For several years, the potential of central Montana's Heath shale has been bandied about among Rocky Mountain explorers, and now this intriguing unconventional oil target is being introduced to wider industry circles. "It took a little while for the industry to get geared up on this play, although the idea has been around for some time," says Irene Haas, senior vice president, Wunderlich Securities Inc.

"Now it is teed up, and there are rigs in the basin."

The late Mississippian Heath is a fine source rock, responsible for high-quality oil produced from the conventional Tyler sandstone play. Today, the Heath has become a target in its own right. Endowed with excellent rock characteristics—high organic content, good thickness, brittle lithology, smack-on thermal maturity—the Heath is enjoying a flush of exploratory work.

Counties of interest include Rosebud, Garfield, Musselshell, Fergus and Petroleum, located in a sedimentary basin called the Central Montana Trough. Active operators are an eclectic mix of public and private firms: Central Montana Resources LLC, Cirque Resources LP, Cabot Oil & Gas Corp., ConocoPhillips Co., Endeavour International Corp., MDU Resources Group Inc., Stealth Energy Inc., True Oil LLC and Voyager Oil & Gas Inc. each have noteworthy acreage positions.

"Most of the land base has been locked up already, and there's a good amount of 2-D seismic coverage from the days of Tyler activity," Haas says. Heath exploration is gaining traction, as operators could drill more than 20 wells in the play this year.

"2011 will give us the first solid data points from the Heath to answer some questions," says Haas. "Is it drillable, what completion technologies will work, what is the best portion of the reservoir, what are the potential economics? The Heath is in its very first steps."

An interesting characteristic of the Heath is its shallow depth. The Central Montana Trough was uplifted multiple times, and today the Heath lies just 5,000 feet below the surface. That translates to horizontal wells with total measured depths of around 10,000 feet, and reasonable per-well costs of $3.5- to $4 million. For vertical wells, costs are in the range of $1.5 million apiece.

At present, private operators are leading the drilling charge. Central Montana Resources has already drilled five Heath wells, a mixture of vertical and horizontal tests, on its 580,000-net-acre leasehold. This year, it could drill up to 18 wells, with four to six in Garfield and Rosebud counties, and the remainder in Petroleum and Musselshell counties. The San Antonio-based independent recently permitted three 4,200-foot vertical Heath tests in Petroleum County, according to IHS Inc.

Cirque Resources, a Denver-based independent, recently drilled a projected 8,417-foot horizontal Heath wildcat on the Cat Creek Anticline in Petroleum County. In early May, Cirque applied with Montana regulators for approval for five 640-acre units on the Sumatra Syncline. Three of the proposed tests fall in Musselshell County and two are in Rosebud County. The operator, which holds 108,000 net acres in the Heath, also has staked a 10,405-foot wildcat in southwestern Garfield County, and a 9,664-foot one in Musselshell County, according to IHS Inc.

Furthermore, Casper-based independent True Oil has applied with Montana regulators for spacing units for six horizontal Heath tests in Musselshell County.

On the public company side, experienced unconventional operator Cabot Oil & Gas drilled a horizontal wildcat last year in Rosebud County, on a portion of its 100,000-plus net acres. The company is completing that well.

Canadian junior Stealth Energy drilled a vertical Heath well in 2010 in Musselshell County, which is still in the completion phase.

This year, Endeavor International plans to participate in three to four Heath wells. Endeavor has 85,000 net acres in a pair of joint ventures in the play, including one with Central Montana Resources. In addition, MDU Resources plans a well this year on its 80,000 acres in Garfield County.

"The Heath has all the right parameters, and it appears to be an attractive exploration target," Haas says. "It's now down to the drilling."

Comments