St. Mary Land & Exploration Co. reported solid success from a horizontal well in the Carthage Field of East Texas, in an area that several other producers have found promising, and it plans to continue to add to its acreage in the region, the Denver-based independent said Thursday.
The producer's first operated horizontal Cotton Valley well in the Carthage Field, the Boise Southern 1-H in which it has a 98% stake, had an initial 10-day average rate of 4.8 MMcfe/d. The well targeted the Basal Cotton Valley sand at a vertical depth of 9,375 feet using seven fracture stimulation stages over a 3,800-foot lateral.
St. Mary also paid $49 million to purchase more acreage in the play in Panola County, TX. The acquired properties are near the Boise Southern well and other St. Mary assets in the Cotton Valley and Travis Peak formations. The new acreage adds an inventory of 15 vertical and seven horizontal locations, with 3,000 gross acres (2,700 net). Estimated net proved reserves are 25 Bcfe, 73% of which are proved undeveloped. Probable and possible reserves are estimated at 12 Bcfe. Current net production is 2 MMcfe/d, primarily natural gas.
As a result of the successful Boise Southern well and the bolt-on acquisition, St. Mary plans a multi-rig program to drill six additional horizontal wells and 14 vertical wells in Carthage in 2008. The acquisition was financed using existing cash on hand and borrowings under the company's existing credit facility.
Solid results continue in its James Lime program, also in the East Texas region, St. Mary said. Its Mast LB 1-H well, in which it holds a 42% stake, was recently completed and had an initial 10-day average flow rate of 6.2 MMcfe/d. The well was the second successful extension well drilled at the company's Loco Bayou prospect, which is about 75 miles southwest of its James Lime development activity. The James Lime acreage currently stands at 50,000 net acres and leasing efforts there are ongoing, St. Mary said.
"The successful horizontal Cotton Valley test and our continued success in the James Lime further solidify St. Mary's reputation as a leading operator in the ArkLaTex region," said CEO Tony Best.
Last week Chesapeake Energy Corp. reported an unconventional gas discovery in the Haynesville Shale near Shreveport, LA, an area of northern Louisiana that trends into the East Texas acreage (see related story). Chesapeake controls about 7.5 Tcfe in the shale and with additional leases, hopes to control "as much as 20 Tcfe over time." Other producers, large and small, also are muscling into the East Texas region to look for natural gas.
St. Mary does not plan to increase its exploration budget in the Carthage Field, which was set at $161 million for 2008. Instead, with the increase in Carthage drilling, St. Mary said that "certain operated projects in the James Lime have been deferred to ensure that the company's total capital investments remain within expected cash flow for 2008."
In the Midcontinent region, however, St. Mary will up its exploration spending in the second half of this year to $155 million from the budgeted $135 million to expand its horizontal Woodford Shale program. The last eight wells in the Woodford have averaged estimated ultimate recoveries of 2.7 Bcfe, which St. Mary said compares favorably to other wells completed throughout the play. The expanded program is expected to keep two operated drilling rigs running in the field through 2008, with the potential for a third rig being added later in the year. An additional seven horizontal Woodford wells (gross) are being added to the budget for a total of 16 wells in the 2008 program.
"In the Midcontinent region, our horizontal Woodford results have improved significantly and our Midcontinent team is focused on ramping up activity in the play," said Best. "Our 2008 business plan included an acceleration of the Woodford program if success called for additional capital; our solid rates and attractive EURs [estimated ultimate reserves], when coupled with some of the lowest drilling costs in the industry, support additional funding this year."
To focus its efforts in East Texas and the Midcontinent region, St. Mary is selling some producing assets in the Green River Basin in Sweetwater County, WY. The assets to be sold include interests in 71 producing wells, four proved developed nonproducing wells and 24 proved undeveloped locations in the Moxa Arch and Wamsutter areas. Total net proved reserves are 12.3 Bcfe, of which 7.1 Bcfe net is proved producing. St. Mary operates 28% of the producing wells and is to operate six proved undeveloped locations in the Wild Rose Field. Net production is 2.4 MMcfe/d, which is 89% weighted to gas. Estimated May 2008 net sales are 69 MMcf of gas and 970 bbl of oil. The data room is open, and the bid due date is April 25, with an effective date of May 1.
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