In preparation for our upcoming What Lies Ahead Conference on February 4, 2016, we have been combing through oil and gas well production rates analyzing productivity gains per lateral foot in the Permian, productivity losses in the Bakken, and well economics across all the shale plays to continue to refine our outlook on commodity prices and investment opportunities in the coming years. What we did not expect to find was an old play reborn in 2015. As far back as 2005 and 2006, Southwestern Energy (NYSE: SWN) announced it was acquiring acreage in the Arkoma basin to explore and develop the Fayetteville shale, but also mentioned at the time was the deeper Moorefield and Chattanooga Shales. In 3Q 2006, following a couple of vertical tests, SWN drilled its first horizontal well in the Moorefield Shale and in November of 2006 brought that well to market at approximately 0.5 MMcf/d. Compared to Fayetteville shale wells at the time that were seeing gas rates in excess of 2 MMcf/d, the well was a comparable dud.
Since then ExxonMobil (NYSE:XOM), BHP Billiton (NYSE:BHP), and SWN have drilled nearly 6,000 cumulative horizontal wells predominately in the Fayetteville shale. However in 2015 Southwestern has began to revitalize the stacked pay opportunity in the Arkoma basin specifically focusing on the Moorefield shale. Since July of 2014, SWN has completed 7 Moorefield shale wells with an average max monthly production rate of 3,490 Mcf/d compared to an average of 2,556 Mcf/d in the Fayetteville shale (439 wells). The top performing Moorefield shale well has produced over 1 Bcf cumulatively to date.
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While seven wells maybe an insignificant number compared to the hundreds of Fayetteville wells developed to date, it is interesting to note that the top performing wells in the Moorefield shale appear to have been drilled with longer laterals compared to previous wells, and represent two of the top five performing wells over the last 18 months from Southwestern Energy based on max monthly production rates.
With new demand surging and associated gas production on the decline, could the Moorefield shale prove to be another play with compelling natural gas (NYSEARCA:UNG) economics? Or will the play fail the test of time and once again fade to obscurity?
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