Pioneer Natural Resources Company Q1 2009 Earnings Call Transcript May 6 , 2009
“Chris will talk a lot more detail about the Eagle Ford Shale. Obviously, we are in the process of frac-ing this week, next week our first Eagle Ford Shale well in South Texas. Also we will be starting a second well horizontal well in the third quarter”
“Turning to page nine, I am going to pass the call over to Chris, as Scott already mentioned, the Eagle Ford Shale has generated a lot of attention and we thought it would be a good idea to have him discuss all of our South Texas operations with the focus also on the Eagle Ford.
Chris Cheatwood
All right. Thanks, Tim. As Tim said, in most of comments I will be talking about the Eagle Ford this morning. But I think it’s important that we not overlook what we have accomplished in the Edwards reef trend that directly underlies with Eagle. Also, I will provide this low historical perspective the database that we have in the Eagle Ford.
From 1997 through 2005, we drilled around 80 horizontal wells in Pawnee field that produces from the Edwards. We more than doubled the reserves in the field during that time and grew production from under 10 million cubic feet per day to over 50 million cubic feet per day. Because of our results and what we learned upon, we began taking up trend acreage in mid-2005 along the Edwards reef play and acquired over 300,000 acres that we still hold today.
In 2006 through 2008, we shut over 900 square miles of 3-D seismic, drilled around 75 wells mostly horizontals and grew production in Edwards outside Pawnee during this time from the previously mentioned 15 million cubic feet per day to over 120 million cubic feet per day. These are gross numbers that I am quoting here. As shown on the slide, that resulted in Q1 ’08 to Q1 ’09 production growth of 28%. Also because of this drilling campaign, we currently have an inventory of over 200 Edwards’ locations to drill. As we were drilling the wells in the Edwards play, we regularly had to flare gas as we drill to the Austin Chalk and the Eagle Ford formations.
We became very interested in the shale formation and gathered information on them as we drilled our Edwards wells. Combining data from the lots and coursing these wells with our expensive 3-D seismic has given us a very good picture of their potential overall acreage. In late 2008, we drilled our first well that has the Eagle Ford formation in Dewitt County. We got a 180 fleet of lower Eagle Ford in the vertical well, and then drilled a 3,000 foot lateral. Completion of the lateral was deferred, so we could incorporate the rock property data from the core. The completion should be done in the next couple of weeks. We will be drilling an 8-stage frac over that 3,000 foot lateral.
We are planning to drill a second horizontal well with Eagle Ford on our acreage in the third quarter. This well will be approximately 75 miles south of the first well. The distance between these wells I think gives you an idea of the scale display across our acreage position. We had plans for a larger drilling campaign, but the world has changed significantly in the last year and accordingly as you heard us discuss before, we reduced our capital expenditures across the company. Because of this, production from our South Texas assets is expected to decline in 2009 about 5% relative to ’08.
Turning to slide 10, I will now talk about Eagle Ford play specifics. The Eagle Ford is a calcareous organic rich shale that overlies our Edwards reef play over our entire 300,000 plus acreage position as shown on the map. It ranges in depth from around 10,000 feet in the Southwest to around 14,000 feet in the Northeast. The thickness ranges from 120 feet wet to 250 feet wet. The good average thickness to use and calculate volume metrics is around 200 feet. The effective porosity averages consistently across the area of around 10%. The formation is slightly overpressured with the pressure radiant on 0.65 to 0.7 psi per foot.
One of the most intriguing features across our acreage is the fracturing of the Shale Ford – Eagle Ford in Austin Chalk formations, because we essentially have total 3-D seismic coverage on our acreage, can see fracturing in shallower Eagle Ford and Austin Chalk formations, both on raw seismic data and especially from coherency process. Most of our previously drilled Edwards well had strong mud log shows which frequently require gas while drilling throughout the lower Austin Chalk and Eagle Ford formations. This extends our gas column in many instances throughout the Edwards, Eagle Ford and lower Austin Chalk. The magnitude is a natural fracturing of individual well production that recovers, it is difficult to predict until we get multiple test, but it is well known in these types of plays that mother nature's contribution can be far greater than man made horsepower. This could be a great benefit to us both from well performance and reduced in completion cost.
As stated earlier, we have drilled around 150 horizontal wells since 1997. Because of this, we feel comfortable that drilling and completion cost in the long run will average around $6 million. Wells during the initial phase have planned additional cost for science and will probably over designed the completions on the first few wells, but I am confident in our process long term. Most of the questions we feel that today as Frank alluded to earlier would sense how Eagle Ford on our acreage compares to the new discovery by Petrohawk in La Salle County. You can see the location of their acreage on the map relative to our. Their play is slightly different and it is concentrated basically of the Edwards reef trend. They have completed four wells to date and are drilling two more at this time.
On the next slide, I am going to show you well (inaudible). My comments will be brief and you can draw your own conclusions because I think the data speaks for itself. A cross-section on slide 11 shows Petrohawk’s Dora Martin well and La Salle County on the left. This well is a strong producer in the Eagle Ford and next to it are two wells on our acreage. The well named Pioneer 1 on the right is a vertical log on the well where we drilled our 3,000 foot lateral and that well is currently complete. It's important to note that this well is located over 125 miles northeast of the Dora Martin.
The well Pioneer 2 in the center is a vertical log near the location where we will drill our second well later this year. It is located over 50 miles from the Dora Martin well. All three lags, on all three lags the curve on the left is (inaudible), the center curve is the decreased activity and the right curve is density porosity with density porosity greater than 9% highlighted in pink. I am not sure on the mud loss because I don’t have one on the Dora Martin, but there were very strong gas shows throughout the Eagle Ford in both of our wells and I am sure on merits as well. Also shown is the location of the core taken in our first well.
On the right is a table comparing published data by Petrohawk combined with lag calculated and core data to compare the three wells in areas. I think the data from both the lag and new tables showed all three to be very similar. So I hope this gives you a relative comparison, the one you’ve been looking for. Our next step of course is to confirm this with a couple of well test. So to conclude today, I would say our South Texas acreage is fulfilling our expectations in the Edwards reef play and the Eagle Ford Shale looks very promising. All of our data supports what you’ve heard from us so far about the new play. Also, it indicates our wells to perform similar to the current producers in La Salle County. I look forward to discussing this again with you in the future when we have some shale test results and some higher gas prices.
I will turn it back now to Tim to talk about Alaska.”
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