Houston-based Stratex Oil & Gas Holdings Inc. has entered a joint development agreement and established an area of mutual interest (AMI) in the Mississippian Lime (ML) of Kansas with privately-held Eagle Oil & Gas Co., marking another entrant into the nascent play.
Under the terms of the agreement announced Friday, Eagle, which already has operations in the ML of Oklahoma, will initially drill four wells targeting the formation in Ford County, KS, with the first expected to be spud sometime in the next 90 days, Stratex said.
The ML, or Stack, SCOOP, CNOW and Hunton Limestone, as other operators refer to it, is a multi-horizon play thought to contain an abundance of wet gases and oil. The formation straddles Oklahoma and Kansas, and presents one of the latest challenges for horizontal operators, with full-scale development thought to be years away (see Shale Daily, April 11).
Stratex will join a handful of smaller operators and larger independents, such as Devon Energy Corp., Newfield Exploration Co. and Continental Resources Inc., that are working to crack the varied rock's code.
Stratex, which has primarily been focused on operated and non-operated wells in the Eagle Ford Shale of Texas, said it has agreed to pay 75% of the estimated drilling and completion costs on the first four wells in return for a 50% working interest. After the next six wells are completed or abandoned, the company will receive a 25% working interest, with that proportion increasing again to 50% once the next 10 wells are finished. From there, the deal calls for a 50/50 partnership in the play.
The agreement covers 35,000 leasehold acres in Ford County. Stratex management said an opportunity exists "for significant additional development on the acreage." As a result, both companies agreed to establish an AMI that will allow each to acquire new leases and additional interests in the county.