Houston-based drilling giant ConocoPhillips is making a play in Louisiana’s portion of the Austin Chalk formation, raising the prospect of a resurgence of onshore drilling activity in the state.
Already EOG Resources, another Houston company, has drilled a test well in the formation, which stretches across Texas through the middle of Louisiana.
The formation had little leasing activity here for two decades until the past year or so.
In that time, a handful of companies — Conoco being the latest with its lease announcement this week — have established positions in Louisiana going from the Texas line eastward through Avoyelles, the Felicianas and beyond Baton Rouge.
“The excitement surrounding it is definitely there and measurable,” said Gifford Briggs, president of the Louisiana Oil and Gas Association. However, the “jury is still out,” he added, on whether the activity will turn into a full-blown resurgence of drilling here. Several variables are at play, such as drilling difficulty, costs and production potential that will be tested with exploratory wells.
EOG Resources, which announced last fall that it had leased 130,000 acres, already has drilled a test well in Avoyelles Parish. The firm on Wednesday said it would not comment on exploration work unless it moves into active development, but Conoco's news is another indication the formation could potentially see drilling activity in the near future.
Kirk Barrell, president of New Orleans-based Amelia Resources, said his firm sold 85,000 acres of leases in the Austin Chalk play to Conoco in December for $87 million. Since then, interest in Amelia's additional 360,000 acres has increased significantly. He said EOG is continuing to lease. Conoco's exploratory wells are expected to be in East and West Feliciana parishes.
Leasing is happening "all over," Barrell said, with Marathon Oil also recently getting in on the action. EOG paid $200 to $300 per acre for a purchase it made about 18 months ago, he said, and recently paid $1,500 per acre for several thousand acres in West Feliciana Parish.
"It's very encouraging to see the quality of companies coming to Louisiana," Barrell said. "If the play works out and it’s able to be drilled and completed economically, it could be a significant situation in the state."
Conoco declined to provide more information on its announcement, but disclosed in a news release this week that “most” of the 245,000 acres it acquired earlier this year are located in central Louisiana’s Austin Chalk formation. The firm said it will drill several exploration wells this year.
PetroQuest Energy from Lafayette is another company that has announced lease purchases in Louisiana’s portion of the Austin Chalk. Briggs said Redhawk Holdings Corp. and Blackbrush Oil and Gas also have positions in Louisiana.
It remains too early to tell whether the recent activity will spur a resurgence of onshore drilling in Louisiana, and whether it will extend across the state. So far, the exploratory well from EOG only provides insight into the area around Avoyelles Parish. But Briggs said leasing also is picking up west of Avoyelles in the larger Master’s Creek and Brookeland fields in central and western Louisiana. Those fields hold the keys to boosting the state and region’s economy, he said.
“It sounds like (Conoco) is interested,” said Eric Smith, associate director of the Tulane Energy Institute. “When they start talking about how many rigs they’re going to be working that’s when I figure out if they’re going to be doing anything.”
While Texas has benefited from a shale formation drilling boom in recent years, Louisiana’s formations — like the once-promising, oil-rich Tuscaloosa Marine Shale, which sits underneath the Austin Chalk — have experienced a dearth of activity. The TMS is one of the most expensive formations to drill in the U.S. Activity fell off when oil prices cratered several years ago and companies looked to cheaper drilling areas elsewhere.
Louisiana industry leaders are hoping Austin Chalk wells will become profitable as companies bring newer technology from the Texas shale plays, and will eventually make drilling in the Tuscaloosa Marine Shale profitable again.
“All these variables are constantly shifting around,” Smith said. “As the technology changes, things that didn’t look so hot before are starting to look attractive now.”
One of the challenges facing the Austin Chalk is that the formation is more difficult to drill in Louisiana than in Texas, Briggs said. That’s the biggest thing that will “keep us from becoming Texas,” he said, as drillers have to work harder to find suitable areas of the formation for drilling.