The Eagle Ford Shale is more than just the Eagle Ford.
Operators in South Texas are drilling into other rock formations, taking horizontal turns — and in some cases getting big results.
While the Eagle Ford appears to be the mother lode — the largest and most prolific South Texas formation — several other rock layers sitting above or below it also are producing oil or gas.
Jeff Seiler, managing director of the banking firm Scotia Waterous, has tracked Texas drilling permits and found hundreds of cases of companies targeting other South Texas formations, especially the Olmos Sandstone, Austin Chalk, Buda Limestone, Edwards Limestone and Pearsall Shale, which companies are using to bolster the value of their Eagle Ford acreage.
“We know these are coming on,” Seiler said last week at Hart Energy’s DUG Eagle Ford conference. “We’ve already seen development plans put together and built into valuations for transactions that are on the Street.”
There have been 292 permits in the Olmos Sandstone, 177 in the Austin Chalk, 60 in the Pearsall Shale, 28 in the Buda Limestone and 24 in the Edwards Limestone.
It’s a small slice of the thousands of wells targeting the Eagle Ford, a 50-mile-wide swath of shale that in Texas runs from the Mexican border to East Texas.
But Lance Robertson, vice president of Eagle Ford operations for Marathon Oil Corp., said the company has started considering other formations in its acreage.
“Over the early part of this year, the middle of this year, we’ve transitioned from being just Eagle Ford focused to looking at other horizons including Austin Chalk and Pearsall, Buda and Wilcox (Formation). And while we’re uncertain of the scale of value of those today, we recognize they’re filled with hydrocarbon and are going to be a value enhancer to our Eagle Ford position. We’re going to go prosecute those.”
Some of the company’s Austin Chalk wells — drilled directly above the Eagle Ford where the two formations meet — have come in producing 1,000 barrels of oil per day, Robertson said.
Seiler said that Texas American Resources is bringing on wells in excess of 500 barrels of oil per day in the Austin Chalk.
And in the Buda Limestone, Beeville-based Dan A. Hughes Co. is bringing on wells in excess of 1,000 barrels of oil equivalent per day, he said.
“We think these wells are below $4 million in cost,” Seiler said.
The Olmos Sandstone has been a longtime target for drillers, but Sieler said it’s being rediscovered through horizontal wells and hydraulic fracturing, the process of pumping high volumes of water, sand and chemicals at high pressure to crack open dense rock. Among the companies finding success in the Olmos is Houston-based Swift Energy in McMullen County.
Seiler said the Pearsall also has had encouraging results and “is a very thick section” that’s hydrocarbon rich. And he said the Edwards is on the radar screen, but has not had as much activity. “We’re not sure what to make of it, how much running room it has,” he said.
The Eagle Ford generally produces more oil on its northern arc, more natural gas to the south and natural gas liquids in the middle. Similarly, these other formations in some areas might produce dry gas, but in another area might provide a bonanza of profitable crude oil or natural gas liquids.
Allen Gilmer, chairman and CEO of the research firm DrillingInfo, said it’s not just other rock formations — drillers also are starting to differentiate between the upper and lower parts of the Eagle Ford, targeting different zones within the shale.
“That whole trend is going to be multiple rocks producing and each of them having very different criteria as to how to optimally produce them,” Gilmer said.
Of the non-Eagle Ford formations, Gilmer said the Buda in particular is starting to produce strong results. He said there have been two or three “spectacular” wells in the northern Gonzales County area where the Eagle Ford isn’t considered viable for oil production. “Some of those look like they’re going to be right in the sweet spot of the Buda.”
Pearsall Shale: Excitement grows for another South Texas shale
Tony Sanchez, CEO of Houston-based Sanchez Energy Corp., said the company recently drilled an Austin Chalk well in Frio County at a cost of $2 million.
“That one was principally drilled to hold a lease,” Sanchez said. “To be totally honest we’ve been totally focused on the Eagle Ford. At this point, I think we’ve got our hands full with it. We think that the chalk is prospective certainly, but it requires work to develop the prospect. But we know that every Eagle Ford well we drill goes through the chalk, and we’ll log it and tie it into our databases.”
The company also has looked at the Buda and Pearsall, and said most of its acreage has Pearsall potential. “We just haven’t seen good well results yet that justify the cost,” Sanchez said.
Ultimately, Sanchez and many other companies will remain focused on the Eagle Ford, where they’re getting more profit for their dollars spent. Next year, Sanchez Energy plans to spend $660 million drilling wells in the Eagle Ford.
“If we could double it, we’d still drill that much more Eagle Ford,” Sanchez said.
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