Can Austin Chalk Expansion Lead to Revival?

Abstract

Interest is growing in drilling the Austin Chalk formation, with oil and gas companies hopeful that applying the latest unconventional resource development technologies can open a new chapter of expansion in a historically prolific play that dates to the 1920s. Much of the new drilling is in areas of the Chalk that overlie some of the most active parts of the Eagle Ford Shale play in south Texas. Drillers there are taking advantage of the additional stacked play opportunities that can often be drilled with the same rigs and crews they are using in the Eagle Ford and sometimes in the same well. Some operators may have also drilled in the Chalk during the depths of the industry downturn to hold leases and temporarily defer deeper Eagle Ford wells. The Austin Chalk extends from Mexico across south and east Texas and a large portion of Louisiana to Mississippi. The history of the Chalk play has seen several booms, the last one coming in the 1990s with the introduction of horizontal drilling. Cumulatively, the formation has produced 1.7 billion BOE with approximately 9,500 wells having been drilled there. Abundant Resources There is good reason to believe that abundant oil and gas resources remain in the Austin Chalk. The United States Geological Survey released a study of four Austin Chalk-area assessment units (AUs) in 2010 that estimated mean undiscovered resources for the Austin Pearsall-Giddings AU of 879 million bbl of oil, 1.3 Tcf of gas, and 106 million bbl of natural gas liquids (NGLs). Three other AUs were estimated to hold a combined mean 78 million bbl of oil, 2.3 Tcf of gas, and 257 million bbl of NGLs. Among the most active participants in the latest Austin Chalk play have been EnerVest, EOG Resources, Encana, and Murphy. Other companies active in the Chalk include GulfTex Energy, ConocoPhillips, Devon Energy, Marathon, Abraxas Petroleum, and Chesapeake. EnerVest, which acquires, develops, and operates oil and gas fields on behalf of its institutional investors, is the largest producer in the Austin Chalk. The company built a substantial position there beginning with its 2007 acquisition of Anadarko’s holdings in Texas’ Giddings field, which has been producing since the 1930s. EnerVest’s move into the Chalk came years before most other current players. In the Giddings field, as in certain other parts of the Austin Chalk, the formation lies above the Eagle Ford. But Eagle Ford development has been minimal there, compared with core Eagle Ford activity taking place from 20 to 80 miles southwest of the field.