Austin Chalk 3.0

Chalk it up to a new downhole recipe. Modern high density completion techniques, including hybrid slickwater fracs, and a stacked and stagger co-development strategy with the underlying Upper Eagle Ford, are generating nice wells in the Austin Chalk play in South Texas.

Austin Chalk? Wasn’t that the carbonate play that galvanized the onshore sector in the 1980s after operators learned to exploit 2-D seismic to pinpoint natural fractures? Vertical wells came in big, generating large quantities of light sweet crude and natural gas in a geographic region that parallels the oil window of today’s Eagle Ford Shale. But the fractures drained quickly and production dropped precipitously. Some operators did well in the Chalk; many busted.

After the vertical play ran its course in the late 1980s, Austin Chalk 2.0 began as operators pioneered short radius horizontal drilling, including developing new downhole motors and drilling bits to extend laterals into multiple natural fractures, which were completed open hole. A representative Chalk short radius horizontal generated 220 barrels per day (bbl/d) of oil and recovered 65,000 bbl.

Two sweet spots developed, including the region west of Pearsall, Texas, and the Giddings area, about an hour east of Austin. But that play wound down in the late 1990s with lower oil prices. Two of the most aggressive horizontal Chalk players experienced significant alterations in corporate destiny. Chesapeake Energy Corp. turned from the Chalk to conventional gas while Anadarko Petroleum Corp. acquired Union Pacific Resources in 1999.

Ultimately natural gas and the shale revolution supplanted the Chalk in the 21st century. Still, Austin Chalk 1.0 and 2.0 produced more than 838 million barrels (MMbbl) of oil from 17,000 wells over a 40-county area of South Texas.

Today, multiple operators are returning to the Chalk as an Eagle Ford extension. More than 1,100 wells have been drilled in the past 15 years. Efforts have intensified in the past three years. Murphy Oil Corp. completed a Chalk appraisal in Karnes County this summer that produced 1,500 barrels of oil equivalent per day (boe/d) and will continue testing the Chalk in 2016. To the northeast, Contango Oil & Gas Co. is working a stacked play in Fayette and Gonzalez counties, Texas, testing the Eagle Ford, the Austin Chalk, and the Buda limestone. Contango notes Chalk and Buda wells are borderline economic in the current commodity price environment.

Baytex Energy Corp. has delineated the Chalk under 50% of its Karnes County acreage in a dual Chalk/Eagle Ford program. The company has drilled 45 Chalk wells with average 30-day initial production (IP) of 1,000 boe/d. Baytex is using stack and frack pilots targeting three zones in the Eagle Ford as well as the overlying Austin Chalk.

The most articulate advocate for Austin Chalk potential is BlackBrush Oil & Gas LP. The company began work in the Chalk in 2012 as part of its Karnes County Eagle Ford exploitation program. In 2014, after an infusion of private equity capital, BlackBrush participated in 34 Chalk wells, including joint venture participation with Marathon Oil Corp. The private independent’s Chalk experience is itemized in “The News From DUG Eagle Ford” in this issue.

The developing narrative is that operators have embarked on Austin Chalk 3.0 and are applying unconventional drilling and completion techniques, including extended laterals, shorter stage spacing at 225 feet, and hybrid slickwater and heavier proppant loading at 2,500 pounds per foot to fracture stimulate the carbonate play.

The Chalk offers a lesson in applying unconventional techniques to a conventional reservoir. Vertical Chalk single-stage tests over the last half-decade recovered 32,000 boe. Turning those verticals into short horizontal laterals with a half dozen stages generated an average IP of 700 bbl/d of oil and produced 110,000 bbl of oil and 234 million cubic feet (MMcf) of gas in 2012-2013, double the per-stage output of the earlier vertical tests.

While previous Chalk success lay at both ends of a barbell-shaped fairway, the newest results are found in the narrow part of the fairway adjacent to the Karnes Trough, and rely on operators’ ability to stimulate the Eagle Ford and Chalk using geosteering and high-density completions.

Daily production from 117 wells co-targeting the Chalk and Eagle Ford is just shy of 16,000 bbl/d of oil. Austin Chalk 3.0 has generated more than 5 MMbbl of new oil in less than three years. More is coming.