Investors in Eagle Ford Shale companies may find opportunities looking for companies in the western oil window of the Eagle Ford. Recent encouraging well news is showing that some acreage once thought not to be that valuable may actually be very valuable. The largest acreage position belongs to Chesapeake (CHK). Chesapeake has announced multiple wells with 24 hour initial production rates over 1,000 Boepd. In Zavala County, Texas, Chesapeake has successfully completed the Winterbotham #A-1 well with an IP of 1,487 Boepd. Chesapeake is claiming their Eagle Ford acreage is worth $30,000 to $50,000 per acre. However, other operators in Zavala County have not been as successful as Chesapeake up until now. Apparently the completion technique is key to obtaining good results and the completion techniques that work best in the Western Eagle Ford Shale oil window are somewhat different than those employed in other parts of the Basin.
At last another company has mirrored Chesapeake's success in Zavala. Sanchez Energy (SN) has successfully completed the Mark & Sandra #2H, a well in the company's Maverick project area. The well was drilled to a measured depth of 11,950 feet (lateral length of 5,476 feet), and was completed with a 19-stage fracture stimulation job. Over a twenty-four hour period, the well produced at a maximum rate of 1,041 barrels of oil equivalent per day (BOE/d) with an initial daily production rate of 931 BOE/d. Approximately 97% of the production stream consisted of crude oil. According to Sanchez Energy, "the strong performance of this most recent well, coupled with the continuously improving results from the previously announced wells in this area, demonstrates that the Maverick area (mostly in Zavala) continues to respond positively to both long-lateral horizontal and single-stage vertical completions. With four horizontal and two vertical wells drilled in the Maverick area this year, the 28,500 acre position is substantially de-risked, thereby providing a repeatable, high-margin source of oil production and reserve growth for the Company. Progressive changes in completion practices and tighter spacing have resulted in steadily improving well results and cost reductions."
What is important to note is that Sanchez didn't have initial success with long lateral wells until they changed their completion techniques to those similar to what Chesapeake's. Another company without initial success in Zavala has been Crimson Exploration (CXPO). Crimson is now flowing back the K.M. Ranch #2H well and is also using similar completion techniques as those employed by Chesapeake. Crimson has 6,550 acres in Zavala and Dimmit and this well could derisk that acreage just like the Mark & Sandra #2H well derisked the Zavala acreage for Sanchez Energy. Crimson's joint venture partner is U.S. Energy (USEG) with 4,136 net acres. Derisking this acreage would create substantial value for a smallcap company like Crimson.
Other companies with acreage in Zavala County include Anadarko Petroleum (APC), Newfield Exploration (NFX), Matador Resources (MTDR), and Cabot Oil & Gas (COG). The acreage in Zavala is already proven in the Pearsall Shale for natural gas, in the Austin Chalk for oil, and in the Buda Lime formations. Chesapeake has unlocked the secrets to the Western Eagle Ford Shale in the oil window. Now Sanchez Energy has also figured out how to complete very good wells in this area. The wells in the Western Eagle Ford Shale in Zavala are shallower and somewhat less expensive to drill than in other parts of the Eagle Ford. While it remains to be seen how many other companies can repeat their success, Chesapeake and Sanchez have proven the geology is favorable for potential success.