Avalon Shale - West
Texas / New Mexico - Major Oil & Natural Gas Field
What is the Avalon
Shale? The Avalon Shale is a small oil & gas shale field
located in Eddy County, Lea County, and Chaves County New Mexico. According to Chesapeake Energy, the Avalon
Shale extends into Texas. This small shale play is making big news as several companies below drill test wells.
The Avalon Shale is the same as the Leonard Shale, drilling companies use one of the two names when they refer to this area. The Avalon Shale is part of the 1st Bone Spring Formation. The Bone Spring is made up of three different zones.
The Avalon Shale is an oil and natural gas field that is part of the Permian Basin. It lies above in the Bone Spring and above Wolfberry Formations. The Avalon shale is primarily spread across parts of Southern Eddy and Southwestern Lea counties in New Mexico.
The Avalon is comprised of a series of individual sandstone zones which are separated by carbonaceous and shaley siltstones
ranging in depth from 6,500 to 9,000 feet. The sandstone zones require artificial stimulation to produce oil and natural
gas. (Paleohydrology of the Delaware Basin, Western Texas: Overpressure Development, Hydrocarbon Migration, and Ore
Genesis - AAPG Bulletin, July 1, 2000; 84(7): 961 - 974. ).
The
Avalon Shale is slowly becoming developed and should see a lot of drilling action in 2012.
Chesapeake Energy Corp. (CHK) has drilled more than 8 wells
to date on their 120,000 net acres across Texas and New Mexico. They predict that each well can produce 350 MBOE with
an unrisked resource of 200 MMBOE. Chesapeake anticipates operating an average of roughly six rigs in the Permian Basin
unconventional liquid plays by the end of 2010 and plans to drill approximately 50 net wells.
EOG Resources Inc. (EOG)- In the New Mexico Leonard Shale (Avalon Shale), EOG reported continued drilling success on an additional
18,000 acres and, combined with previous reported success on 31,000 acres, has now proven up 49,000 of its 120,000 total net
acre position. The Elk Wallow 11 State #1H has been producing for over 30 days at an average rate of 337 Bopd with 3,070 Mcfd
of rich natural gas. The Elk Wallow 11 State #2H has been producing for 11 days at an average rate of 505 Bopd with 4,770
Mcfd of rich natural gas. EOG has 100 percent working interest in these Eddy County wells.
Anadarko Petroleum Corp. (APC) is currently testing Avalon shale to see if the formation is profitable: Anadarko exited
the quarter with four operated rigs and five non-operated rigs drilling in the Bone Spring horizontal play and one operated
rig and one non-operated rig drilling in the Avalon Shale. A total of 15 wells were spud during the quarter and 19 wells were
completed.
Devon Energy Corp (DVN) has
been building a position in the Avalon Shale play recently. To date, they have assembled 235,000 perspective net acres
in this conensate and liquids-rich gas play. Although they are still in the early evaluation of the play, initial drilling
results indicate an attractive, repeatable play with outstanding economics. The best wells Devon Energy has drilled
to date, have IP-ed at over 500 barrels of condensate per day, 500 barrels of NGLs per day and 3 million to 5 million cubic
feet per day of gas. Well costs in the play run between $3.3 million and $4 million. Devon expects Avalon wells
to have average IPs of 300 barrels of condensate per day, 300 barrels of NGLs per day and 2 million cubic feet of gas per
day in the heart of the play. They expect per-well recoveries to average over 600,000 barrels of oil equivalent. They
believe Avalon shale has great return potential and they plan to participate in 32 Avalon wells by the end of 2010, 20 of
which they will operate.
As of June 30,
2010 Devon assembled more than 700,000 net acres of leasehold targeting the Avalon Shale, Bone Spring, Wolfberry and other
conventional formations. Devon is currently running 11 rigs to de-risk and develop its Permian Basin acreage position.
Avalon Shale Map
Eddy County, Lea County - New Mexico
PetroHawk Energy (HK) - Petrohawk Energy (HK) Expands to the Permian Basin - Petrohawk began building an acreage position in the
Permian Basin in the second half of 2010, and has now acquired or has committed to acquire approximately 325,000 net acres
at an average cost of approximately $1,400/acre with over 90% expected to be operated. The Company's
core position includes acreage in the Midland Basin, where the primary target is the Lower Wolfcamp, and acreage in the Delaware Basin, where the primary targets are the Lower Wolfcamp Shale, Bone Springs Sands and
Avalon Shale.
Petrohawk will allocate approximately $75 million of
drilling and completion capital to drill on its Permian Basin acreage during 2011. The Company plans to run four rigs in the
Basin with 15 wells scheduled to be drilled. Capital spending in this area is scheduled to gradually increase throughout 2012
and beyond with most lease terms providing for a four to five year development window. Hawk Field Services LLC, the Company's
midstream subsidiary, is in the planning stages to address infrastructure issues and opportunities for both Petrohawk and
third-parties.
The Delaware Basin holds three objectives - the
Avalon Shale, Bone Springs Sands and the Wolfcamp Shale, in a gross interval of approximately 3,000 feet. These targets are
found at a vertical depth of between 5,000 and 12,000 feet across the basin. The Company expects a product mix of primarily
condensate and natural gas with significant NGL yield. Horizontal wells are forecasted to cost between $6.5
and $8.0 million.
Climarex Energy (XEC) believes
in the strong potential of the Avalon Shale. They have already seen excellent results their horizontal play in Eddy
and Lea counties, New Mexico. They drilled one horizontal well in the Avalon shale which they are still evaluating but
thus far, they are pleased with the results.
Spectra Energy Corp. (SE) is currently adding new gathering and processing
capacity for Avalon shale volumes being developed now in southeast New Mexico.
During the third quarter of 2010, the Company drilled 64 wells (59 operated) on its New Mexico Shelf assets, which includes
both the Yeso and the Lower Abo, with a 100% success rate on the 32 wells that had been completed by September 30, 2010. During
the first nine months of 2010, the Company drilled 179 operated wells on the New Mexico Shelf and participated in sixteen
additional wells.
On the New Mexico Shelf, the Company drilled or participated in four Lower Abo wells in the third
quarter of 2010, of which one was completed at quarter end. During the first nine months of 2010, the Company drilled nine
operated wells in the Lower Abo horizontal oil play and participated in an additional four wells. In the third quarter of
2010, production from the Lower Abo wells, net to the Company's interest, averaged approximately 2,000 Boepd.
