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Goodrich Profiting from TMS Lessons Learned

Less than two months after Goodrich Petroleum Corp. said it encountered a problem during hydraulic fracturing (fracking) operations at a well in the Tuscaloosa Marine Shale (TMS) in Mississippi, the company on Thursday reported that the well reached a peak rate from a shortened lateral of 530 Boe/d, composed of 501 bbl of oil and 174 Mcf of gas.

In late December, Houston-based Goodrich said it had successfully fracture stimulated 17 stages at the Huff 18-7H-1 well in Amite County, MS, and had started to receive flowback at expected fluid rates "when the well became plugged with frack-related debris at a frac plug approximately 500 feet into the lateral" (see Shale Daily,Dec. 27, 2013). The debris would need to be cleaned out before resuming flowback, a procedure that would delay completion results for several days, the company said at the time. Those workover operations were completed and the well is producing on a 13/64 choke, landing it "in the company's upper target in the TMS," Goodrich said.

Problems encountered at the well taught Goodrich lessons that it is using across the TMS, where operators have been working to mitigate and resolve drilling issues for some time, CEO Walter Goodrich said during a conference call to discuss 4Q2013 and full year earnings with analysts Thursday.

"During the past two years, we and our partners in the play have made tremendous progress in de-risking and delineating the TMS and demonstrating, we believe, the tremendous potential of the play. However, like all emerging plays, we have experienced a number of challenging, unique issues with this play, some of which we have been able to successfully mitigate, yet other challenges remain as we continue to work towards best practice to both drilling and completion operations...

"The first unique challenge we experienced relative to the TMS drilling operations was maintaining wellbore stability in the lateral section of the horizontal wells...There are sections within the TMS which are highly naturally fractured, or as we have described them, rubblized zones. Our efforts to mitigate the problems and enhance wellbore stability have been numerous and are yielding positive results."

The company has also experienced problems drilling out frack plugs after completion in frack operations, probably due to higher clay content increasing the elasticity of the formation, prompting the use of permanent style frac plugs, the CEO said. Those plugs "have the potential to be an elegant solution, as they could eliminate the risk associated with drilling out the plugs, as well as reduce overall well cost by approximately $500,000," he said.

Another well targeting the TMS -- Goodrich's Weyerhaeuser 51-1H-1, located in St. Helena Parish, LA -- was successfully drilled in the company's lower target during 4Q2013 with a lateral length of approximately 6,200 feet, and was fracture stimulated with 23 stages. "The well initially flowed back through permanent frac plugs at high frac fluid rates on similar choke sizes to other wells in the field, but over time showed signs of plugging off on a portion of the lateral," Goodrich said. As a result, the company is drilling out the frack plugs prior to returning the well to production. 

Houston-based Goodrich is fracking the CMR 8-5 H-1 well in Amite County, MS, which is a 5,300 foot lateral with 20 planned frac stages, and is drilling the Blades 33H-1 well in Tangipahoa Parish, LA, and the CH Lewis 30-19H-1 well in Amite County. A third operated rig is expected in the TMS in early March. In October, Goodrich announced plans to increase the number of rigs targeting the TMS from two to five, and said it would spend about $300 million on drilling and completion activities, plus facilities and infrastructure, in the play this year (see Shale Daily, Oct. 16, 2013).

The TMS in Mississippi and Louisiana is attractively positioned in relation to pipelines and refineries on the Gulf Coast. TMS has about 320,000 net acres in the play.

Goodrich reported 4Q2013 production at 7.4 Bcfe, up from 6.6 Bcfe in 4Q2012, with oil production at 3,950 b/d, compared with 3,580 b/d in 4Q2012. Production during the quarter was negatively affected by delays in the TMS, the company said. 1Q2014 production is expected to be 3,800-4,200 b/d of oil and 48,000-50,000 Mcf/d of natural gas.

Proved oil and natural gas reserves as of Dec. 31 were 452.2 Bcfe, a 36% increase compared with 333.1 Bcfe at the end of 2012. Year-end proved reserves were 73% natural gas, 27% oil and liquids and 39% developed.

Goodrich has set a $375 million capital expenditure budget for 2014, with $300 million set aside to drill 32 gross (23 net) wells in the TMS. The company also plans to spend $45 million to drill 9 gross (6 net) wells in the Eagle Ford Shale.

The company announced a net loss applicable to common stock of $30.9 million (minus 73 cents/share) in 4Q2013, significantly better than the 4Q2012 net loss of $77.2 million (minus $2.12/share) reported in 4Q2012.

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