Having enjoyed success in the Haynesville Shale in DeSoto Parish, LA, Houston-based Mainland Resources Inc. heard a call to go east — to Mississippi, where as it turns out the Haynesville “expands significantly,” CEO Nicholas Atencio told NGI’s Shale Daily.

Last month Mainland completed drilling its Burkley-Philips No. 1 well in Jefferson County, MS, to a depth of 22,000 feet and set production casing (see Shale Daily, Dec. 6, 2010). Mainland also acquired a 21-foot full core of the Haynesville at 20,415 feet, which it is now studying. Hopes are high that the Haynesville successes seen in North Louisiana will show up in Mississippi as well.

“As you work eastward into Mississippi along the Haynesville trend you go deeper in section, and in the area that we’re drilling it may be unique, but we don’t think it’s unique…the Haynesville expands significantly…in both section and depth,” said Atencio, who is a petroleum engineer and a veteran of Tenneco Oil, Apache Corp. and Kerr McGee.

Mainland is treading where Chevron Corp. has gone before, and it has benefited from the supermajor’s experience, Atencio said. In 1980-1981 Chevron drilled a well targeting the Smackover formation, which is below the Haynesville. “At that time the supermajors were drilling their stratigraphic tests all over the United States looking for Smackover.”

Chevron’s well passed through about 2,000 feet of Haynesville and reached its total depth of about 22,000 feet still in the Haynesville after encountering structural problems with the wellbore, Atencio said. “So they never tested the Smackover.”

Temperatures in this piece of the Haynesville are about 400 degrees Fahrenheit with pressures estimated to be about 20,000 psi, Atencio said. “So you’re looking at a Haynesville that is much thicker, much deeper and much higher pressured.” Thanks to the higher pressure and the fact that it’s thicker, the interval can contain more gas.

It took Chevron more than a year to drill what Atencio described as a “true wildcat well.” But Mainland’s Burkley-Philips No. 1 offset to the Chevron well was drilled in 160 days at a cased hole cost of about $9.5 million, “which is a phenomenal accomplishment,” Atencio said. “I don’t belittle [Chevron’s] effort; their effort was phenomenal because they were drilling into something that no one had seen before. We had their offset well to help us.”

He also credited advances in technology since 1980 that have yielded drillbit improvements as well as gains in metallurgy and drilling mud technology. Further, since Mainland is a small player it was able to bring in talent with local expertise rather than relying on an in-house staff that wouldn’t have been as familiar with the play.

“We focused on people who had done this, maybe not this deep, but who knew the area, local people, local rigs, local oversight, local mud people that knew this area,” he said.

The talent Mainland hired also enabled the company to acquire a full core of the Haynesville, “which I believe is unprecedented at that depth and pressure and may be unprecedented in the industry in capturing a full core in the Haynesville Shale,” Atencio said. “We went and found people who have cored deep, hot holes and brought them in and had our specialists with our oversight capture a full core…Now we’re able to take direct measurements of the Haynesville Shale, which we’re in the process of doing right now.”

While Mainland has learned much about the Haynesville in Mississippi, there’s plenty more know about the resource play. “We expect it to be dry gas, certainly at this temperature and pressure. And of course we’ll know much more about its deliverability potential when we have completed all of our analyses. We did have mud log gas shows throughout the entire Haynesville section that we drilled.” Like Chevron’s well, the Mainland well reached a total depth of 22,000 feet and was still in the Haynesville, “so we don’t know how thick it can be,” Atencio said.

Mainland has negotiated lease extensions for its Buena Vista acreage in Jefferson County. More than 95% of the acreage under leases subject to expire this year is now leased into 2012, giving the company primary term leasehold acreage expiring in 2012 and 2013.

“Retaining this acreage into 2012 and 2013 is a fundamental part of our business plan in the Buena Vista Haynesville Shale operating area,” said Atencio. “As we move our program into the analysis and testing phases, the retention of key acreage positions assures our ability to expand the play and to maximize shareholder value.”

But right now there’s not a whole lot of interest from the rest of the industry in leasing the area, Atencio conceded, “and this allows us a lot of running room.” He said Mainland will be analyzing the data it has collected to learn more about the play with the hope that its get-in-early strategy will pay off again as it did in DeSoto Parish in Northwest Louisiana.

Mainland got its start in 2008 in the East Holly Field targeting the Hosston/Cotton Valley and Haynesville intervals. A joint venture was struck with Petrohawk, which drilled the first well in February 2009. Last April Mainland closed the sale of 40% of its Haynesville rights in the East Holly Field for $28.8 million to Exco Operating Co. LP. However, it retained 100% of its rights to stacked pay in the Upper Bossier, Cotton Valley and Hosston formations.

“In that area now the next phase of excitement is the Bossier,” Atencio said. “It has the potential for additional liquids, and people are starting now to play the Bossier in that area. We’re pretty excited about it.”

One month earlier in March 2009 Mainland announced its merger with American Exploration Corp., the goal of which was to consolidate ownership in the Mississippi Buena Vista play. Additional Buena Vista acreage — 4,575 acres — was acquired last May.

Mainland is developing the Mississippi Haynesville dry gas play at a time when much of the industry has been turning up its nose at dry gas, favoring wetter plays, such as the Eagle Ford in South Texas, because of more favorable economics.

Atencio is reluctant to discuss other companies’ portfolios. “Our business model is to get in early, to get good, fair prices for our land, and our sunk costs are low. This was our business model and our footprint in DeSoto parish. We were in at very low cost and as soon as the Haynesville exploded it was $20,000 an acre,” he said.

“We learned from that and picked up 18,000 acres [in Mississippi] and our sunk cost is very low… I can’t speak to other people’s overhead and all the other costs they put into their calculations to see if something is commercial or not. But I can tell you that if your sunk cost is low and your life-cycle cost is low, then the prices that we’re seeing here are reasonable for us.”

Atencio said Mississippi is “very producer-friendly” with a well-defined regulatory system to govern exploration and production. ” I don’t expect to see the same type of issues that you’re seeing in the Marcellus [Shale] or the East Coast. These are areas that are developing their learning curve in our industry.”

The company’s activities are “pretty close to the Mississippi River” and access to water wells in the area isn’t likely to be a problem, Atencio said, so there should be plenty of water available for hydraulic fracturing.