04-08-04 Houston's EOG Resources gave more life to the potential Barnett Shale natural gas boom south of Fort Worth when it told investors that it plans to spend $ 1 bn to drill up to 700 wells in the next decade and beyond.
"We continue to be very excited about the potential of this play," said EOG's CEO, Mark Papa, in a conference call with analysts. "This is an awesome opportunity."
Papa said EOG would have three to five drilling rigs working in Johnson County next year. At the rate of a new well every 15 days, the company might drill up to 125 wells in 2005.

EOG's planned investment, along with its recent announcement that it will lease a full floor of the Bank One building, are the latest measures of the economic boon created by the Barnett Shale gas field. A growing number of exploration companies are hiring workers and subcontractors, paying healthy royalty fees to landowners and making bigger tax payments to local governments.
Hallwood Energy has set up a headquarters in Cleburne and through early summer had drilled 45 producing wells in Johnson County. Hallwood has plans for as many as 500 wells in Johnson and adjoining counties.

Tax rolls have already seen a benefit. Denton County got $ 12.7 mm in property taxes from Devon Energy of Oklahoma City last year for the company's extensive Barnett Shale drilling program north of Fort Worth. The company estimates that its Denton County tax bill for 2004 will top $ 24 mm. Similarly, Devon's payments to Wise County are likely to jump to $ 12.9 mm this year, up from $ 7.7 mm last year. Each drilling rig employs 16-18 workers for the round-the-clock drilling period, which lasts 10-15 days.
"The economic impact is hard to gauge, but we have about 100 contractors and several of them are local," said Bill Marble, one of the principals in Hallwood. The companies are paying subcontractors for dirt, gravel, fencing and signs at each well. "We've probably ordered 150 to 200 signs for our wells this year alone," Marble said.

Hallwood has createda stir in the energy sector by bringing in one Johnson County well with an estimated lifetime production of 5 bn cf of natural gas, three to five times the average for Barnett Shale wells. Although Hallwood is a private partnership, EOG Resources is a publicly traded company. Its revelation this year that it had developed nine producing wells near Godley in Johnson County touched off intense interest on Wall Street in the Barnett Shale.
Before that, many sceptics had questioned whether the success of Devon and other drillers north of Fort Worth, where more than 2,400 Barnett Shale wells have been drilled since 1999, could be replicated in the more geologically complicated formations south of the city.
"We're learning as we go along," Papa said. "We still don't know how far apart to space the wells, and we still have things to learn about well completions. We're going to take this slowly and not get into a frenzy."

The Barnett Shale is a formation of hard shale 350 mm years old and 6,000 to 8,000 feet below the Earth's surface. The US Geological Survey says it holds up to 30 tcf of natural gas, enough to supply the United States' demands for a year. Until the late 1990s, drillers considered the Barnett Shale rock impermeable, compared with the limestone and sandstone from which most natural gas is extracted.
But in recent years drillers pioneered by Mitchell Energy, before it was acquired by Devon Energy, exploited the Shale by using hydraulic fracturing -- the high-speed injection of water and sand to crack open the rock -- and horizontal drilling to curve the well casings sideways deeper into the formations.

Papa said that a typical Barnett Shale well might produce at least 1.2 bn cf of natural gas over its lifetime. Each horizontal well costs $ 1.4 mm to drill and complete. The Barnett Shale field is already the largest natural gas drilling play in Texas. Its wells are considered to have lives of at least 15 years, possibly longer with refracturing.
In addition to the hard rock, another problem with drilling south of Fort Worth has been the relative lack of pipeline capacity. That obstacle is expected to be partly relieved by the end of the year with the completion of a 54-mile pipeline by Energy Transfer Partners of Dallas. The line will extend from Cleburne to a gas processing plant in Springtown, northwest of Fort Worth.

EOG Resources and Hallwood will have company in the Johnson and Parker County areas. Devon Energy, which has already drilled 1,600 wells in Wise, Denton and north Tarrant counties, has leased an additional 390,000 acres there.
Quicksilver Resources of Fort Worth has reported leases on 110,000 acres west of Fort Worth, and XTO Energy has 40,000 acres, mostly in southeast Parker County.