Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



This New Oil Play Still Looks Good

Earlier this week, Goodrich Petroleum (NYSE: GDP  ) announced solid well results in the Mississippi portion of the Tuscaloosa Marine Shale. The company's C.H. Lewis 30-19H-1 well achieved a peak 24-hour average production rate of 1,450 barrels of oil equivalent, or BOE. It really was an oil-rich well, as 1,387 barrels of that production was oil, or more than 95%. It was actually one of the best wells that Goodrich Petroleum or its main competitors in the play, Encana (NYSE: ECA  ) or Halcon Resources (NYSE: HK  ) , have drilled to date, as the following slide indicates.

Source: Goodrich Petroleum Investor Presentation (link opens a PDF).

Drilling down into the results
As that slide notes, the C.H. Lewis well was drilled in close proximity to Goodrich Petroleum's Smith 5-29H #1 well, which delivered a peak 24-hour production rate of 1,045 BOE, as well as Encana's Anderson well pad, which had rates as high as 1,540 BOE to as low as 915 BOE. Needless to say, this is a pretty solid result, which bodes well for the company's acreage position in Mississippi.

The result also suggests strong oil-rich growth potential for Encana, which also has a strong acreage position in the Mississippi portion of the Tuscaloosa Marine Shale, as detailed on the following slide.

Source: Encana Investor Presentation (link opens a PDF).

Encana sees this oil play having massive upside potential thanks to the nearly 8 billion barrels of oil, gas, and liquids saturating the rocks underneath Mississippi and Louisiana. Because of this, the company sees the potential for the play to produce more than 50,000 barrels of oil per day in the future, when it enters full development mode. This should yield fairly profitable returns as Encana sees 40%-50% rates of return once the company enters full development mode.

Still waiting on Halcon Resources
It's returns like these that drew Halcon Resources to the play. The company, which is in the process of drilling its first few wells, has amassed a very large acreage position, as the following slide notes.

Source: Halcon Resources Investor Presentation (link opens a PDF).

While Halcon Resources' acreage position isn't all that close to Goodrich Petroleum's most recent well results, the company's acreage does appear to be within the oil producing zones. As that slide noted, both Goodrich Petroleum and Encana have drilled oil wells in and around Halcon Resources' acreage.

Investor takeaway
That being said, Encana, Goodrich Petroleum, and Halcon Resources are still appraising the play. Wells can cost upwards of $14 million apiece because of the depths needing to be drilled. Moreover, there are plenty of areas that still need to be tested, so the opportunity might not be as large as the acreage positions these companies possess. That's why investors in each company need to keep an eye on future well results to make sure these companies don't start drilling dry holes. However, so far, the results from this new oil play still look good. 

OPEC is absolutely terrified of this game-changer
OPEC isn't all that worried about American shale plays. That being said there is an energy technology that has it absolutely terrified. In an exclusive, brand-new Motley Fool report we reveal the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2982325, ~/Articles/ArticleHandler.aspx, 8/29/2015 5:13:20 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Matt DiLallo

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries:

Today's Market

updated 19 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:04 PM
ECA $7.08 Up +0.23 +3.36%
EnCana Corp (USA) CAPS Rating: ***
GDP $0.83 Up +0.15 +22.65%
Goodrich Petroleum… CAPS Rating: **
HK $1.05 Down -0.01 -0.94%
Halcon Resources C… CAPS Rating: **