Standing In Tall Cotton

While Pennsylvania attracts the bigger headlines on single-well, high-rate natural gas production, northeast Louisiana is quietly building its own case as a contender.

The Lower Cotton Valley play, and specifically the Terryville Field in Louisiana, continues to place single, high-rate natural gas wells among the nation’s Top 100, based on 30-day Mcfe production. Memorial Resource Development Corp. now tallies 25 wells in that group, a respectable second to the 36 Pennsylvanian wells Cabot Oil & Gas Corp. has drilled.

Headlines aside, the unfolding story involves a fascinating evolutionary step in the Cotton Valley, which one can argue is the original onshore tight formation stacked play. For 50 years, the play has been a gift that keeps on giving as operators employ successive generations of new completion technology to free tight formation gas out of multiple stacked pay zones in East Texas and northern Louisiana.

About 20 rigs are active in the Cotton Valley Trend, which arcs 250 miles across Texas and northern Louisiana. Terryville Field, site of Memorial’s pantheon of producers, is near the eastern edge. Other activity clusters are in northeast Texas, involving Anadarko Petroleum Corp., Indigo Energy Partners LLP and BHP Billiton Ltd., and in the southwest corner of the Trend, where Devon Energy Corp. and XTO Energy Inc. are active.

Memorial recently allocated $373.8 million for a potential 132,758 net acres in Jackson, Lincoln, Bienville, Claiborne and Lincoln parishes in Louisiana, assuming all options play out. Memorial is focusing on the over-pressured Lower Cotton Valley, stratigraphically one step above the mighty Haynesville Shale. Essentially, Memorial more than tripled its northeast Louisiana Lower Cotton Valley holdings from 61,157 net acres at year-end 2014 to 193,915 net acres as of the end of third-quarter 2015. The recent acreage additions have expanded the company’s Terryville Field holdings by 78%.

Memorial is targeting two Upper Red and one Lower Red liquids-rich intervals in the stacked play with potential targets uphole in the Bossier and Smackover Gray Sand. The Upper Red is the headline generator. Memorial completed 14 wells in the zone during third-quarter 2015 with an average 30-day initial production (IP) rate of 24.9 MMcfe/d, or 3.6 MMcfe/d per thousand foot of lateral. The company also reported results from the Dowling 27-34-HC-1 well with a 40.7 MMcfe/d peak 24-hour rate, reportedly the best 24-hour rate in Terryville Field. Similarly, Memorial completed a two-well Belleville Timber pad during the third quarter, which included one lateral with a peak 24-hour rate of 40.1 MMcfed.

The Cotton Valley is undergoing a transition from vertical well commingled production out of multiple stacked formations which, from the late 1950s to 2008, was the primary means of exploitation, to individual formation harvest after 2013 via horizontal drilling and enhanced completions. Previously, operators targeted as many as 13 zones along a single vertical wellbore. Several of those formations are now individual objectives for horizontal drilling.

In the over-pressured Lower Cotton Valley, the play is experiencing the same uplift from enhanced completion techniques as other tight formation basins around the U.S. Geosteering allows operators to stay within a narrow zone on extended length horizontal laterals. Increased proppant loading, closer stage spacing, and zipper fracs create highly productive completions.

Individual well costs on four well pads are estimated at $11.8 million, though service costs are deflating. The resource potential is estimated at 43 Bcfe per section of original gas in place, or less than half of the 100-plus Bcfe per section in the Haynesville and Utica. However, Memorial’s recent completions suggest those Lower Cotton Valley estimates are too low. The liquids-rich nature of the Terryville Lower Cotton Valley makes wells economic down to $50 oil and $2.50 gas, with the Upper Red capable of 75% IRRs.

The late, great Petrohawk also found the Terryville Complex to its liking, especially when the company woke up one morning in June 2008 to find itself sitting atop a brand new play called the Haynesville Shale. Initially, Petrohawk liked big 24-hour IPs, as did Chesapeake Energy Corp.—and Wall Street. But precipitous declines and reservoir damage followed big rate wells. Petrohawk pioneered choke management, or restricted rate production, in Terryville Field to preserve reservoir productivity in a high-decline basin. High IPs are great for headlines. The reservoir management program after the headlines is what really counts.