Alabama

By OGJ editors
HOUSTON, Sept. 17 – Energen Corp., Birmingham, Ala., will write off the balance of its Alabama shale leasehold, taking a $14.4 million after-tax charge in the 2010 third quarter.

The company decided on the write-off after flow rates from a shallow Conasauga interval and from a multistage completion in the Chattanooga shale were insufficient to support economic development. Energen in the second quarter wrote off $10 million of leasehold in the deep, mushwad Conasauga shale (OGJ Online, July 20, 2010).

In the Conasauga interval at 3,000-4,000 ft, initial flow rates decreased quickly to noneconomic levels, and no meaningful flow was generated from the Chattanooga shale formation that was tested in a 3,000-ft horizontal lateral at 7,500 ft.

The company noted that it obtained essentially a free look at the shales, having recorded a $55 million after-tax gain in 2006 after it sold half of its then-200,000-acre lease position to Chesapeake Energy Corp. Energen’s subsequent investment in leasehold, drilling, and completion approximated that gain.