Hurricanes Katrina and Rita double-punched South Louisiana's oil and gas operators. Swamped fields, storm-tossed rigs and busted pipelines starkly revealed the vulnerability of one of the Pelican State's most crucial industries.

That said, recovery of the oil and gas industry across Louisiana's coastal parishes is close to complete. After more than 18 months, properties that haven't been restored are mainly those that were already marginally economic.

Reality is that South Louisiana offers a range of attractive opportunities, especially to independents. This is indeed a mature region, but its geologic complexity ensures that oil and gas accumulations still remain undiscovered. And these accumulations are in conventional hydrocarbon reservoirs, with outstanding porosities and permeabilities, in a region that is interlaced with processing, marketing and transportation infrastructure.

The sizes of these opportunities may not be meaningful for the largest firms, but for small and midsize independents, it's a place they can thrive.



From South Texas

Corpus Christi, Texas-based private firm Manti Resources entered South Louisiana in 1997. Prior to that time, the company worked solely in South Texas. "We used have a pure engineering focus, employing the latest technologies to identify and monetize latent potential in mature fields," says Gary Mize, vice president.

After several years, Manti realized these types of exploitation opportunities had largely dried up in South Texas. It looked about for fresh areas, and South Louisiana rose to the top of the pile. The region's stacked pays and high-rate wells appealed to Manti.

"Plus, we love amplitude plays and they seem to work well there."

So, the exploitation company moved into South Louisiana, and in the process morphed into an exploration firm. In addition to South Louisiana, Manti began to explore along the entire Gulf Coast, inland and offshore. It retains its develop-and-sell strategy-Manti constantly cycles properties so that it stays small and nimble. "We don't accumulate assets. Usually we sell to midcaps that want predominantly producing assets with some residual upside," says Mize.

One of its first Louisiana projects was in Jefferson Davis Parish. Manti acquired a one-third interest in dormant Thornwell Field, a 1956-vintage accumulation. The company, which relies heavily on 3-D seismic to reduce risk, acquired a 125-square-mile 3-D survey over the property. It drilled 14 successful wells in the abnormally pressured amplitude play and built production to a peak of 78 million cubic feet and 3,200 barrels of oil per day. The company sold its interests in Thornwell to Denbury Resources in late 2000.

Another major Manti project has been in the Lake Borgne (in St. Bernard Parish) and Chandeleur Sound (in state waters) regions. The company kicked off activity in 2001, when it acquired 825 square miles of 3-D. No wells had been drilled in Lake Borgne for 10 years prior to Manti's entrance.

"This has been a bread-and-butter project for us for the past five years," says Mize. The shallow, normally pressured wells cost $1- to $1.5 million dry, and are on seismic amplitude anomalies. Manti invested $100 million and drilled 57 wells with a 65% success rate. Peak production reached 155 million per day.

Manti's partners in the project are Tri-C Resources, based in Houston, and Sunbelt Energy, based in Lafayette, Louisiana. The company has sold off chunks of its production to various parties, but continues to operate eight wells that produce into two platforms in Lake Borgne, and four wells that produce into two platforms in Chandeleur Sound. This year, it has scheduled several wells in the southern portion of Lake Borgne.

A brand new project the firm is kicking off is Bully Camp in Lafourche Parish. Bully Camp is a 1940s-era salt-dome field that had been lightly drilled and developed. Years ago, a major donated the surface lands to the state, and Bully Camp is now a wildlife refuge.

"More often these days, the good opportunities that still exist are found in areas such as wildlife refuges or nature conservancy lands," says Barry Clark, reservoir engineer and project manager. "These areas obviously require a lot of time and effort, from negotiating the deals through every phase of the project, to ensure full regulatory compliance and profitability."

Manti now plans to shoot a 125-square-mile 3-D survey over the properties. Because it is marshland, costs are expected to be about $100,000 a square mile. That project will begin this spring, says Clark.



Leeville Field

Then again, Manti has not forgotten its roots in field rejuvenation. The company has an active program at Leeville, one of South Louisiana's vintage salt domes.

Leeville was discovered in southern Lafourche Parish in 1928, and hundreds of wells were drilled on and around the dome on 2-D and subsurface data. In 1997, a major shot a 3-D survey across the field, which produces from 45 reservoirs at depths from 1,400 to 19,000 feet, but did little with it. The major eventually divested Leeville to Houston-based EnerVest Management Partners, and Manti joined forces with it in 2004.

Privately held, Houston-based Goldking Energy Corp. has since acquired the EnerVest interest, and now operates Leeville's production; Manti operates drilling and workover activities. To date, Leeville has produced 125 million barrels of oil and 300 billion cubic feet (Bcf) of gas from wonderful reservoirs. Recoveries are exceptional, in the range of 500 to 750 barrels per acre-foot.

Manti has drilled 10 wells during its tenure at Leeville and has scored a 70% success rate and some amazing finds, including several million-barrel wells. It has raised daily production from 500 barrels of oil equivalent (BOE) to 2,600 BOE, about 80% of which is light-gravity oil. Its tests, which usually encounter high pressures, are in the 10,000- to 14,500-foot depth range. Completed wells run $3- to $4 million each.

"The largest driving force in our success has been the 3-D seismic," says David Habachy, reservoir engineer. "The 3-D has shown us passed-over reserves, additional fault blocks and additional exploration potential."

The company is working off a decade-old 3-D shoot, but the data is depth-migrated and Manti is applying the newest geophysical reprocessing technologies to scrub prospects from the volume, says geophysicist Tom Medary. "This salt dome is very complex-it has unconformities and faults, correlations that aren't clear, and wells that behave badly. By figuring out all those problems we find new places to drill."



Going forward

As Manti has grown increasingly comfortable in South Louisiana, it has ventured in more exploratory projects. The firm has moved into the deep Miocene, and has built an inventory of projects that feature drilling depths of 19,000 feet and dry-hole costs of $10- to $15 million.

"Unlike the shallow amplitude plays-singles-these deep prospects have home-run potential. So far our success rate is 50%," says Mize.

Manti develops these prospects itself and in joint ventures with prospect-generating companies such as Sunbelt Energy and Houston-based Catapult Exploration. One JV is with partners LLOG Exploration and BTA Oil Producers. In that project, the partners fund one of the generating companies to work 3,000 square miles of 3-D data. Another, which Manti funds alone, also generates South Louisiana prospects and reviews outside deals.

"Two years ago we wouldn't have even considered drilling a 19,000-foot well, and now we have a whole inventory of them. To find plays that aren't washed up, we have to go to these kinds of depths," says Clark.

This year, Manti will spend $60- to $70 million to drill 25 to 30 wells in South Louisiana, and it will operate the majority of them. Its target is to reach net production of 50 million cubic feet of gas and 3,000 barrels of oil per day from the region by the close of 2007.

"We have seven different prospects now in different stages of maturity," says Mize. "Certainly the opportunities are not infinite, but our existing inventory will keep us busy in South Louisiana for at least another five years."



Hidden potential

A phenomenal story of Louisiana's hidden potential can be told by Houston-based Swift Energy Co. The firm operates Lake Washington, a salt-dome field that was discovered more than 70 years ago. The company purchased the Plaquemines Parish field in 2001, after production had declined to 750 BOE net per day and proved reserves had been whittled to 7.7 million BOE.

At the time Lake Washington was discovered, South Louisiana's onshore, near shore and inland water areas were prime fishing grounds for major oil companies. They sent teams of geophysicists, armed first with refraction and later with reflection seismographs, to prospect for salt domes. Prolific discoveries soon spanned the southern tier of the state.

The majors didn't start to let go of these grand old fields until the late 1990s and early 2000s, when production had dwindled to insignificant levels.

At last, independents such as Swift had the chance to try the latest technologies on some of these care-worn assets. After its purchase of Lake Washington, Swift spent the next 4.5 years redeveloping the field. It started its campaign with traditional geological techniques such as mapping and well correlations; later it shot a 54-square-mile 3-D survey across the property.

Drilling technologies such as measurement- and logging-while-drilling were helpful, along with oil-based mud drilling in certain applications. Gravel packing made a tremendous difference in well performance in the shallow, high-quality reservoirs.

Today, Lake Washington is making an awesome 20,000 BOE per day. Swift is now the largest crude-oil producer in the state of Louisiana, and it's also in the top handful of natural gas producers. And year-end 2006 proved reserves at Lake Washington are more than 40 million BOE.

"South Louisiana is my favorite place in the world these days," says Bruce Vincent, president. "Its conventional plays have been economic for decades, and with today's higher prices and advances in technology, they make for even better opportunities."

Building on its results at Lake Washington, Swift added two more salt-dome fields to its portfolio in late 2004: Bay de Chene in Lafourche Parish and Cote Blanche Island in St. Mary's Parish.

Last year, Swift bought five more fields from BP America Production Co.-Bayou Sale, Horseshoe Bayou and Jeanerette fields, in St. Mary Parish; High Island Field in Cameron Parish; and Bayou Penchant in Terrebonne Parish. All are operated by Swift except for Bayou Penchant.

With its recent purchases, the company has built a very substantial position of existing fields that includes processing facilities, market access and held-by-production acreage. Complementary to that, Swift has been acquiring 3-D seismic data sets in and around its properties, and merging those datasets together. At present, it has 4,000 square miles of South Louisiana data, an invaluable asset for its field developments and for evaluations of neighboring deals.

"These salt-dome fields are all in different stages of development, and we think we have opportunities in each similar to those we developed in Lake Washington, although not necessarily of the same scale," says Vincent.

This year, Swift will spend at least 50% of its budget of $350- to $400 million in South Louisiana. Lake Washington will account for a large chunk of that money. There, the company plans to add another 10,000 barrels of production capacity to its infrastructure. Currently, it has three barge rigs operating in the Lake Washington area and two at Bay de Chene. Swift also plans wells in each of its other Louisiana properties.

"We're very diversified now with eight fields, and each field is in a different place on its growth curve," says Vincent. "We're excited about our new areas and we're really looking forward to our 2007 drilling program."



30,000-foot test

For more than 15 years, The Meridian Resource Corp. has worked South Louisiana. Today, the Houston-based independent produces some 62 million cubic feet of gas per day from the region, nearly 100% of its production. The company has drilled more feet of hole in the state than any other small independent, and it has invested on the order of $1 billion there.

"We've been exploring South Louisiana for many years," says Joe Reeves, chairman and chief executive. Beginning in the early 1990s, Meridian shot and acquired 3-D seismic, and it has continued to place heavy emphasis on seismic prospecting. Since 1995, Meridian has processed its data in-house, an uncommon ability for a small firm. "We have our own proprietary processing algorithms," says Alan Pennington, vice president.

The company further enhanced its database when it purchased Shell Oil Co.'s South Louisiana properties in 1998. At present, it has amassed more than 8,000 square miles of 3-D data throughout the southern parishes. "Across the entire state, from east to west, we develop prospects based on 3-D seismic," he says.

Since 1992, the company has been pushing into deeper strata. "We still see some prospects at depths as shallow as 11,000 feet that are available, but we're now generating prospects down to depths of 30,000 feet," says Reeves.

Indeed, Meridian's Archtop prospect in St. Bernard Parish is a four-way closure the company plans to test to 30,000 feet in Jurassic Cotton Valley. Projected spud for the test, which offers reserve potential of up to 5 trillion cubic feet of gas, is 2008. The company expects to spend the coming year in pre-drill work, and then 300-plus days to drill the wildcat.

Archtop lies in the company's Biloxi Marshlands area. This major exploratory test will cost $60 million dry, a huge sum but only a slice of what an offshore well of similar depth would run. The gargantuan target offers a very large closure, imaged by 3-D seismic.

The Archtop well will be the first Cotton Valley test in this dip position in onshore Louisiana. If successful, it will extend by 30 miles a prolific trend of very thick Cotton Valley pay in southern Mississippi. The company projects that more than 8,000 feet of objective section from the Cretaceous through Jurassic could be encountered in this prospect.

"We have offshore-like potential in an onshore location, without the cost or cycle time," says Mike Mayell, president and chief operating officer. If the well is successful, Meridian says it could be on production within three months. That's because the company operates 30 shallow Miocene producers in the area, with attendant infrastructure.

Naturally, Meridian has a portfolio of more traditional properties in Louisiana. It is drilling a prospect now in the Hackberry sands in the southwestern corner of the state; it recently made a nice well at its Weeks Island Field in Iberia Parish. That old salt dome has produced more than 70 billion cubic feet of gas from discoveries Meridian has made since it took over operations in 1998.

Nonetheless, most of Louisiana's southern parishes have been shot with 3-D, and those volumes have been worked two or three times already. "Within those sets of data, South Louisiana is certainly becoming more mature," says Mayell. "We see fewer opportunities that are of the sizes we like."

Simultaneously, costs have spiraled upward. Wells that Meridian could drill five years ago for $5 million currently carry $15-million price tags. Some of the run-up is hurricane-related, as prices for tugs and barge rigs have surged exponentially, and some is due to robust activity levels across the whole industry. Insurance prices have shot up as well.

Still, thanks to its marvelous database and deep experience, Meridian plans to keep a footprint in the state. "We will protect and continue to expand our investments in South Louisiana, but we aren't going to make that our steady diet," says Reeves. To balance its portfolio, Meridian has recently moved into out-of-state plays such as the Austin Chalk in East Texas, Frio and Vicksburg in South Texas, and Hunton in Oklahoma.

In conclusion? "There are a lot of difficulties in South Louisiana, including really high costs, taxes and royalties, but there are very few other places we can get such high returns," says Mayell. "The rewards for success are stunning. That's what keeps people interested."



Bayou Postillion

South Louisiana has been a part of Penn Virginia Corp.'s business for the past three years, says Baird Whitehead, executive vice president of the Radnor, Pennsylvania-based company. "We saw that there were still things to do in South Louisiana, and we liked the upside." The company has focused on Miocene plays, from 10,000 to 20,000 feet in depth.

"There are various degrees of size, risk and cost within that range, and we try to expose ourselves to prospects across that spectrum," he says. The company prefers to keep risk in check by holding its working interests below 50% in wells in the region.

Penn Virginia owns about 3,700 square miles of 3-D data in the state, and it both generates its own prospects and takes outside deals. "We tended to take more outside deals in the past, but today we generate more than half of our prospects in-house," he says. Most of its 2006 wells were Penn Virginia originals.

An internally generated prospect that has been quite successful for the company is Bayou Postillion in Iberia Parish. Penn Virginia sold half of its interest to Austin-based Brigham Exploration Co., which operates the drilling phase of the project and Penn Virginia operates the production. The 11,000-foot wells run about $5- to $7 million to drill and complete. The partners' Cotten Land #1 encountered approximately 34 feet of pay and is currently producing 14 million cubic feet of gas per day, gross. "This ultimately could be an overall 100-Bcf discovery, on a gross basis," says Whitehead.



The Laphroaig prospect in St. Mary Parish is another example. Penn Virginia internally generated the deal, and brought in two other companies as partners. The operator attempted a completion after the well was drilled to a true vertical depth of 18,412 feet. That was not successful, and it then drilled deeper to a TVD of 19,060 feet. In the deeper section, 56 net feet of hydrocarbon-bearing sands were encountered.

Penn Virginia had a 25% carried working interest in the initial well, and it elected to go non-consent on the first attempted completion and on the deepening. "We have rights going forward in the prospect, if additional wells are drilled," says Whitehead. "Ultimately, this could be a significant discovery."

This year, Penn Virginia plans to drill between five and 10 wells in South Louisiana, including two offsets at Bayou Postillion.

"Even taking into account geologic risk, at almost any gas price it still makes sense to explore South Louisiana because of the types of fields we can find," says Whitehead. "When it works, it works very well, and it will continue to be an integral part of our overall exploration strategy."



3- to 5-Bcf targets

Houston-based independent Whittier Energy Corp., which recently agreed to be acquired by U.K.-based Sterling Energy Plc, has operated in South Louisiana since 2002. "We decided to work the coastal area from the Rio Grande to the Mississippi rivers. Because we were a small company, we didn't want to get too spread out," says Dan Silverman, chief operating officer.

The multiple targets and abundant infrastructure in South Louisiana attracted the firm. It also appreciated the excellent service base in the state, and the strong experience level of those personnel. Whittier decided to confine its operations to dry land, again in deference to its size.

Its first foray into South Louisiana was in Beaver Dam Creek Field in St. Helena Parish. The six-well property produced 300 barrels of oil per day, and the buy gave Whittier a foothold in the state. The following year, it bought an operated interest in Rayne Field in Acadia Parish. That 1950s property produced from 40 different sands in 30 wells.

More purchases followed, including interests in Cut Off and Coffee Bay fields in Lafourche Parish, Duson in Lafayette Parish and Kings Bayou in Cameron Parish. Whittier's acquisition of Rimco Production Co. in 2005 brought it a full exploration team as well.

"There is so much in South Louisiana that makes perfect sense for a company our size," says Silverman. Lots of 3- to 5-Bcf, one- to two-well targets are available onshore. Whittier has drilled four to six such prospects annually for the past few years.

At present, the company has a rig working on a five-well package. Most of its prospects are 10,000 to 13,000 feet in depth and normally pressured. In 2007, a typical completed well in the deeper end of that range cost $3- to $3.5 million.

"These are wonderful targets for us, and very economic," he says. Whittier's success rate has been excellent, in the vicinity of 80%. This record has been attained thanks to 3-D seismic, both acquired new and purchased off the shelf. "We like to pick around the edges of established fields, and that's one reason our success rate is so good," says Silverman. "We're not drilling high-risk projects."

Unusual for a company its size, Whittier has a full land department, with two degreed title attorneys on staff. It's been an advantage for the firm, which has been successful at picking up acreage on its prospects. "Leasing has been competitive, but we are still getting most of what we need," he says.

At year-end 2006, Whittier's total daily production was 18 million cubic feet per day, 26% of this from South Louisiana. The region accounted for 35% of its estimated reserves of 50 Bcf equivalent. This year, the company expects to spend a third of its $39-million budget to drill 14 wells in the Pelican State.

"South Louisiana is a good place to start a business."

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