It’s hunting season in South Texas, where talk of leases fills café conversations in Atascosa, McMullen, LaSalle and Frio counties. The caffeinated conversational zest this season stems from persistent sightings of an elusive multipointed trophy attracting a coterie of experienced gamesmen to the region.

That trophy is the Pearsall shale. Those who have signed leases for a shot at the quarry include large game hunters like EOG Resources Inc. (NYSE: EOG) Chesapeake Energy Corp. (NYSE: CHK) and Cabot Oil and Gas Corp. (NYSE: COG). But no one should overlook experienced marksmen like Magnum Hunter Resources Corp. (NYSE: MHR), Rosetta Resources Inc. (Nasdaq: ROSE) and privately held sharpshooters such as Cheyenne Oil and Gas in Arlington, Texas, Blackbrush Oil & Gas LP in San Antonio and Houston-based Momentum Oil and Gas LLC.

Like annual rumors about a seasoned prize buck, the Pearsall has been sighted everywhere from Maverick County on the border with Mexico on over to Gonzales, Texas, 60 miles east of San Antonio.

By many accounts, including those around trade industry campfires like Hart’s 3rd Annual DUG Eagle Ford Conference and Exposition in San Antonio, Pearsall fortunes will change in 2013 as operators close in on sweet spots near the junction of four Texas counties: Atascosa, McMullen, Frio, and LaSalle.

The hunt for the Pearsall got a boost in June 2012 when Cabot Oil & Gas Corp. signed a $250 million joint venture with Osaka Gas Co. Ltd to begin a two-rig program on 50,000 net acres in Atascosa, Frio, LaSalle and Zavala counties, Texas. That program will expand to three rigs in 2013 and four in 2014, financed by Osaka’s $125 million drilling carry. Cabot has compiled 147 square miles of 3D seismic data in the Buckhorn Pearsall, where it projects a potential 300 locations producing up to 40% dry gas and 60% condensate and natural gas liquids at 1,000 foot spacing straddling the Atascosa/McMullen county line.

Cabot’s first horizontal well, a $10 million Frio County test, produced a 24-hour initial production (IP) of 1,400 barrels of oil equivalent per day (Boepd), roughly 50% oil, out of 11 frac stages in October. (See October 25, 2012 Cabot Oil & Gas Corp Provides Operations Update). The company was completing a second Pearsall well in November with three others under way as part of a six well 2012 program. The company plans 50 Pearsall wells as part of the Osaka JV in 2013.

Cabot’s results compare favorably to Cheyenne Oil and Gas, which has completed three Pearsall tests in LaSalle County that generated an average 1,524 barrels of oil equivalent per day, roughly one-third crude oil. To date, Cabot, Cheyenne and Blackbrush Oil & Gas have produced wells exceeding 1,000 barrels of oil equivalent per day with EOG Resources and Chesapeake Energy averaging about half of that.

Close to Cabot’s holdings, Momentum Oil & Gas LLC has acquired 15,000 net acres of its 20,000-acre target after the private equity backed independent commenced leasing Pearsall acreage in January 2012. The company will drill its first Pearsall test in 2013. Company CEO Rusty Shepherd provided a comprehensive overview of current and historic Pearsall activity at Hart Energy’s DUG Eagle Ford conference in October 2012.

According to Shepherd, the Pearsall, at 10,000 feet, is the lowest of several stacked formation targets in a stratigraphic column that tops out in the Austin Chalk. The Pearsall ranges from 300 to 700 feet thick as it arcs from the Maverick Basin on the west to the San Marcos Arch on the east, enough thickness to create are hydrocarbon resource play.

Historically, the first Pearsall discovery occurred in the early 1960s with commercial production in the Maverick Basin flowing from 26 vertical wells over a 45-year period. The industry shifted focus to horizontal drilling in the Pearsall in 2008, completing the first of 15 Maverick Basin horizontal wells, which averaged dry gas production of 2.3 million cubic feet per day (Mmcfpd) with estimated ultimate recoveries (EURs) of 1 billion cubic feet of gas.

Drilling targeting the Pearsall accelerated in 2012 when operators drilled 14 Pearsall producers outside the Maverick Basin core, including 11 horizontal wells. Operators currently are focusing Pearsall efforts on a narrow strip liquids rich paralleling the Karnes Trough of Eagle Ford fame. The Pearsall sweet spot, according to Momentum’s Shepherd, appears to lie near the junction of Atascosa, Frio, McMullen and LaSalle counties — prosaically named Four Corners. The sweet spot contains more liquids than are found in the Maverick Basin iteration of the Pearsall and also produces twice as much gas as Maverick Basin Pearsall wells, averaging 4.5 million cubic feet of gas per day before adding in liquids.

Momentum came across its Pearsall shale activity the old-fashioned way. It acquired non-core legacy gas production from a publicly held operator and subsequently began looking at the stratigraphic column. Momentum’s May 2011 purchase involved deep rights to 5,000 net acres in Atascosa County’s Fashing Field, which was the crown jewel of Edwards formation natural gas production.The Fashing Field produced 1.2 trillion cubic feet after its 1957 discovery, though no new wells had been drilled in more than a decade when Newfield Exploration Co. (NYSE: NFX) divested the deep rights to Momentum. Momentum noticed a large volume of liquids production surrounding the Fashing Field and began investigating the stratigraphic column, eventually zeroing in on the Pearsall shale.

Pearsall production reflects the Eagle Ford. Leases in the Eagle Ford gas window also produce dry gas in the deeper Pearsall. But Pearsall prospective acreage in the oil window of the Eagle Ford yields condensate or liquids, which is the primary focus of current industry efforts in the Pearsall. Of the 11 non-Maverick Basin tests in 2012, nine generated highly sought condensate and two were oil producers.

Shepherd says the Pearsall is a nuanced play with three major members: the Bexar, the Cow Creek, and the Pine Island. Future development will focus on specific member groups within the Pearsall, mostly tracking along the oil/condensate window of the Eagle Ford shale.

As South Texas large game season gets under way, several marksmen anticipate a 2013 trip to the Wall Street taxidermist if the Pearsall hunt plays out. The Pearsall is a nice piece of lagniappe in a region that will remain dominated by drilling efforts in the shallower — and more economically attractive — Eagle Ford shale.

Consequently, most of the best acreage prospective for the Pearsall is already leased, meaning entry in the future for most operators depends on participating in joint ventures or acquisitions.

Contact the author, Richard Mason, at rmason@hartenergy.com.