The oil patch is a happening place these days -- and a lot of the activity is directed toward acquisitions, mergers, downsizing and the like.
Combine this focus with lowered company head-counts, and it's not surprising that explorationists often have little opportunity to examine exploration activity on trend or to consider the overall significance of exploratory developments.
With this in mind, M. Byron Miller, research geologist at the Louisiana State University Basin Research Institute, took on the task of reviewing exploration trends in Louisiana. He presented his findings at last month's Gulf Coast Association of Geological Societies annual meeting in Houston.
Oil prices spiraled downward from an average $20.61 per barrel in 1997 to $14.44 per barrel in 1998 before rebounding in the latter half of 1999 to a per barrel average $19.32. Miller noted that during this three-year period, the average annual drilling rig count in the United States declined 34 percent, dropping from 943 rigs in 1997 to 625 rigs in 1999.
The average annual drilling rig count for Louisiana declined 27 percent during this time, with 194 rigs drilling in 1997 and only 141 rigs in 1999, according to Miller. Simultaneously, permits for wildcat wells in the state declined 25 percent, with a total of 141 wells permitted in 1997 versus 106 in 1999.
"A review of the locations of the wildcat wells completed as discoveries in the past three years shows the majority of the discoveries have occurred on the margins of highly productive areas," Miller said, "and many of the discoveries are located along the Louisiana coast in state-owned waters bordering the federal waters of the Gulf of Mexico."
This coastal area is the locale of the still-relatively unexplored transition zone, which until recently had not been adequately imaged in the subsurface using sophisticated
3-D seismic technology.
Miller asserts the decline in wildcat well permits is only indirectly related to lower commodity prices, saying it's more likely the result of a rotation away from successfully explored or highly developed trends and toward less mature areas.
The Austin Chalk trend is a striking example. Wildcat permits for the trend tallied 42 in 1997, dropping to six in 1998 and none in 1999.
When the chalk play in Louisiana kicked off in the early 1990s, operators were quick to snap up both small and vast leaseholds, hoping to duplicate the earlier Texas success stories, such as Pearsall and Giddings fields. But the deep, hostile environments of the Louisiana deposits proved too daunting for many players, and the bloom was soon off the rose.
Still, several new fields were established and extensively developed in the trend, and Miller attributes the sharp decrease in wildcat permits to an aggressive and successful effort to identify and delineate the productive areas.
Areas of Interest
The Wilcox sands in the Bayou State's central regions long have been a popular drilling target, particularly for the smaller independents who dominate this area.
The Wilcox trend is a mature hydrocarbon play, where prospects are generated by traditional subsurface mapping techniques, using a minimum of geophysical data, according to Miller. Drilling targets typically are about 3,000 feet.
It sounds almost like a slam-dunk for the typical seasoned oil finder who plays this turf. Yet the number of wildcat well permits decreased 55 percent in three years, ranging from 27 in 1997 to 17 in 1998 and down to 12 in 1999.
"Small operators exploring with a minimum of modern technology are particularly vulnerable to oil price fluctuations," Miller said, "and the Wilcox trend is an example of rotation away from a mature area that is most likely a direct result of the decline in oil prices."
He noted the shallow Frio trend in the central and south central part of the state had the largest increase in the number of wildcat permits, with two wells permitted in 1997, one in 1998 and 24 in 1999. A single operator, Maoco Inc., permitted 20 wells at drilling depths between 2,400 and 3,000 feet.
According to Miller, prospects in the shallow Frio trend are generally seismically-generated bright spot targets less than 5,000 feet deep. Reservoirs typically are stratigraphically trapped dry gas accumulations with limited areal extent.
"Exploration for shallow Frio targets is technology dependent and price dependent," Miller said, "and sufficient seismic data coverage and sophisticated processing techniques are necessary to identify prospects.
"The high exploratory costs and the small gas accumulations allow for little price latitude in the full cycle economics."
He also identified both the Hackberry trend in southwestern Louisiana and the offshore state waters as other areas of strong interest for operators.
Hackberry trend wildcat permits numbered 10 in both 1997 and 1999, with 16 wells permitted in 1998. Recent exploration in the trend has yielded success rates exceeding 80 percent due to the successful application of 3-D seismic data analysis, according to Miller.
"Both oil and gas reservoirs have been identified by bright spot analysis of 3-D seismic data," he said, "and this technology has dramatically rejuvenated exploration interest and success in the Hackberry trend."
Regarding the offshore state waters, Miller noted this is an area of much exploration activity where there have been several successful wildcats in the Breton Sound and Main Pass areas.
"These are small bright spot-related plays in the Cib Carst section at depths of approximately 8,000 feet," he said, "and 11 successful wildcats have been drilled in the area in the past three years."
Political Battlefields
Despite the fact that industry activity in general looks fairly positive, there are oil patch jitters aplenty over what the future holds for E&P activity of any kind in the Bayou State, given the attitude of the lawmakers.
Charles Goodson, president and chief executive officer of PetroQuest, speaks what's on the minds of many oil finders.
"LIOGA president Don Briggs and some of the other companies and I met with the speaker of the House the other day, and he demanded to know why activity hasn't picked up here as much as everywhere else," Goodson said. "We told him it's state government, state regulations.
"They've built a brick wall around the state with all the fees."
And it could get worse.
Seeking to cover a roughly $270 million shortfall in the state budget, this year's legislative session focused on business -- and particularly the oil and gas industry -- as a primary target to try and wrest more revenues.
Indeed, between the House and the Senate, 10 bills were introduced to try and levy a hydrocarbon processing tax or even to change the Constitution so the tax could be levied in the future. These were only part of a barrage of anti-industry proposals that, if passed, would have substantially escalated the cost of doing business in Louisiana for every segment of the oil and gas industry, according to Briggs.
Among the numerous proposals were bills to repeal the depletion allowance and to increase the natural gas severance tax.
When all was said and done, the anti-industry solons were voted down -- for the time being. LIOGA chairman Bill Fenstermaker cautioned, "We can't afford to rest on our laurels."
In fact, the oil and gas industry did not emerge completely unscathed from the recent legislative skirmish.
The Oil and Gas Incentive Program, which was instituted by Louisiana in 1994 to encourage drilling and was structured to be a win-win arrangement for both the state and the industry, was not renewed and subsequently expired July 1, 2000.