Calibre Energy has interesting Overview of Lipan Country Barnett Shale Challenges

Good Overview of Barnett Shale Geology affecting Lipan Country

The presentation puts Lipan Country in Tier 2 of the Non-Core area, and seems to heavily discount the long term economic value this far west of the thick Core Area.

Tier 2. Geographically, this area is West and South of Tier 1. (counties include parts or all of Jack, Erath, Palo Pinto, Parker, Hood, Somervell, etc). This is the riskiest area in the Barnett Shale. Conventional analysis has suggested that much of the Barnett Shale in Tier 2 has the likelihood to produce oil (uneconomic volumes) instead of gas based on the thermal maturity of the Barnett in these areas. This results in lower amounts of gas-in-place and recovery per section than the Core or Tier 1 areas. There is no long-term production performance. Uncertainties surrounding the gas window and the lower resource potential due to a thinner and shallower reservoir make widespread commercial development less certain in Tier 2. These uncertainties increase significantly as the industry tries to push the play even further West and South (into counties such as Comanche and Stephens).

Barnett Shale frac job to be done by B J Services Company on Ator Lease east of Lipan on Hwy 4

B J Serices Company website

Devon rig on Nora Williams #1H 2.5 miles east of Lipan on Highway 4

Rig moved on lease during the week of October 23rd. This 655 acre lease is located within sight of the Ator leases. The Railroad Commission drilling permit was submitted and approved October 13th. Total drill length is 9,000 feet which is the same as Devon's Ator leases just to the west.

Ator Lease drilling completed, Frac jobs pending

Devon reports that the fracing of at least one of the Ator lease wells is likely to occur in November. That well has "frac valve" tops now in place (shown in picture). For the time being, the other well has a different "christmas tree" top until the frac process is to begin. As is normal, estimates of the economic potential of these wells is not being disclosed by the company. Even so, the completion of successful frac jobs are necessary to make a determination.

Ator #1H Gas Well - Drilling underway.

In the right background on the panoramic shot is the first drilled well, the Ator GU #1H, which is waiting to be fraced with a completion unit or rig. The Felderhoff drilling rig is now on the adjacent pad and has begun drilling the Ator #1H.

Ator #1H Drilling Begins

Devon reports that the "drilling" of the Ator GU #1H is finished, and that the Felderhoff #4 rig has moved over to the adjacent Ator #1H pad. The gas potential associated with this first well is not determined yet. The fracing of the GU #1H is likely 2 months off.

Devon is committed to selling the gas to Cross Tex Pipeline who has not yet begun their Ator lease gathering lines. Interestingly, the Enbridge pipeline just across the road will not be used.

Also, the source of water for the frac jobs is not known currently. A deep water well (down 6,000') has been staked as a possibility, but other alternatives are being evaluated.

Ator GU #1H - After earlier problems, drilling of horizontal leg underway.

Devon reports that the drilling of the horizontal borehole is finally underway. Since the Ator GU #1 is a new well in this area, a deep vertical hole was drilled to carefully log and examine the Barnett Shale formation. Subsequently, an engineering problem arose when more than one cement plug failed to hold for the horizontal "kick out." Approximately a week was required for resolution.

Once drilled, Felderhoff's #4 rig will set up on the adjacent Ator #1H pad. The log records from the first well may make the drilling of another deep vertical hole unnessesary.

The extent of the gas potential will not be known until the high pressure frac jobs are completed. This engineering process can take 2 to 4 months to be evaluated and completed.

General Information on the "Frac Process"

Here is some general information regarding the all important frac process of a Barnett Shale well.

The smaller completion rig (sometimes called a workover rig) follows the drilling rig by a few weeks and sometimes longer. During that interval, the company evaluates data required to complete the well and then schedule the frac work. When pipelines are not available, this removes any "hurry" in scheduling the frac.

Once frac job is done, there is usually another couple of weeks of flowback and cleaning out of the well and running production equipment.

Depending on the pipeline infrastructure near the well, it is not uncommon for it to be 150 to 180 days from "spud" (the beginning of drilling) to the sale of gas.

Drilling Underway on Devon's Ator GU #1H in NW Hood County

According to Devon Energy, a portion of the Ator Lease is now pooled with an adjacent 125 acre mineral lease creating the Ator Gas Unit. Devon exercised this pooling option to hold the 125 acre lease which was to expire in September. An amended drilling permit moves the Ator #1H into the Ator GU. The drilling of the Ator #2H will hold the remainder of the Ator Lease, and will be drilled following the completion of the GU #1H.

Felderhoff Bros Drilling Co, Rig #4, began drilling Thursday, August 17th, and the expected completion takes 2 to 3 weeks.

Ator #1H pad location complete, #2H pad underway

Ator #1H pad construction underway

Cude Oilfield Contractors started the 300' x 200' pad for Devon's Ator #1H. Two Cat D8s are moving lots of rock. This lease is located across the road from Enbridge's Lipan Processing Plant from which a new pipeline is being laid toward Weatherford.

Where is Lipan Country? Far NW Hood County, 50 minutes WSW of Fort Worth.

Approx. distances from City of Lipan:
Dennis 10 mi NE
Thrope Springs 14 mi E
Tolar 12 mi SSE
Bluff Dale 11 mi S
Morgan Mill 12 mi SW
Patillo 8 mi W
Santo 12 mi WNW

Drilling Permits NW of Granbury, at Tolar and near to Thorp Springs, Bluff Dale and Morgan Mill

These horizontal gas well drilling permits are within a 10-15 mile radius of Lipan.

1.03 miles SE of Tolar:
Chief has Swaim Unit #1H approved 5/12/06.

7.3 miles NW of Granbury:
XTO has Wilhoit #4H and #3H approved 3/10/06 & 5/20/06 respectively.

3.0 miles N of Thorp Springs:
EOG has Black Ranch #8H approved 6/20/06.

5.7 miles NW of Bluff Dale:
EOG has Houston Ranch #15H approved 6/20/06.

3.0 miles SE of Morgan Mill:
EOG has Yancy Unit #1H approved 6/14/06.

2 Gas Wells Scheduled East of Lipan

Chief Oil & Gas (soon to be Devon Energy) has scheduled the drilling of 2 gas wells in late August and early September.

The "drilling permits" (W1) can be viewed on the Texas Railroad Commission "Interactive Data" online site - RRC disctrict: 7B; County: Hood; Operator: Chief; Lease name: Ator.

The lease is located 2+ miles east of Lipan on the west side of the Gas Plant Road. A Chief representative states that Union Drilling, Inc. is contracted for the wells.

Originally bought by Howell Petroleum of Houston, Chief subsequently acquired this lease. Most of Chief's Barnett Shale properties are now being transferred to Devon Energy.

Oil field activity around Lipan is more evident with the construction of the Enbridge pipeline connecting the Lipan compressor station with Weatherford. Seismic studies have been completed this spring around Lipan by Time Slice Technology, Inc. and Exploration Geophysics, Inc. which mapped the Barnett Shale geological properties for EOG, Chief and others.

A well east of Lipan on the Ward Lease was drilled in 2005 and reportedly encounted significant water problems. The new seismic studies may enable better results. The Barnett Shale in western Hood County is known as being in the "non-core", or thinner, portion of the formation. As a result, the risk associated with water encroachment is greater.

Devon Energy to Acquire Barnett Shale-Focused Chief Holdings

Devon Energy, the most experienced and largest producer in the Barnett Shale field, is buying Chief Holdings. Chief has many acres leased in Lipan Country.

Read Devon's May 2, 2006 press release

Barnett Shale Drilling Continuing in Erath Co (fwst 3-17-06)

EOG Resources March 15th Report at AG Edwards Energy Conference

http://www.eogresources.com/media/slides/AGE_0306.pdf

Pages 9 - 14 of the report address EOG's Barnett Shale efforts in the western counties like Hood and Erath.

Lipan Area Update on Barnett Shale activity

1. What's the status of the EOG and Chief seismic surveys affecting the Lipan township? (NOTE: The illustration at right is of no particular place. Just plucked from the web for interest sake! Looks like a wad of wells!)

2. There's a property just east of town where the 2 year option expires in September. Are there other similar expirations that will drive activity this summer?

3. land survey on a proposed gas pipeline between Weatherford and the Lipan Gas Plant. Who knows more info?