The Bossier

Five years ago, Freestone, Leon and Robertson counties were awash in land brokers, seismic crews and high hopes. People believed that 3-D seismic was the key to finding the wildly prolific Cotton Valley pinnacle reefs, and a mad scramble was on to tap their riches.

Alas, the Cotton Valley play turned out to be just a flash in the pan. Out of 60 pinnacle reef tests drilled between 1993 and 1998, only a dozen were commercially successful, says Tom Covington, Denver-based oil and gas analyst with A.G. Edwards & Sons Inc. "By early 1998, the play was dead."

But something quite different was percolating in almost exactly the same area. As early as 1996, Anadarko Petroleum Corp. began looking at the Bossier interval, a shale-dominated section immediately overlying the Cotton Valley pinnacles. "We drilled a deep well that was unsuccessful," says Rex Alman, vice president of domestic operations. "We sat around on our hands for awhile, then we started to look at the uphole section. We tested an interval at about 12,500 feet, and that first test was marginally successful. It was good enough that we drilled another well, then another."

The zone wasn't exactly an unknown, as operators had occasionally attempted to make something of the low permeability and low porosity reservoir. "There was some existing Bossier production in Mimms Creek Field in Freestone County," notes Alman. "We began to piece a story together, realizing how tight the reservoir rock was and how limited its drainage area was."

Anadarko quickly perceived that the Bossier play offered fabulous infill potential. Instead of the typical spacing of one gas well per 640 acres for reservoirs at that depth, the company realized that the Bossier sands could support wells on units of 80 acres or smaller. This was a vast resource-it just didn't quite meet Anadarko's economic standards. "When we started drilling, gas prices were at $2 per thousand cubic feet and we were trying to keep the play economic," says Alman.

Some close figuring was in order.

To make the Bossier work at $2 gas, Anadarko had to reengineer the play, with strict cost-control crucial. The company got several rigs running to wring out operational inefficiencies, drastically pared back fracturing costs, and laid its own gathering system. It cut drilling time almost in half for the wells, partly by introducing downhole motors. It compressed the cycle time so that a well was producing into the sales line 45 days after spud.

"Early on, these strategies helped get the play off the ground," says Alman. "Then, as gas prices began to come back, we quit hearing people say we were crazy and instead found they were trying to lease acreage offsetting us."

Once just a marginal bailout zone, the Bossier is now the star attraction in East Texas. An Upper Jurassic marine shale that contains some turbidite sands, the Bossier is time-equivalent to the Cotton Valley sands that produce to the west. In the main part of the play in Freestone County, the zone occurs between 12,000 and 15,000 feet.

Four main sands come and go throughout the established fairway. The two upper ones, the Moore and Shelley, are slightly overpressured and widely distributed. A typical well in this interval, drilled with 10- to 11-pound-per-gallon mud weights, might make 2 billion cubic feet of gas (Bcf).

The lower Bonner and York sands are quite different. They feature both increased pressures and improved reservoir characteristics. The high-pressure regime, requiring mud weights as high as 14 pounds per gallon, yields wells in the 4- to 7-Bcf range. Drilling the high-pressure intervals requires intermediate liner and additional mud, adding at least $300,000 to the cost of a well. Further, these sands are more erratic in their distribution than are their shallower cousins.

Bossier wells typically encounter between 50 and 200 feet of net pay with porosities of 6% to 12% and permeabilities of 0.01 to 0.1 millidarcies. The wells, depending on pay thickness and quality, produce at a good clip of around several million cubic feet per day before declining hyperbolically. Then, they will produce steadily for another 25 years.

Anadarko figures the average well costs $1.6 million completed, recovers 3 Bcf, and produces at a level of about 1 million cubic feet per day after the first year.

So far, vertical wells are the exploitation method of choice in the Bossier. Anadarko has drilled about a dozen horizontal wells in the play, mainly in the southern part of Dew Field where a large surface coal lease precludes vertical drilling. "We're still evaluating the results of our horizontal wells, comparing them with vertical wells," says Alman. "The Bossier is not like the Austin Chalk, in which we drilled wells to intersect natural fracture clusters. The Bossier is just incredibly tight. In a few places, horizontal drilling might be the way to go, but overall we prefer vertical wells on a pretty tight spacing."

In today's $4.50 gas market, the economics of the Bossier wells are unquestionably robust. Even at a much more conservative Nymex value of $3 per thousand cubic feet, Anadarko calculates its return on investment in the Bossier at 45%; its finding and development cost at 50 cents per Mcf; and its payout at two years. Also at $3, a Bossier well has an after-tax net present value of $900,000 (at a 12% discount rate). At $2, the economics are breakeven.

What's so impressive about the Bossier, however, is the tremendous number of wells it can support. "We've got 27 rigs running in East Texas and six in Louisiana on the play," says Alman. By the close of 2000, Anadarko will be producing 225 million net cubic feet of gas per day from 325 Bossier wells. "Next year we plan to drill 230 wells, and we'll be pushing more than 500 wells by the end of the year," he says. Indeed, in 2000 the volumes from the Bossier will surpass the amount of gas that Anadarko produces out of its cornerstone, Hugoton Field in Kansas.

Anadarko now holds more than 200,000 acres associated with the Bossier shelf margin play, including its holdings around Vernon Field in Louisiana's Jackson Parish. "Our position is growing every day," says Alman. "With our Union Pacific Resources merger, we acquired an additional 800,000 acres in East Texas, and half of that may be potentially prospective for these same kinds of sands. After we finish our leasing in East Texas, we'll get back to fully evaluating the potential on the ex-UPR lands."

One of the first firms to follow Anadarko into the Bossier was Pioneer Natural Resources Co. The Dallas-based independent currently owns 57,000 gross (32,000 net) acres in the play. In 1997, it acquired 10,000 acres in the heart of the Bossier when it bought American Cometra, one of the early pinnacle reef players.

Pioneer began working the Bossier in earnest in 1998. "We were closely following Anadarko's activity near Dew Field," says Kevin Schepel, worldwide exploitation manager. "We have acreage throughout that area." Pioneer recompleted some Bossier intervals in existing wells and participated in nine Anadarko-operated Bossier wells, with interests of 2% to 45%.

It is also operating its own tests. "By year-end, we expect to have drilled 13 new wells and recompleted three in the Bossier," says Danny Kellum, executive vice president, domestic operations.

The company is approaching the Bossier carefully. "At this time, we are evaluating our results and assessing a wide range of areas in the play," he says. Currently, Pioneer is running four rigs, and will maintain its activity at four to five rigs until it has identified the areas where it wants to proceed with more intensive development.

Pioneer hand-picks the very best locations, eschewing a manufacturing-like approach. "A lot of wells will ultimately make only 500 million cubic feet of gas apiece, while others will make as much as 7 Bcf," says Schepel. "Our objective is to use the best technical data that we have to lean us toward the high side of that range, because it's possible to drill a lot of wells that could potentially be very close to subeconomic."

3-D seismic is a lynchpin of that technical effort. Data is widely available in the area, thanks to the earlier Cotton Valley pinnacle reef activity. "We think that we can identify the Bossier sands with 3-D seismic. We use some sophisticated inversion processing that we believe allows us to image some of the 100-foot-thick channel sands," he says. "Furthermore, many of these channels are only 700 to 1,500 feet wide, and without seismic they are easy to miss."

Although the bulk of Pioneer's activity has centered in Freestone County, the firm is also stepping out into the broader play. "We recognize that the Bossier has the potential to extend northeastward into southwest Louisiana, and certainly south into Robertson and Leon counties," says Schepel. "But we're not going to let the rigs get ahead of our technical program."

Says Kellum, "We are enforcing very strongly on our asset teams the internal guidelines that we use to meet our hurdle rates. We use a $3 price deck for natural gas, and at the same time we are combating an increase in well costs."

One of Pioneer's foremost advantages is that it entered the play early and was able to build a significant position before competition raised land prices. Depending on location, leases in the Bossier now range from $25 to $500 per acre. "Our average acreage cost is between $125 and $150 per acre. We're still buying, and we presently have five brokers in the field. Right now, acreage is the cheapest part of this formula," says Schepel.

"We'll continue to acquire good acreage and make deals with other operators. We would like to pool some interests and share some of the exposure. There are several ways to tackle the Bossier, and we want to make sure that we pick the one that's going to make the company money," he says.

With favorable success, by year-end 2001 Pioneer could be producing 30 million per day from the Bossier, says Kellum.

Matador Petroleum Corp., a private firm based in Dallas, has also amassed an impressive position in the play. The independent owns 55,000 gross acres that are prospective, says Joe Foran, chairman and chief executive officer. "We've been working East Texas for the past four years. It's a fairly new area for us, because we've been primarily a Permian Basin operator."

The firm operates about 180 wells, two-thirds of them in the Permian. Some three years ago, Spirit 76 traded its southeast New Mexico properties for Matador stock, and the Unocal unit now owns a third of the company. Matador is currently producing 38 million cubic feet per day, and has about 60 employees.

Matador studied East Texas because it was seeking a second growth area. "We were looking at all the traditional plays such as the Travis Peak, the Pettit and the Cotton Valley," he says. "East Texas was gas-prone, close to home and underexplored. It had stacked pays at reasonable depths and good economics." Matador began to acquire acreage and wells in the area.

About a year ago the company turned its attention to the Bossier. "We drilled a couple of wells looking for stacked pays in the Cotton Valley Lime and Bossier," says Jeff Ventura, vice president of exploration and development. "We found both, and completed the first two wells in the Lime and left the Bossier behind pipe."

Sufficiently encouraged, Matador contracted a rig to drill exclusively for Bossier. It added a second rig, and is currently picking up a third. Two will be drilling exclusively for Bossier and the other, more traditional Cotton Valley and Travis Peak wells.

Most of Matador's acreage lies north of the Dew/Mimms Creek area, with the exception of a 13,000-acre holding in the basinward portion of the play in Leon County. The firm has completed two Bossier wells, with its first making 3 million cubic feet per day into the sales line. A third test was just logged at press time.

"An exciting part of this area is that in certain places we can find Cotton Valley Lime production below the Bossier, and Lower Cotton Valley sands, Travis Peak, Pettit and Rodessa above the Bossier," Ventura says. "So far, we've drilled and logged five wells and we've found multiple pay zones in all five."

The independent operates virtually all its Bossier wells and holds a 50% to 75% working interest in each test. Spirit 76 is a major working interest partner as well as a shareholder, and Fortson Oil Co., a Fort Worth independent, is another major partner.

Matador will drill between 30 and 40 Bossier wells next year, says Foran. "We have high hopes for the Bossier." Right now, the company is drilling appraisal wells on a large spacing pattern to evaluate its acreage. Once the production profiles of these wells are scrutinized, Matador will begin infill drilling. "To be successful in the Bossier, we have to find the better areas and be very cost-conscious. And we have to work on the marketing end to get the best possible gas price."

Says Ventura, "Some people think that exploration in the onshore U.S. is played out. But the Bossier could ultimately contain a trillion cubic feet of gas deposited at reasonable depths in a great gas market."

El Paso Production Co. is another firm deeply involved in the Bossier. Bob Cavnar, senior vice president and chief financial officer, says the Bossier is an important part of his firm's domestic operations. "The Bossier gives us a relatively low-risk onshore source of reserves, and it's a nice counterpoint to our more-costly offshore opportunities."

After a long hiatus, Houston-based El Paso reentered upstream exploration and production when it purchased Sonat Inc. in 1999. Sonat had been quite active in the East Texas pinnacle reef play, and El Paso now holds about 23,000 gross and 13,000 net acres that are prospective for Bossier. Its leases are mainly in Freestone and Leon counties, with a little bit in Limestone County.

El Paso quickly decided to ramp up the Bossier activity that Sonat had initiated. "We're producing about 41 million cubic feet per day gross, and 13 million per day net," says Cavnar. "We have 14 operated Bossier wells and working interests in 17 nonoperated wells." By year-end 2000, the company expects to have interests in 22 operated and 25 nonoperated wells.

"We're going to step up activity next year, and drill about 30 operated wells and participate in seven nonoperated wells." El Paso currently runs four rigs and is looking for two additional ones.

The development of good, solid completion techniques has been essential to the success of the play. "There's still discussion about the optimal fracing technique," says Cavnar. "We use a little different frac technique than others. We like a gelled, propped frac with about 250,000 pounds of sand. We think that this gives us a higher initial potential and more sustained production through the first year, and it seems to be working very well."

El Paso's wells run between $1.2 million and $1.8 million apiece, depending on the pressure regime. For next year, the company is forecasting 15% to 20% higher drilling and completion costs, a figure that other operators agree with. "We're looking at serious price increases next year, in all the services and even in the production equipment area. All of the intangible costs are going to be higher in 2001," says Cavnar.

Reserves on its Bossier wells run between 2- and 3 Bcf each, with a high of 6 Bcf. Most of El Paso's drilling has been in the Dew area in Freestone County, with some activity in the Bear Grass area in Leon County.

"The Bossier is a good play, and we're really excited about it," says Cavnar. "It's been a lot of years since I've seen this much activity."

A partner with El Paso in several wells is privately held Houston-based Miller Energy Inc., which was founded in 1979 by Wayne Miller and Steve Aldridge. The company primarily operates in Freestone County, where it owns interests in more than 100 wells.

Aldridge has a long familiarity with the Bossier. He was working at TXO Production Corp. when that firm completed the original Bossier wells in Freestone County in the early 1980s. "The #1 Glazener Gas Unit in Dew Field, which Miller now owns, was one of the models for the present Bossier play," he says. "That well was drilled almost 20 years ago, and it has made 2 Bcf of gas."

Miller Energy holds about 10,000 gross acres in Freestone and Robertson counties, all in held-by-production leases. It operates eight Bossier wells and owns interests in quite a few others.

"We're actively drilling wells. We've just completed the #8 Glazener Unit in Dew Field, and we participate in El Paso's Webb wells in Dew also." Near Donie, further south in Freestone County, Miller is a 50% partner in a well on the Oakes-Turner lease. The second Bossier well is currently drilling on that unit. And, the company is presently drilling in Robertson County, where it has already completed one well.

"The Bossier didn't have a good name in the early 1980s, because the Cotton Valley Lime, which lies just below the Bossier, was much more prolific," he says. "The original Bossier wells were low-profile producers. They would make about half a Bcf the first year, then decline hyperbolically and produce for 20 years."

But today's combination of lower well costs and higher gas prices has added luster to the Bossier. "We used to think we couldn't make a living out of the Bossier. Up until about a year ago, everybody thought that Anadarko was crazy, drilling all these Bossier wells. Then the price of gas jumped," says Aldridge. "Now we're drilling them too."

Another active player in the Bossier is Fort Worth-based Cross Timbers Oil Co. "The Bossier is one of our biggest areas right now," says Keith Hutton, executive vice president, operations. "It's a highlight area for us. Currently, we're running four rigs in the play." By the end of the year, Cross Timbers will have drilled more than 20 new wells in the Bossier, and recompleted the Bossier in 10 to 15 existing wells.

The company plays the Bossier with a slightly different twist than some of the other operators: it completes its wells in other intervals and commingles the Cotton Valley sands or the Cotton Valley Lime with the Bossier, says Hutton. Too, Cross Timbers likes to drill on top of structures, to increase its chances of hitting production in the more structurally controlled objectives. "That lessens our risk, and we're not completely dependent on whether we hit a Bossier Sand or not."

Cross Timbers entered the play in 1998 when it acquired its East Texas properties from EEX Corp. The company's 23,000 gross acres lie mainly in Freestone and Robertson counties, scattered throughout four or five fields. It operates about 80 wells in the area; Freestone Field (in Freestone County) and Bald Prairie Field (in Robertson County) are core holdings.

"When we took over the properties from EEX, we tried a couple of recompletions," says Hutton. "The fields we're in had not been developed in the Bossier. The historical production in Freestone Field is mainly Travis Peak, and the Bossier and deeper zones are wide open for development. Bald Prairie Field was produced from the Cotton Valley Lime, but only a few of the shallow zones were shot there." After rehabilitating some old wells and being pleased with the results, the company started drilling new wells.

Cross Timbers figures its wells cost $1.4 million to $1.8 million apiece, depending on the number of treatments. "We always run an intermediate liner, since we drill to the Lime," says Hutton.

Getting a good frac is fundamental. Cross Timbers has been stimulating its wells with 10,000-barrel water fracs carrying 100,000 to 150,000 pounds of sand at injection rates of 50 to 60 barrels per minute. "Slowly but surely, we've been pressing the pounds per gallon-the amount of sand we can pump with our water fracs. We complete both Bossier and Cotton Valley Sand or Lime, and we use similar fracs in each interval," he says. Each zone is produced for a couple of weeks, then the next zone is treated. The reservoirs are then commingled and the well starts selling gas.

"Our results have been excellent-we've been averaging more than 4 million cubic feet per day actual sales volume for each well that we've brought online."

Ocean Energy Inc. has also become involved in the Bossier play. The Houston-based firm launched a pilot program this year that has evolved into a two-rig drilling program. Its first two wells, one at Mimms Creek Field and one at Nan-Su-Gail, flowed into the sales line at initial rates of 6.1 million and 11.1 million cubic feet of gas per day, respectively.

It has drilled 10 wells so far in the Bossier play. "Currently, we have about 15,000 gross acres in the area, mainly northeast of Dew Field, where the Bossier is normal-pressured," says John Campbell, vice president of exploitation, North America onshore group.

Ocean is a longtime player in the Cotton Valley, Bossier and Travis Peak areas in Freestone County, dating back to acreage owned by its predecessor Seagull Energy. Five Bossier members are present in its fields, and sand thickness ranges from 30 to more than 200 feet, says Campbell. Some of the wells have streaks of 9% to 18% porosity, while other wells might have 200 feet of pay with average porosity of 6%. "We see variation in the quality and thickness of the sands, but overall the sand risk is pretty minimal," he says. "This is a very tight sand, and it requires a high-volume, high-rate frac technique developed specifically for this area."

"We use water-based fracs in the Bossier, although we prefer conventional gelled fracs in the Cotton Valley and Travis Peak. For the Bossier, we find that the water-based treatment reduces the treatment costs substantially," he says.

Ocean's results are encouraging: first-month production from its wells is 4- to 5 million cubic feet a day. The company expects to complete nine Bossier producers by year-end. "We will keep our two rigs going throughout 2001, and we'll drill another 17 to 18 wells next year," says Campbell. "The Bossier play has certainly been an economic boost for this part of East Texas."

The Bossier is even attracting interest from companies with no previous ties to East Texas. Mt. Pleasant, Michigan-based Gastar Exploration Ltd. has acquired a 40% working interest in about 12,000 acres in Leon County in the deep Bossier from GeoStar Corp., Gastar's controlling shareholder.

"The Bossier is at about 16,500 feet in our area. Our sands are deeper, thicker and significantly higher-pressured than in the shelf-edge play," says Victor Hughes Jr., Gastar vice president of finance and corporate development.

The company views its acreage as fairly low risk because it has already been drilled to the zone. In the early 1980s, two wells were drilled on the property. One produced 5 million cubic feet of gas per day from the Bossier before the casing parted and the well had to be abandoned, and the other was not completed because the original operator encountered financial problems.

Engineering firm Netherland, Sewell & Associates recently assigned initial proved, probable and possible reserves of 65 Bcf to Gastar's interest in the leases.

Seismic prospecting is an integral part of the company's plans. "The deeper sands are not as widely distributed as those on the shelf," says Hughes. "We have extensive 2-D seismic, as well as some existing 3-D seismic over our acreage, and we're reworking that. We're also designing a 35-square-mile 3-D program to help us identify our drilling locations." A well could be drilled in 2001, he says.

At the moment, how far the red-hot play can run is anyone's guess. Whatever its final disposition, the Bossier has certainly proved that the U.S. upstream still offers some excitement.

"We've hit fast-forward on this play," says Anadarko's Alman. "And we're fortunate that we're in a time when there's a great need for natural gas development in North America."