Excitement grows for another South Texas shale

A natural gas drilling site in the Eagle Ford Shale. (Jake Lacey/Houston Chronicle file photo)

SAN ANTONIO — The Eagle Ford Shale is a behemoth oil and gas field in both size and profits.

But it’s not the only shale in South Texas.

Oil and gas companies are hunting hydrocarbons in several other geologic formations including the Pearsall Shale, which so far has 22 producing wells and is driving some mineral leasing in the region.

“It’s early days. The Pearsall is emerging,” said Peggy Williams, editorial director with Hart Energy. “People are working on it and it could develop into something, but it’s not as fully commercial as the Eagle Ford is at this point.”

The Eagle Ford is a 50-mile-wide swath of shale that runs from the Mexican border to East Texas, with more than 5,400 wells permitted so far. It appears to be the mother lode — the largest and most consistent South Texas formation holding the most oil and gas.

But the Pearsall Shale is the rock formation that many say is most like the Eagle Ford. It’s deeper and older than the Eagle Ford, but was also deposited in the Cretaceous Period when much of Texas was covered by a shallow sea.

Eaglebine: ‘The next thing’ for drilling companies

It was long assumed that the Pearsall contained only natural gas until Oklahoma-based Cheyenne Petroleum Co. drilled a Pearsall well in 2011 that produced crude oil. So, like the Eagle Ford, the Pearsall also has “windows” where more oil or more gas can be produced.

The research firm Drillinginfo.com, which tracks wells around the world, has identified 22 wells with Pearsall production — mostly natural gas producers in Dimmit and Maverick counties that were drilled in 2010 and 2011.

But along the county lines in northeastern La Salle and southeastern Frio counties, Pearsall wells have produced more oil.

With much of South Texas tied up in Eagle Ford mineral leases, David Roth, an attorney who heads the energy team at Cox Smith in San Antonio, said the Pearsall is one geologic formation where leases are still being hammered out.

“I would say new leasing south of San Antonio is all Pearsall,” Roth said. “There’s just not a lot of acreage trading hands. There’s not enough open acreage.”

But leases that target the Pearsall can get complicated.

Some mineral leases have depth-severance provisions. After a period of time, a company loses the right to drill anything deeper than has already been produced. That has opened up some ability for dual leases on one piece of land — one company targeting the Eagle Ford, another targeting the deeper Pearsall.

But many leases don’t have a depth-severance clause, and so ongoing drilling in the Eagle Ford “holds” the Pearsall indefinitely for the company operating there.

“A lot of people leased all depths, and there’s a lot of Pearsall that’s sitting there because of this very normal business practice: If I’m an oil company (and) I’m making money in the Eagle Ford, I’m going to keep spending money in the Eagle Ford,” Roth said.

That said, some Pearsall wells have been making around 600 barrels a day, a result that Roth noted companies will take “all day long.”

“It seems that some significant production will come from Pearsall,” he said.

The Houston-based Cabot Oil & Gas Corp. has 43 producing Eagle Ford wells, but plans to drill 15 Pearsall wells this year.

Cline Shale: West Texas shale could dwarf Eagle Ford

In an earnings call last week with analysts, Cabot executives said that the 30-day average production rate for its six Pearsall wells was around 600 barrels of oil equivalent daily, which includes a mix of crude oil and natural gas liquids such as propane and butane. About half of those barrels were crude oil.

Dan Dinges, chairman, CEO and president of Cabot, said during the call, “The Pearsall, it’s still a young play and remains a science project for us.”

Dinges stopped short of giving a range for how much oil it might ultimately recover from its 71,000 Pearsall Shale acres, located in the “Four Corners” area where Frio, Atascosa, La Salle and McMullen counties meet.

Several other companies are also looking at the Pearsall. Magnum Hunter and Marathon Oil Corp. are drilling a Pearsall well in Atascosa County. Goodrich Petroleum Corp. has said it’s monitoring Pearsall wells and has tentative plans to drill a well there later this year. Sanchez Energy Corp. has said it is mapping the Pearsall and thinks a large portion of its Eagle Ford acreage could have Pearsall potential.

But the costs of a Pearsall well — around $10 million by Cabot’s estimates (which include the cost of science) — and the fact that companies have to pass through the Eagle Ford to get there, mean that companies drilling the Pearsall must really want to. Companies must drill about 10,000 feet down and then make a horizontal turn into the formation.

“They’re not a casual investment,” Williams of Hart Energy said. “In this particular area, early results are encouraging.”

View the original article here