Shale plays are the latest rage in the exploration and production industry and dominate the headlines, so this might be a good time to write about non-shale news that emerged during earnings season in the sector. After all, it does get boring reading about areas like the Haynesville and Marcellus shale all the time.
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Meet the Granite Wash
One play that is attracting more and more attention is the Granite Wash area of the Texas Panhandle. It should be noted that although this is not a shale play, the wells are best drilled horizontally using hydraulic fracturing. In April 2009, Forest Oil (NYSE:FST) drilled its first operated well in this area. The well came on line with an initial production rate of 17 million cubic feet equivalent per day. Over the last four months the well has produced at an average rate of 7.8 million cubic feet equivalent per day.
This initial production rate can stand up to just about any well in the Haynesville shale. Chesapeake Energy (NYSE:CHK), which is a major operator in the Haynesville shale, uses an average initial production rate of 14.1 million cubic feet equivalent for its capital planning. This rate is based on 56 operated wells that Chesapeake Energy has drilled on its own into the Haynesville shale. During the conference call, Forest Oil disclosed that they had 91,000 net acres total under lease in the Granite Wash. Another advantage for the Granite Wash area is that the wells contain up to 30% natural gas liquids, which can also be sold into the market.
Wash Better Than Shale
Two more facts that Forest Oil disclosed may make Granite Wash wells even better that Haynesville shale wells. The management is using a 6.5 Bcfe estimated ultimate recovery (EUR) for its horizontal wells here. This is the same EUR that Chesapeake Energy uses in the Haynesville Shale, but Chesapeake's wells average $7.5 million to drill while Granite Wash wells come in at $5.5 million.
Newfield Exploration (NYSE:NFX) is another company developing the Granite Wash. The company has drilled seven horizontal wells since it entered the area in 2008, and its initial production rate averaged 22 million cubic feet equivalent per day for the seven wells.
Don't Forget the Oil Sands
Another area that is still moving forward despite many cancellations or deferrals of projects by some operators, is the Canadian Oil Sands. Devon Energy (NYSE:DVN) is developing a two-stage project in Alberta called Jackfish. The first phase of Jackfish is already complete, and Devon Energy produced 33,000 barrels per day here, close to its full capacity of 35,000 barrels per day. Jackfish 2 is 40% complete, and the company has started drilling wells here to supply this phase when it is complete.
The Bottom Line
Shale plays are not the only game in town, as the exploration and production industry is still moving aggressively in other prolific oil and gas areas in North America, with the goal of profiting from the country's insatiable need for energy. (For more, read Oil And Gas Industry Primer.)
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