One area that the exploration and production industry has been developing for many years that is still fairly unknown is the Selma Chalk formation located in the Gulf Coast area. The Selma Chalk is an upper cretaceous play that produces natural gas. The Selma Chalk has some advantages over other basins being developed in the U.S. The decline curve from wells here are as not as steep as unconventional shale plays, with first-year decline rates of only 52%. The horizontal wells in the Selma Chalk are also lower cost and come in at approximately $2.4 million, with an estimated ultimate recovery (EUR) of 2.0 Bcf. Let's take a look.
The Selma Chalk Drillers
Denbury Resources (NYSE:DNR) is mostly known for its enhanced oil recovery (EOR) operations in Mississippi, but the company also has a significant amount of production from its Heidelberg Field, where it has numerous wells into the Selma Chalk at approximately 3,700 feet. The company was drilling as many as 20 development wells here every year prior to the onset of the recession and collapse in commodity prices. It's possible that Denbury Resources may start up development here again if prices recover.
Penn Virginia (NYSE:PVA) has 29,000 net acres prospective for the Selma Chalk, and about 200 gross drilling locations here. The company also has 155 Bcfe of proved reserves in the Selma Chalk as of the end of 2008. The company moved from a vertical to a horizontal development program in 2007, and will operate one rig to drill as many as 18 wells in 2010.
EOG Resources (NYSE:EOG) also has acreage in Mississippi that produces natural gas from the Selma Chalk, and drilled 26 net wells in 2008, and began its owns horizontal development program as well.
Chesapeake Energy (NYSE:CHK), which is active in most of the major unconventional shale plays in the United States, experiences much higher decline rates for its wells than those that operate in the Selma Chalk. In the Haynesville Shale, Chesapeake Energy is seeing first-year decline rates of 85%, the Fayetteville Shale has 68% decline rates, and the Barnett Shale has a 70% decline rate for the first year as of the second 2009 quarter.
The Bottom Line
The Selma Chalk is an under-the-radar natural gas bearing formation that is being developed by the industry, proving that shale plays are not the only game in town. (Drill down into financial statements to tap into the right companies and let returns flow. To learn more, check out Unearth Profits In Oil Exploration And Production.)
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