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Comment by L Davis on June 7, 2011 at 3:45

Arkansas Democrat-Gazette 

Oil companies are snatching up mineral rights on thousands of acres in the old Smackover oil field, which has yielded little since its boom days in the 1920s and ’30s. 

Why the renewed interest? 

Advanced hydraulic fracturing has awakened slumbering oil formations in Texas and elsewhere in the country. 

“This is the biggest thing to happen to U.S. oil in 40 years,” said Raoul LeBlanc, a financial adviser with PFC Energy, a Washington-based oil and natural gas research and consulting firm. “Oil production has been in decline for 30 years, but last year it went up and it will go up again this year.” 

U.S. production peaked in 1970 at 9,637,000 barrels a day. By 2000, the number had fallen to 5,822,000. In 2008, fewer than 5 million were produced, before the uptick in 2010 pushed it to more than 5.5 million, according to the U.S. Energy Information Administration. 

In Texas, the Eagle Ford Shale was once a rich oil field. But in 2009 fewer than 30 well permits were granted in the 22-county area. 

In 2010 that number jumped to more than 1,000, and more than 500 in the first quarter of this year, according to the Texas Railroad Commission, which regulates oil and gas. 

Eagle Ford could produce 420,000 barrels of oil a day — or almost as much as Ecuador — according to LeBlanc. 

The largest oil field in the United States that is being developed with fracking is the Bakken formation in Montana and North Dakota, which produces more than 450,000 barrels a day. Before 2009, the oil in the Bakken field was mostly unreachable. It was there that a geologist first tried extracting oil via fracking. 

“It essentially helped keep North Dakota out of the recession,” LeBlanc said. 

Though fracking has been around for 60 years, in the past decade improvements have been made to the method, allowing highly successful extraction of natural gas from rock formations such as the Fayetteville Shale in northern Arkansas. 

Fracking unlocks natural gas — and now oil — by breaking up rock formations with millions of gallons of pressurized water mixed with chemicals and sucking the minerals out of the ground. 

Fracking is not without its critics, however. Bill Kopsky of the Arkansas Public Policy Panel, a group that lobbied for stricter fracking regulations during the 2011 legislative session, said that it could harm the water supply. 

There are also concerns that the sheer amount of water used in the processes could deplete supplies, Kopsky said. Most of the fracking water in Arkansas ends up in injection, or disposal, wells, never to be reused. 

The drilling success in south Texas has led to an increased number of jobs and economic activity in an area considered one of the poorest in the country, according an economic impact study published by the University of Texas at San Antonio in February. 

“Under modest assumptions, by 2020 the Eagle Ford Shale is expected to account for close to $11.6 billion in gross state product, $21.6 billion in total economic output impact and support close to 67,971 fulltime jobs in the area,” according to the study. 

But that hasn’t stopped companies from exploring different drilling possibilities. 

“Right now, [exploration around the country] is going on like crazy,” LeBlanc said. “Prospectors, drillers and land guys are all out trying to find the next Eagle Ford or Bakken.” 

He said that the new fracking technology and high oil prices make the risk-versusreward ratio favorable, prompting “people to look for all types of new plays.” 

There is little expectation the Smackover formation will produce nearly as much oil as Eagle Ford and Bakken have, LeBlanc said. Geologists suspect that there are natural fractures already in the rock that made it easier to reach the oil in the 1920s, he added. 

In the Smackover field, two companies have been leasing mineral rights for about $275 an acre. An acre in Eagle Ford can go for more than $10,000, but was about $200 before it took off. 

Rob Reynolds, who owns Shuler Drilling in El Dorado, estimates that Alabama-based Pinebelt Energy Resources Corp. has leased about 300,000 acres in southern Union County. 

“I looked at the south half of the county, which is the area where the land professionals are working, and compared it to the whole county,” Reynolds said. He said there is no precise way to know exactly how much Pinebelt has leased in Union County, even by combing land records at the circuit clerk’s office. 

A spokesman for Pinebelt said he was not permitted to say which oil exploration firm he represents or how much the company has leased. 

One company, Shreveport-based Brammer Engineering, drilled a horizontal well in December but it produced only 49 barrels of oil a day, records show. It would take about 400 barrels a day to pay for the $10 million well, LeBlanc said, adding that it could take between 15 and 30 tested wells before geologists determine if the play is feasible. 

Triad Land Services of Tyler, Texas, has requested permission from the Arkansas Oil and Gas Commission to “integrate” a section, or 640 acres, southeast of Magnolia. A majority of mineral rights in one section must be leased to allow drilling. According to Triad’s request, it has obtained that majority. 

Shane Khoury, general counsel for the commission, said the request was made in early May and it would take at least a month before it is considered. Exploration for oil in the Smackover field is in the beginning stages, he said. 

According to Triad’s request, it plans to spend about $10 million on the proposed “There is a significant economical and mechanical risk associated with the drilling and production of the proposed well because the lower Smackover has only been sparsely tested,” independent Arkansas geologist Ken Fritsche wrote in an affidavit. 

Fritsche said that the nearest significant well was drilled in 1982 and produced only If a substantial amount of oil is found, it would be the biggest development in the Smackover field since 1921, when oil was discovered there. Since then, it has been “I’ve heard Smackover called a pin cushion, it’s been drilled so much,” Reynolds He The first major development in the Smackover formation was the Busey-Armstrong No. 1 oil well. It drilled nearly a half mile into the earth before unleashing a big Production hit a peak in 1925 with an output of 69 million barrels, according to the commission. The Encyclopedia of Arkansas said that oil companies were unchecked, allowing oil and natural gas to gush out of the earth like a punctured aerosol can, further depleting the minerals. 

In 1923, the town of Smackover had grown to 25,000 roughnecks and others, many of whom enjoyed the saloons and brothels. As the field played out, the population quickly decreased to one-fifth of its boom size and oil companies turned their attention to fields in Texas and Oklahoma. (The current population is about 1,800.) 

“Lately, it’s been the scrap left over by the major companies,” Reynolds said. “It’s been truly marginal wells.”

 

 

Comment by L Davis on May 27, 2011 at 10:00

  Here is the complete article.  Let me know if you are unable to read it.

           
       Major producer’s presence felt as area oil leases are grabbed up
            By: Allison Gatlin - - Published: 05/27/2011

     

            Quietly, a large independent oil company has been leasing lucrative mineral-rich land in southern Arkansas and northern Louisiana, Shuler Drilling Director Rob Reynolds told members of the El Dorado Civitan Club Thursday afternoon.

      The name of the company and its ultimate intentions are still under wraps, but Reynolds said the potential entrance of a new producer in Union County — where the company has leased approximately 300,000 acres — would be an added economic benefit to the area.

      Total acreage is approximately one million and includes areas in the southern halves of Union, Lafayette and Miller counties, and the northern halves of Claiborne and Union parishes, he said.

      Reynolds said he imagines the company is most likely interested in the Smackover Limestone area, which has been tested, but not yet produced.

      “I think that’s what this present leasing activity has in mind is if somebody can do it and hopefully do it better, it would be one of the best things to ever happen to Union County if it were to come to pass,” he said.

      Two test wells were drilled in 2010 in Lafayette County and Columbia County that ultimately reaped little benefit to the company, Reynolds said.

      The first was a completely vertical well that was eventually plugged following testing. The second, he explained, was drilled vertically and horizontally in the lower part of the Smackover Limestone at a cost of $12 million, but only produced about 100 barrels a day.

      “It was, what I would call an uneconomical well,” he said. “In testing it only produced around 100 barrels a day, that’s a lot of oil for Smackover and El Dorado but it won’t pay for $12 million.”

      It all comes down to tight rock samples in the Smackover Limestone which have caused hesitation among producers unwilling to expend money testing rock that may be too dense to produce, he said.

      An independent producer himself with years of experience under his belt, the bulk of Reynolds’ presentation dealt with the history and fine print of oil and gas production today.

      He touched on the first days of crude oil production in the mid-19th century which has since grown to encompass 33 producing states. Though America might only be the third largest oil producer, the country is the number one consumer and employs the highest number of operators – 17,874 – he said.

      “Because of those independents there are more operators in the United States than there are in the rest of the world put together,” he said.

      Interest in oil and gas has skyrocketed with federal regulation threatening to rain down legislation on production, prices at the pump jumping for drivers nationwide and heavy discussion concerning a complete overhaul of the tax code, Reynolds said.

      Among these interests, Reynolds listed the controversial process of hydraulic fracturing which allows producers to drill oil from tight rocks.

      Skeptics say the process only serves to pollute the water supply, he said, adding that he gives little credence to this criticism.

      “To my knowledge there’s never been freshwater supply contaminated by fracturing,” he said. “Here in Union County, fracturing has been used since 1950. We don’t know the exact number of fracture jobs in Union County, but it’s about 1,000 and we, on the water side, never found any of those fracture products in the water.”

      Probed by questioning, Reynolds also touched on the production of partial or complete natural gas-run vehicles, which he said are created almost exclusively in California and Oklahoma where the infrastructure makes sense.

      Rolling out with these vehicles in other states would be “haphazard and chaotic,” he said, likening it to the competition between VHS and beta video cassettes.

      As natural gas is not a liquid, but actually a highly-compressed gas, to run a vehicle on a combination of oil and natural gas would require two separate tanks to account for the differing pressures, he said.

      Reynolds added that adapter kits are available, but wouldn’t make much sense until a national push for natural gas vehicles and stations was made, and he didn’t imagine the federal government would be successful in those efforts.

      “It runs wonderfully. The octane is about 130, there are no performance issues, it’s a matter of availability,” he said. “Honda has continued to make a vehicle that runs exclusively on natural gas and I think those are going to be isolated in California and Oklahoma City until there’s a national development.”

 

 

Comment by L Davis on May 27, 2011 at 9:08

The counties referenced were Union, Columbia, Lafayette and Miller counties in S AR.  Union and Claiborne parishes in N LA.

 

I tried to copy and post the entire article but it was copy protected and would not copy. 

Comment by North LA on May 27, 2011 at 8:56

Thanks

Comment by L Davis on May 27, 2011 at 7:32

For those of you who cannot access the full article.  It was a talk to the local Civitan Club by Rob Reynolds Director of Shuler Drilling of El Dorado.  A large unnamed indepentent was leasing in S Ar/N LA and that 300,000 acres had been leased out of a total area of about one million acres.  A summary of the Lafayette and Columbia county wells that were disappointing.  The target area was the lower Smackover.

 

Pretty generic and nothing new that I could determine but is the first that has been in the paper.  Hope this helps.

Comment by tresangeles on May 27, 2011 at 4:29

I would like to know more too. Which counties specifically? I don't have a T-S-R map for Union County.

Comment by North LA on May 27, 2011 at 3:37

L Davis,

 

I could only read part of the article and I don't want to subscribe to the paper. Can you give a summary.

 

Thanks

Comment by L Davis on May 27, 2011 at 2:26

The following article was in the El Dorado paper 05/27/2011 about leasing in S AR/N LA.

 

http://www.eldoradonews.com/news/localnews/2011/05/27/major-produce...

Comment by Skip Peel - Mineral Consultant on May 20, 2011 at 15:52

Welcome back, Aubrey.

 

http://www.gohaynesvilleshale.com/profile/AubreyCSandersJr757?xg_so...

Comment by tresangeles on November 29, 2010 at 4:53

Four completions to the Smackover in Union County:
http://aogc2.state.ar.us/WIPE/2010/WklyRep%2011-26-10.pdf

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