Two years ago, oil and gas companies began placing big bets on the Austin Chalk, a geological formation that many hoped could revive drilling across a large swath of south Louisiana — including areas around Baton Rouge.
Now, with some wells hitting more water than oil, the Austin Chalk’s prospects have become murkier. At least one major player has pulled out, though others still see potential in the play.
In late September, Houston-based ConocoPhillips decided to "discontinue exploration activities" in the Louisiana Austin Chalk, then put its 234,000 leased acres up for a mid-October auction — for which results are confidential.
The company had spent $120 million pretax during third-quarter this year related to its operations. Its portfolio included leases in Avoyelles, East Baton Rouge, East Feliciana, Livingston, Pointe Coupee, St. Helena, St. Landry, West Baton Rouge and West Feliciana parishes.
The biggest issue isn't that the Austin Chalk doesn't produce oil but rather a gap in the technology required to efficiently extract it from the rock without pulling out too much water at the same time.
"We know that we've got oil, the question is how we can get that oil out," Kirk Barrell, president of New Orleans-based Amelia Resources, told a crowd at the recent LSU Energy Summit. "We have a water issue."
For some wells, ConocoPhillips hit 90% water and only 100 barrels of oil per day.
Barrell said he's still confident that better hydraulic fracturing engineering could help the Austin Chalk live up to its potential for oil and gas extraction. Fracking, as the process is called, involves forcing huge volumes of water, sand and chemicals underground. The process widens the openings in the rock so that oil and gas can flow more freely to the surface.
Interest in the Louisiana section of the Austin Chalk — which stretches from Mexico across Texas and through Louisiana's midsection — was piqued when EOG Resources, another Houston-based operator, found oil in Avoyelles Parish in 2017. At the time, EOG Resources pulled out more than 1,120 barrels of oil and 1.16 million cubic feet of natural gas per day.
"That was important to me seeing (EOG Resources) come into the chalk," Barrell said.
Leasing in the formation had dried up about two decades earlier.
EOG Resources, a publicly traded company, declined an interview about its exploration operations in Louisiana.
The Austin Chalk sits 800 feet to 1,200 feet above the Tuscaloosa Marine Shale — another type of formation that had great prospects earlier this decade until oil prices started tumbling in 2014 to less than half the $100 per barrel at the time. The price collapse made somewhat complicated Tuscaloosa Marine Shale wells too expensive to drill so oil producers looked to cheaper drilling formations in Texas and other parts of the country.
The Austin Chalk is proving to be a more fragile fracking operation, though producers were aware of its challenges.
"When you do these high-pressure fracks it's like hitting your windshield with a hammer," Barrell said. "Ideally you'd just like to crack a piece of it but you've cracked the whole windshield. So far, the frack design that was used has not been successful … so it's going to take a range of frack designs to get a strong enough frack to get into the chalk but not get into the water barrier."
For independent operator Sunrise Exploration in Metairie, ConocoPhillips' experiences aren't daunting enough to stop it from exploring the Austin Chalk.
"It was disappointing but I think that the Austin Chalk needs to be treated differently than a shale play," said Brandt Temple, chief executive officer of Sunrise Exploration.
For example, operators could have used too much sand in the fracking operation, which can be overpowering in the more brittle chalk formation, he said.
"We need to try some different completion methods," Temple said, suggesting that it can be done with technology already available.
Sunrise Exploration has about 50,000 acres in the Louisiana Austin Chalk, which includes land in East Baton Rouge and St. Helena parishes that the company has been looking to develop independently or in conjunction with a larger company.
"We have come so far that we are willing to risk more of our money to prove this opportunity," he said. "Everyone is a little bit antsy right now but we need more wells to figure it out."
Likewise, Lafayette-based PetroQuest's top executive sees potential in the Louisiana Austin Chalk.
CEO Charles Goodson suggested that companies drilling the formation have found that below a particular shelf there is often more water than oil but above that same shelf there's a higher percentage of oil and natural gas to be found.
PetroQuest acquired 24,600 lease acres in the play, which includes a well in Pointe Coupee Parish it drilled for testing.
A pilot test hole costs about $7 million. Going back to complete the well could cost another $10 million in general, according to the company. PetroQuest plans to re-enter that test well, drill laterally and frack it after it raises the funds to do so. But it's unclear whether the Austin Chalk is economical to drill when the price of oil per barrel remains well below $100.
"Until we drill our lateral well and frack it we don't know," Goodson said. "At this stage, it's so early in the play that you are looking to determine whether it will be economical at any price. The Austin Chalk in Louisiana so far has had more negative news but it's still very early in the life, you've only had a handful of wells drilled."
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