Thursday, July 28, 2011

Southwestern Goes Public on Smackover Brown Dense

In its quarterly earnings call today, Southwestern Energy announced that it has spent $150 million leasing 460,000 acres in southern Arkansas and northern Louisiana prospective for the Lower Smackover Brown Dense formation.  The land is prospective for oil (!!!) and gas.  Most of the oil appears to be in Arkansas, but the gas portion of the field expands eastward to Monroe, LA.

The formation varies in thickness from 300 to 500 feet and is found at depths between 8,000 and 11,000 feet.  It is of the Upper Jurassic age (close to the Haynesville Shale) and is a source rock for a number of formations across the Gulf Coast.  Southwestern plans to drill its first well in Columbia Co., AR to a depth of 8,900 feet, with a lateral of 3,500 feet.  A second well is planned for Claiborne Parish, LA with a depth of 10,700 feet with a 6,000 foot lateral.  The company will drill another ten wells in 2012 with the goal of figuring out if the Lower Smackover is commercial.

From the Southwestern press release:
“We extensively reviewed the Brown Dense across the region and have indications that the right mix of reservoir depth, thickness, porosity, matrix permeability, sealing formations, thermal maturity and oil characteristics are found in the area of Southern Arkansas and Northern Louisiana. This region of Arkansas and Louisiana has produced oil and gas from the Upper Smackover since the 1920s. The Brown Dense formation is the source rock for these Upper Smackover fields. It has the critical properties necessary to be a successful play and compares favorably to other productive oil plays in the United States. However, it has never been exploited with horizontal drilling technology until now,” stated (CEO Steve) Mueller."
There has been much chatter about the uptick in leasing activity over the past year.  Southwestern has been mentioned prominently, although most leasing is done through third parties.  The implied lease bonus was around $325 per acre, so the company is not on the hook for Haynesville-like investment.  Clearly Southwestern thinks the formation has good potential, but without real well results we won't know for a while.    There will be a lot of eyes on those test wells!

1 comment:

bradley said...

Keep it turning to the right!