Wise County in 2003. James Poston told OGJ that Aruba will drill another 15 Barnett wells in 2004, including one on federal land. They were already permitted as of Dec. 23.
Chief Oil & Gas LLC was operating four wells in Tarrant County in December.
Denver-based Hallwood Energy Corp., a subsidiary of Midland-based Pure Resources Inc., was operating three wells in Johnson County in December.
Dallas-based HEP Oil Co. Ltd. was drilling in Denton County in December, using Felderhoff Bros. Drilling. The company has permitted 10 wells using the ECAP system and has tried horizontal drilling in the Goldfield Unit.
Privately held Merit Energy Co., Dallas, drilled two wells in Wise County in 2003. The company is considering additional wells in Tarrant County. Tommy Lambert, a regional manager for Merit told OGJ that there is "not much downside" to drilling in the Barnett. The wells are shallow and low-cost, generally costing his company $300,000-500,000. Frac jobs cost $80,000-120,000. Merit uses Schlumberger and BJ Services for its fracs, using 1/4 to 1/2 ppg proppant.
The maximum weight they have used in the Barnett is 1 ppg.
Dallas-based Texahoma Oil & Gas Corp. has been drilling in northern Wise County. Tom Sprinkle, drilling and completions manager, told OGJ, "we're just a small player; we've drilled two wells and will spud a third location after the start of the year."
Sprinkle said that Texahoma uses Big Giant Drilling, a small contractor out of Archer City, Tex., with two rigs—a double capable of drilling to 8,500 ft and a triple capable of drilling to 10,000 ft. Texahoma wells are drilled to 8,000-8,500 ft, usually within 14 days. The company drills to 5,500-6,000 ft using only water and then weights up to 9.3 ppg to drill to TD. Surface casing is set to 20 ft below the deepest freshwater sands.
LBJ National Grasslands
Texahoma also plans to file a drilling permit for the as-yet undeveloped LBJ Grasslands, where the company holds scattered tracts in a 2,700-ft wide strip. Texahoma is interested in the federal grassland acreage along with other acreage outside the core area because "the heart of the Barnett is already leased."
Sprinkle anticipates a 60-day filing process for the mineral and surface permits. The application for permit to drill (APD) will be filed with the US Bureau of Land Management (BLM; OGJ, Apr. 1, 1996, p. 23), which issued a streamlined APD policy on Apr. 14, 2003. The surface permit application will be submitted to the USDA Forest Service, which publishes permits in the Denton Record Chronicle (daily) and the Wise County Messenger (biweekly), to begin a federally mandated 30-day public scoping period.
The LBJ National Grasslands occupy a little more than 20,000 acres in Wise County and about 70 acres in Montague County, one of 20 publicly owned national grasslands administered by the Forest Service.
According to David Weldon, minerals technician for the Forest Service in Decatur, Tex., "We went 4 years without any APDs. Then this Barnett shale started picking up in the last year or two. I've talked to various operators; they're developing the area further south right now. Now that most of the grasslands acreage was leased in the recent BLM sales, we expect to see more applications to drill."
Weldon said only two APDs were approved for drilling in the LBJ Grasslands last year. Dallas-based Aruba Petroleum Inc. received permission to drill in Unit 62 in July 2003, but told OGJ that the well will not be spud until April 2004.
Dallas-based Roil Mineral & Land Co., owned by Dehryll Galloway, drilled a well in Unit 72 of LBJ Grasslands in the first part of December 2003 but had not yet completed it as of Dec. 26. Two other locations are staked. Roil geologist Chad Galloway told OGJ that they rely on Steinberger Drilling Co., Windthorst, Tex., and BJ Services for their fracs—"I wouldn't let anybody else on location. We like the consistency of the Barnett. We feel we can always make something of it and we've enjoyed some really good successes." Galloway cautioned that the area has become great for promoters, but prices are now inflated and the leasing terms are getting too high to make a profit on future wells.
Roil had previously drilled 16 Barnett wells beginning in 1985; it was the first company to drill after Mitchell Energy & Development Corp.
Larger operators
Houston-based Mitchell Energy made the first economic completion in the Barnett shale in 1981 with the CW Slay No. 1 discovery well, 4 miles east of Newark, Tex. In an examiner's report from a 1985 field rules hearing, "Mitchell pointed out that most of its wells are drilled as dual target wells with the Boonsville (Bend conglomerate) as the primary objective and the Barnett shale as a deeper secondary objective" (Docket 9-86,394).
By 1994, there were 121 wells in the Newark, East field, and Mitchell operated 110 of them, in Denton, Wise, and Tarrant counties. Mitchell was the largest operator in the Barnett until it was acquired by Devon Energy Corp. in January 2002.
By February 2002, there were about 1,120 wells operated by 33 companies, in seven counties: Denton, Wise, Tarrant, Jack, Palo Pinto, Parker, and Hood.
Republic Energy Inc., Lakota Energy Ltd., and Enre Corp. were the next largest operators before the Mitchell acquisition, with about 1 bcf/year production each. Where are they now?
Privately owned Republic Energy Inc. of Bridgeport, Tex., sold Barnett shale properties to Progress Fuels Corp., a unit of Progress Energy of Raleigh, NC (OGJ Online, Feb. 25, 2003). Republic had filed 92 well permits for Barnett drilling in Wise and Denton counties using the ECAP system since 2001 but drilled the last two of those wells in 2003.
Paradise, Tex.-based Lakota Energy Inc. continues drilling and filed a Wise County permit in October 2003 but does not utilize the RRC online filing system.
San Antonio-based Enre Corp. (EnRe LP) filed for bankruptcy in February 2003, and an unsecured creditors' committee status hearing was held on Dec. 1, 2003, in the court of the Hon. Richard S. Schmidt, Southern District, Texas.
On May 8, 2003, Devon reported that it had increased production to 500 MMcfd from 375 MMcfd at the time of the Mitchell acquisition.
Devon Energy's extensive activities in the Barnett are reviewed on p. 51 of this issue. Devon Chairman and CEO J. Larry Nichols told OGJ, "We wanted Mitchell because it had what has turned out to be one of the fastest-growing gas fields in North America, where we've drilled—I've lost count of how many—hundreds of wells without a dry hole. We have now 16 rigs running day-in and day-out all year long" (OGJ, Sept. 22, 2003, p. 38).
On Dec. 12, Devon was drilling at least 12 Barnett wells, in Johnson County (1), Tarrant County (1), Denton County (8), and Wise County (2).
Devon Energy spokesperson Chip Minty explains the company's interest in the Barnett: "The play has a great deal of potential and room for innovation," referring to Devon's development of an optimized superfrac process and its application both inside and outside the core area. Minty noted that within the Mitchell Energy acquisition, "the Barnett acreage was an attractive element of the deal."
Brad Foster, vice-president and general manager of Devon's central division, told OGJ, "Currently we estimate the Barnett has 142 bcf of natural gas in place per square mile. We are able to extract 10 to 14% of the gas in place today, and we expect ongoing technological advancements to make more of the gas in place recoverable in the future."
Devon intends to try different drilling and completion techniques. The company is trying horizontal drilling, using primarily Nabors Drilling USA Inc. and Patterson-UTI Drilling Co. for the Barnett. Whereas Mitchell Energy used gel fracs, Devon has been using water fracs. Devon uses BJ Services, Schlumberger, and Halliburton for frac jobs.
Bill Penhall, land manager for Devon's central division, said that Devon does not file drilling permits online with the RRC but may try in the future. The company hand-delivers paper applications to the RRC in Austin and walks them through in 1 day. Devon has not drilled the Barnett on federal lands; although it does hold some leases, Penhall said the company is not focused on the federal acreage at this time.
Following Devon
Burlington Resources Oil & Gas Co. LP entered the Barnett trend relatively recently, drilling nine wells in 2001 and early 2002, before investing $141 million in an acquisition that added 21,000 acres. This made it the second-largest Barnett player.
Burlington drilled 40 wells in 2002 and invested $29 million in 2002, excluding acquisitions, during that year, with average production of 7 MMcfd. Among the wells drilled in 2002 was a single Barnett test well in Bosque County, the Walker No. 1.
The company drilled 100-150 Barnett wells in 2003, and by midyear production reached 45 MMcfd. On Dec. 12, Burlington was drilling three Barnett wells in Denton County.
Burlington used the ECAP online filing system for 382 well-permit applications in 2001-03. The company employed Nabors Drilling, Patterson-UTI Drilling, and Pioneer Drilling Co. (PDC).
Dallas-based Denbury Resources Inc. has amassed 22,000 acres in the Barnett shale since 2001 (OGJ Online, June 26, 2003). The company budgeted $3.9 million for the Barnett in 2003. On Dec. 11, 2003, Denbury announced the capital expenditure plan for 2004; about 5% of the $173 million development and exploration expenditures budget is allocated to the Barnett shale ($8.65 million).
Fort Worth-based Quicksilver Resources Inc. is one of the newest players in the Barnett, having previously focused on shallow, unconventional gas reserves, such as fractured shales, coal beds, and tight sands, in Michigan, Indiana, and Canada.
John Gremillion, vice-president of investor relations at Quicksilver, told OGJ that the company "has acquired over 95,000 net acres in the Barnett play and will commence drilling activities in 2004." The company went public in 1999 and follows a low-cost "gas farming" development strategy.
Savannah Energy Inc., a subsidiary of Tejas Western Corp., holds more than 10,000 acres in the Barnett play and operates 75 wells in Tarrant, Denton, Wise, Montague, and Clay counties. The majority of its production is from the Barnett shale.
Houston-based EOG Resources is a large independent operating company but has drilled only five Barnett wells, all in Johnson County, four of them in 2003. Billy Helms in EOG's Midland office told OGJ that the company has a drilling program planned for 2004, all on private lands. EOG uses the online ECAP system to file drilling permits and employs Abilene-based SPA Drilling Co. EOG uses Schlumberger Oilfield Services and BJ Services Co. USA for frac work.
Fracture stimulation
Hydraulic fracturing is used in the Barnett shale, as elsewhere, to stimulate production by increasing permeability through hydraulically induced fractures propped open by various materials to maintain flow paths. Shales are fine-grained sedimentary rocks with the potential to carry vast amounts of absorbed gas in minute pore spaces but generally lack permeability and thus require fracture stimulation.
David F. Martineau, exploration manager for Pitts Oil Co. and Dallas Production Inc., presented papers on the Barnett shale at the AAPG 2003 Convention in Fort Worth, Apr. 2-4, and at the 30th Annual North American Petroleum Accounting Conference (NAPAC) in Dallas, May 15-16.
He noted that frac treatments in the 1980s initially used 300,000-gal gel and 300,000-lb sand, which was increased over the years to 1 million-gal gel and 1 million-lb sand. Then in 1997, operators shifted from gel frac to water frac, using very small volumes of sand and large volumes of fresh water.
Three main operators provide fracture services for the Barnett shale: BJ Services, Halliburton Energy Services, and Schlumberger (FracCade advisor software), as well as a small number of local companies.
Typical frac jobs in the Barnett are two-stage operations, which use high volumes of plain water and sand and cost $80,000 to $160,000.
Refracing older wells has been lucrative and successful for many operators. The Slay No. 1 discovery well was initially stimulated with 210,00 lb of sand and produced 500 MMcf/month until being shut-in August 1998.
Mitchell Energy reworked the wellbore in July 2000 with additional perforations and a larger frac, and the well now produces close to 1 MMcfd.
One new technology being employed is floating proppants—materials with a lower specific gravity than the frac fluid, generally brine. These light proppants are thought to improve conductivity farther from the wellbore because they can float on the fluid a greater distance into the fracture without settling out. Companies have experimented with different floating proppants, such as plastic beads, walnut shells (OGJ, Oct. 27, 2003, p. 56), and ceramics.
BJ Services recently released a new floating proppant called LiteProp, a porous ceramic particle (cellulose substrate) with a phenolic resin coating. LiteProp 125 and 175 weigh 1.25 g/cc and 1.75 g/cc, respectively.
According to research published by BJ Services, these new proppants can withstand downhole temperatures to 225° F. and pressures to 5,000 psi before deforming.
The closest equivalent in strength is resin-coated sand (2.55 g/cc, therefore not a floating proppant).
Gary Schein, region technical manager of East Texas for BJ Services, told OGJ that LiteProp 125 was tested in a Barnett shale well in October 2003 for Canan Operating Inc., Wichita Falls, Tex. The test was a comparison of two offset vertical wells in Wise County.
The first well was stimulated with a conventional sand frac. In the second well, most of the sand, about 70% volumetrically, was replaced with LiteProp 125, 20/40 mesh.
The wellbore fractured with LiteProp had a higher percentage of fluid recovery and a production rate that was substantially higher for several weeks.
The production rate then leveled off, nearly matching the conventionally fractured wellbore, but Schein expects that it will demonstrate better long-term productivity.
LiteProp adds 15-20% to the overall cost of a frac job on a vertical well but may be less expensive in a horizontal well because the operator can pump at a lower rate and save on horsepower. Schein said that vertical wells are pumped at 170-180 bbl/min, and horizontal wells are pumped at 125 bbl/min.
Drilling ahead
There is a great deal of excitement about the prospectivity of the Barnett outside the core area of the Newark, East field.
Operators expect to see many wells spud in new areas in 2004, particularly in the outlying southern and western margins, an expanded use of horizontal drilling, and recompletions of older wells.
There has been ongoing discussion of drilling in the Fort Worth metropolitan area (Tarrant County), and several wells have been drilled downtown and near DFW airport.
What is the areal extent of potential Barnett shale production? Will long-lived Barnett production provide fiscal renewal in north Texas? A lesson learned in the core area is that the Barnett seldom disappoints.
