Sugarloaf Prospect >> Current Status at Sugarkane – (December 2009)
To date fifteen modern exploration and appraisal wells have been drilled into the targeted Austin Chalk and/or underlying Eagle Ford Shale formations within the Sugarkane Field. Other horizontal wells are either planned or presently underway. Four of these existing wells are within the Sugarloaf area of interest and eleven wells have been drilled by ConocoPhillips either adjacent to or nearby to the Sugarloaf prospect. Very encouraging initial rates of production have been achieved by wells within the Sugarkane Field which have shown a high condensate to gas ratio significantly improving the field economics.
Eleven of the wells drilled within the larger Sugarkane area have been horizontal wells and four have been vertical. Of the horizontal wells two have been drilled into the underlying Eagle Ford shale formation with the others located within the Austin Chalk. Texas Crude Energy Inc, the operator at Sugarloaf, advise that the cost of drilling the most recent wells in the Sugarkane area have reduced substantially as a result of prior learning with the attendant positive impact on commercial returns. There is currently further activity underway in the adjacent acreage.
Three of the four wells that Eureka has participated in at Sugarloaf are horizontal. Kowalik -1H and Kennedy -1H are tied in to the sale lines and producing at low comparative rates with further completion and stimulation activities required to optimise production rates. The third horizontal well completed earlier in 2009, Weston-1H, has a liner cemented along the lateral length of the well and is suspended awaiting stimulation activities. Eureka has a 12.5% interest in the Kennedy-1H and Weston-1H wells and a 14.33% interest in the Kowalik-1H. Both the Kowalik-1H and Weston-1H wells have been drilled horizontally within the Austin Chalk whilst the Kennedy-1H well was drilled into the Eagle Ford Shale formation.
Recent information continues to support the geological model of the Sugarkane Gas and Condensate field consisting of a localised pool of over-pressured Austin Chalk directly above a regionally extensive over pressured Eagle Ford organic shale with a well established common pressure gradient of 0.8 psi/ft. This can be compared to a ‘normal’ pressure gradient of 0.45 psi/ft, meaning that the reservoir pressure is almost double a ‘normal’ gradient. Gross reservoir thickness across the Sugarkane field is between 180 – 250 ft, which is controlled by at least 8 fully logged historical wells (plus a large number of wells with less than full log suites available), 15 wells drilled in the last 4 years, 2D seismic and partial coverage by a 3D seismic survey. Whilst a distinction has previously been made between the two horizons, they act as a single reservoir and have many similarities including lithology with calcareous (Chalk) interbedding being evident down through the Eagle Ford reservoir, hence the earlier designation of a ‘New Chalk’. Production from the Sugarkane Field has been fairly consistent across all of the recently producing wells. Gas being produced is very rich with 1250 British Thermal Units per cubic feet of gas (“BTU/scf”) and a significant condensate ratio of 150 – 300 barrels per million cubic feet of gas (“bbls/mmscf”).
These factors are important as they distinguish our production from elsewhere within the trend and from other ‘dry’ gas shales with ~1000 BTU/scf gas being produced only. This has a substantial impact on the commerciality of the play with higher BTU gas priced higher than low BTU gas and liquids being considerably more valuable than gas. Using current prices and the condensate ratios observed to date, liquids should account for over 80% of the value of the produced hydrocarbons from the field.