A prominent company operating in the Tuscaloosa Marine Shale announced today it’s ramping up production in the oil play, potentially opening the door for other oil companies to do the same after a six-month hiatus due to low oil prices.
Goodrich Petroleum said it’s nearing completion of two wells in Tangipahoa Parish, La. The fracking of the two wells, the B-Nez 43H-1 and the B-Nez 43H-2, is imminent, and they are expected to start producing oil in the next week or two, Goodrich reports.
The company has four more drilled but uncompleted wells in the play, according to a news release. Completion of those wells is expected to occur as early as July and continue through September or October, Goodrich officials said.
The gradual return of local activity has been anticipated, but not all who follow the industry are calling Goodrich’s announcement a sure thing for the future of the oil formation, which covers much of southwest Mississippi and central and southeastern Louisiana.
“I’m not surprised. I’ve been hearing for a couple months now that most companies were going to come back to the play in June,” said Charlotte Batson, CEO of Tuscaloosa Energy Services, a company that promotes development in the play.
Batson said she expects other companies to follow suit and noted that a Halcon well also is in operation near Osyka.
“ Every company with the exception of Sanchez all have field offices here. That suggests they’re beginning to start up operations again,” she said.
However, Liberty Bernell McGehee, who closely follows the local oil industry and writes a weekly newspaper column about it, said it’s unlikely for production to reach the point where it once was, or to expect anything close to full-fledged operations until the price of oil goes up.
“It looks to me like they are staggering production of these wells until they get to the end of the year,” he said. “Sometimes you have to read between the lines to get a good feel for it, but the feeling is that nothing big is going to happen until oil reaches $80 a barrel. Until then, we are very unlikely to see them drill any new wells.”
The wells were drilled last year before the price of crude oil dropped to its lowest level in six years, making operations in the play financially unsustainable.
In January, the price dropped to $46 a barrel. While good news for motorists, the low price of crude led to companies to temporarily suspend fracking operations in the Tuscaloosa Marine Shale, if not abandon them altogether.
Goodrich, Encana, Halcon, Comstock and Sanchez all either left or suspended operations in the region around the same time.
And throughout the U.S. rig counts plummeted to about half of what they had been the year before, when oil prices were nearly doubled.
Analysts had predicted it would take oil prices of $70 a barrel for operations to continue. Since mid-April, the oil prices began to climb back up and have hovered at or above the $60 a barrel mark since then.
Oil was trading at $59.61 per barrel this morning.
Goodrich has acquired 150,000 acres in the Tuscaloosa Marine Shale, making it the second-largest operator in the formation.
Goodrich also has the second-highest production in the TMS, with close to 1.25 million oil barrels to gallon produced, behind Encana’s 2 million, according to the Mississippi Oil and Gas Board.
Encana, which has 200,000 acres in the TMS, barely mentions TMS operations in a corporate presentation it released earlier this month. Instead, the company said it is devoting 80 percent of its capital to explorations in the Permian and Eagle Ford formations in Texas, and the Duvernay and Montney formations in Alberta, Canada, where the company is based.
That’s a major contrast to Goodrich’s strategy. In this morning’s news release Goodrich said it is looking to either sell or seek a joint venture partner for its holdings in the Eagle Ford formation. That’s significant because that formation has been established longer, and per-well operations there cost less compared to the TMS, which some analysts still regard as a science experiment.
