New Wells Encouraging, But Brown Dense Viability Still Debated

by Luke Jones  on Monday, Sep. 10, 2012 12:00 am  

Steve Mueller, CEO of Southwestern Energy Co.

As Southwestern Energy Co. drills more test wells in the Lower Smackover Brown Dense formation, preliminary results are coming back looking more and more promising.

Robert Reynolds, president of Shuler Drilling Co. of El Dorado, said the BML well in Louisiana has been "very encouraging," but Southwestern likely won't report any initial production numbers until the end of the year. Reynolds has been involved in the oil and gas industry in south Arkansas for almost 40 years.

"They have improved substantially," Reynolds said. "The first well drilled in Columbia County, by the short name Roberson, had a peak day of something like 103 barrels of oil. It never made as much as 103 before, and it hasn't made that much since."

The Garrett well in Claiborne Parish, La., peaked at 306 barrels, and the BML well in Union Parish had similar numbers.

The industry has several ways of presenting its production numbers. Even though Southwestern has reported some numbers, they do not represent the official answer to the play in question.

"In the oil and gas industry, state regulation agencies - and Arkansas and Louisiana are very similar in this respect - require us to report what is called initial production or, in industry jargon, what we abbreviate as IP," Reynolds said.

That means once the well has been drilled, the stone hydraulically fractured and the oil tapped, the number is the first full day of production for the well. However, none of the wells in the brown dense is "in production" per se.

"An IP is when you put your well into formal production on an ongoing basis," said Larry Bengal, director of the Arkansas Oil & Gas Commission. "That's your IP. They never got into that."

"Even though they've physically completed the well, they are still testing," Reynolds said. "They've not filed completion reports with the regulatory agency. It's that completion report file ... that tells the IP."

The oil from the test well is sold, but the wells are then plugged and abandoned until the drilling company decides whether continuing to produce oil would be viable. Instead of IP, Southwestern has reported "peak day" numbers to investors.

"Peak is not a standard industry-type concept," Reynolds said. "It was invented to describe what they're doing."

The huge amount of hydraulic "frack" fluid involved in the well jobs, Reynolds said, meant that the peak oil production times occurred as the used frack fluid flowed back out of the well.



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