Company optimistic on area oil

The president of a major oil company operating in the Tuscaloosa Marine Shale Formation says initial production signs are promising and likely to result in ramped-up activity in the months to come.

Goodrich Petroleum President Robert Turnham, speaking on a video blog published last week by Oil & Gas 360, said his company plans on drilling two to five more wells this year.

“With continued success you are likely going to see us ramp up that development and run as many as three or four rigs in 2013,” he said.

He said the company operated conservatively in the formation this year “mainly because we wanted to see well results.”

And with positive production news so far, “we very well could take our budget from $20 million to $45 million by virtue of continued success on the play” next year, he said.

Turnham said Goodrich started seriously considering drilling in the Tuscaloosa Shale because “we were looking for another area that would be very similar to the Eagle Ford” shale play in south Texas, one of the nation’s hotbeds of oil activity.

Drilling in both formations involves hydraulic fracturing, in which high-pressure water laced with sand and chemicals is shot into the ground to free oil trapped in underground rock formations.

Gooodrich’s first well to see positive results is the Anderson 17-H, which is one of two wells on Amite County property owned by Rhett Anderson.

“We’ve announced a well result on the Anderson 17-H — a very attractive 72-hour rate of close to 1,100 barrels a day, and we’re extremely encouraged by what we see,” Turnham said. “That’s a great result, and that’s going to lead to further development.”

Turnham said Goodrich has a 20 percent interest in the so-called Joe Jackson well, which is being drilled west of the Anderson wells.

“We’ll maintain our non-operated activity in a handful of wells,” he said.

Turnham said another positive factor about the Tuscaloosa play is the relatively low cost of acquiring land on which to operate.

He said Goodrich’s “acreage footprint” in Mississippi overlaps that of Canadian oil company Encana, which also has an interest in the Anderson wells and others.

“At 132,000 net acres, we have the most leverage of any company in the play relative to our size, so we likely are near the end of our acreage acquisition,” he said.

But Turnham said the cost of leasing land will likely rise in the near future, so Goodrich is trying to secure land now.

“We’re in it at $225 per acre, and if this thing follows the Eagle Ford playbook, you’ll see $5,000, $10,000, $15,000 per acre potential value, so $5,000 per acre is more than our market cap,” he said. “I think it’s more likely that the bulk of our (land) acquisition has taken place.”

Turnham also noted other advantages to operating in the Tuscaloosa play compared to Eagle Ford. Those include the fact that oil produced here is priced off of Louisiana sweet crude markets, which provides an automatic “$15 uplift” in prices per barrel, as well as a royalty burden 20 percent versus 25 percent in Eagle Ford.