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Tuscaloosa Shale Drilling Revs Up In Louisiana And Mississippi

This article is printed in “The Louisiana Weekly” within the Sept. 16, 2013 version.)
Many northwest Louisiana residents have been enriched by Haynesville, the nation’s prime shale play earlier than its wells began producing much less. Farther south, activity in the Tuscaloosa Marine Shale or TMS deposit–thought to contain 7 billion barrels of recoverable oil–is accelerating now. Extending throughout central Louisiana, the TMS play gets as near New Orleans as St. Tammany Parish. It consists of the state’s Florida parishes and several Mississippi counties positioned above the foot of Louisiana’s boot.

The jap swathe of the TMS is close to oil infrastructure, together with the St. James petroleum reserve terminal and main refineries between Baton Rouge and New Orleans.

Tuscaloosa drilling dates to the 1970s and earlier. However the play’s wells, boring down about 11,000 ft after which drilling horizontally, are expensive. “The principle, added expense for these wells over most others drilled in South Louisiana is their long horizontal laterals,” Patrick Courreges, Louisiana Dept. of Pure Assets spokesman, said final week.

Drillers fracture the Tuscaloosa formation in stages, forcing water, mixed with sand or ceramic material and chemicals to crack the shale. The cracks open, releasing oil. Tuscaloosa rock is softer and extra clay-like than many different shales, however. Quite than cracking as meant, it oil and gas stocks under $10 might probably absorb injected fluids. What’s more, the clayish rock typically closes the opened cracks.

The Tuscaloosa play was sporadically drilled with out much success for many years. But corporations stored trying new methods. “Sixteen wells have been completed in Louisiana previously couple of years and are presently producing, whereas two more have been drilled and are awaiting completion,” Courreges said. Most of Louisiana’s manufacturing to this point has been from wells drilled in St. Helena Parish, he stated.

St. Helena, two parishes away from Orleans, is east of the Mississippi River at the top of the foot refining of boot. Simply north of it are Wilkinson and Amite Counties in Mississippi–each lively, drilling spots now, primarily due to that state’s shale-friendly policies.

“Encana has eleven wells whole in the Tuscaloosa play and all of them are at the moment on production,” Doug Hock, spokesman for Encana Oil & Gasoline USA in Denver, said final week. Encana Corp. is a pure gas and oil producer based mostly in Canada. “Eight of our wells are in Mississippi and three are in Louisiana,” he said. oil and gas stocks under $10 All three of Encana’s Louisiana wells are in St. Helena Parish.

Two different Encana wells in Mississippi, the Anderson 17H-2 and the Anderson 17H-3, will enter production in the subsequent few weeks, Hock said. Most of Encana’s Tuscaloosa acreage is in Mississippi, where the company’s first Tuscaloosa properly was drilled in Amite County in 2011.

Hock stated the company’s three, newest Tuscaloosa wells cost about $sixteen million every to drill, full and produce into production. The corporate remains to be within the exploration or design-of-experiment part, and hopes to cut back its costs.

Encana’s Haynesville wells have been solely slightly cheaper to drill than its Tuscaloosa units. Estimates for its Haynesville wells were within the $14 million vary in Encana’s second-quarter 2013 convention name on July 24, Hock stated. The company’s objective is to reduce its Tuscaloosa price tag to $12.8 million per effectively. “Our prices have steadily declined as we’ve drilled these wells,” making Encana extra assured that it will probably profitably function within the TMS, he stated.

“Once we have found out one of the best well design, offering probably the most economic and efficient resource recovery, we will drill a number of wells on a pad in a repeatable fashion and create a truly industrial play,” Hock stated.

Encana does not launch production information. But analyst Patrica Wells with Louisiana’s DNR stated as of Could–the last, required reporting time–Encana’s top St. Helena well, Weyerhaeuser 60 H No. 001, produced 976 barrels of oil daily. Considered one of the biggest landowners in the TMS is timber giant Weyerhaeuser, headquartered in Washington state.

As for oil and fuel distribution from that site, “we do not have gathering lines and infrastructure at the moment from wells in St. Helena Parish,” Hock said. “We promote at the lease to our buyer, and they’ve a number of options as to where they take the crude. Trucks come to the lease and pick up the product.”

Tuscaloosa wells largely produce Mild Louisiana Sweet crude, which fetched $108 to $109 a barrel early last week. Assuming 976 barrels of crude at $108 a barrel, gross income from Encana’s Weyerhaeuser 60 H totaled $105,408 a day. LLS crude sells at a premium to West Texas Intermediate because it is easier to refine.

In the meantime, other companies which have drilled the TMS include Goodrich, Devon Energy, Indigo Minerals, EOG, Halcon, Denbury Onshore and Justiss Oil. Houston-based Goodrich controls 320,000 acres, the largest area in the play, after it acquired Devon’s two-thirds share of 277,000 leased acres for $26.7 million this 12 months.

“We have been working one rig full time for a lot of the yr in Mississippi,” Robert Turnham, Jr. president of Goodrich Petroleum, mentioned last week. “That will develop to 2 in Mississippi in October as a result of we’re completing our Foster Creek nicely there now.”

A second rig will drill the corporate’s Weyerhaeuser site in St. Helena in October, and then it is going to head to Tangipahoa Parish, Turnham said. “We’ll probably run two and a half rigs in 2014, spread between Louisiana and Mississippi, with the places not yet finalized,” he stated. A half rig operates six months of the year. The company’s Weyerhaeuser site is a former Devon property.

In addition to St. Helena, other Louisiana parishes the place TMS drilling has occurred embrace East Feliciana, West Feliciana, Tangipahoa, Rapides and Vernon.

In St. Helena, oil and fuel companies have dealt directly with landowners, Randal Cooper of Cooper Actual Property in Greensburg said final week. “To this point, we solely have a number of wells here in the northern part of the parish,” he stated. Landmen, or mineral consultants, aren’t swarming the way in which they did round Shreveport, La. because of Haynesville and have carried out in Wilkinson and Amite Counties in Mississippi. “We’ve heard about drilling interest in St. Helena for a minimum of two years now but individuals aren’t leaping up and down and hollering about it,” he said.

While rural St. Helena does not have any red lights and traffic isn’t a problem, Amite and Wilkinson County officials are questioning find out how to pay for road upkeep as drilling there attracts big trucks and heavy tools.

As for lease rates, oil and gas stocks under $10 many of the promising TMS acreage was lapped up by late final year, Dan S. Collins, minerals consultant and landman in Baton Rouge, stated last week. In 2010, rates had been round $a hundred and fifty an acre for 3-year leases however they grew to $300 to $450 an acre final 12 months, he said. Leases within the TMS are unlikely to ever reach the tens of hundreds of dollars per acre seen for awhile in Haynesville.

“Haynesville leases peaked at over $30,000 an acre however that was throughout oil-and-gasoline worth escalation,” Collins mentioned. “Folks thought oil and gasoline would keep rising but they did not.” WTI prices dropped after reaching $134 a barrel in June 2008.

Collins discussed the current flurry of curiosity in Mississippi. “Mississippi handed a severance-tax discount law this yr that’s a little bit higher than Louisiana’s,” he mentioned. “It trumped Louisiana.” A severance tax is a levy on the removal of nonrenewable assets, including oil and pure gas. Efficient in July, Mississippi’s tax price on hydrocarbons from horizontal wells was lower to 1.Three percent from 6 p.c for the primary 30 months of manufacturing or until the properly pays out. Throughout the primary two years of drilling in Louisiana, the state has no severance tax on sales of oil produced. But Louisiana’s tax jumps to 12 percent after two years.

Another reason operators are gravitating to Mississippi is its “forced pooling” if a landowner doesn’t wish to sign a lease, Collins said. In Mississippi, if Tuscaloosa operators can lease a 3rd of the mineral rights in an area, they will “drive-integrate” holdouts by giving them the phrases of the most effective lease they gave to the first third.

Additionally in Mississippi, the State Oil and Gas Board has permitted very giant drilling units, exceeding Louisiana’s–which range from 640 to 1,520 acres, Collins mentioned. With larger units, firms can hold onto their leases but drill fewer wells. “I anticipate Louisiana will follow Mississippi sooner or later so I search for a lot larger items in Louisiana as nicely,” Collins stated.

Meanwhile, the U.S. Environmental Protection Agency is assessing potential impacts of hydraulic fracking on drinking water sources at the request of Congress. A draft report from that study needs to be launched next 12 months for public remark.