Welcome Australis
Things have been slow in the Tuscaloosa Marine Shale for some time now. Last summer there were signs of life that turned out to be solely related to Halcon fracking its last two previously drilled wells. Later in the summer and into the fall, there was a little flurry of leasing in the “sweet spot” of the TMS.
Since then, not much has happened…just rocking along….until this week when it was announced that Encana, the Top Dog in the TMS, sold out its producing wells in the TMS to Australis Oil and Gas effective with November 1, 2016 production. Though Australis will take over operation of the TMS wells when this transaction is completed Encana TMS personnel in the field will be offered jobs according to the company's February 28 news release.
https://thewest.com.au/business/plenty-of-takers-for-australis-shale-play-ng-b88400890z
Here is some additional information from a September 2016 presentation by Australis Oil and Gas. Both articles mention an association with the former organization known as Aurora Oil and Gas.
http://www.asx.com.au/asxpdf/20160902/pdf/439x534b6v8003.pdf
The February 28, 2017 news release from Australis can be found by copying and pasting the link below:
http://www.australisoil.com/irm/PDF/1125_0/USShaleAcquisitionandA100MillionPlacement
Encana appears to have sold for the value of the TMS producing wells and just threw in the lease holdings at no charge. Personally, I think Australis got a good deal.
Once this news began to trickle out I was asked whether we here in the TMS had gotten a good deal from the exchange of companies. I responded that we were likely worse in some ways and better in others.
We are likely worse in that Encana had demonstrated on some of its last completed wells that they had found the sweet spot of the play and had more or less mastered how to drill and complete wells here. I hate losing that expertise. No matter how much knowledge and experience Australis brings to the table it will still have a learning curve for the nuances of the challenging Tuscaloosa Marine Shale.
Also, prices dropped before a few more questions could have been answered that may have brought the TMS out of the “emerging play” status into the “development play” status. For example, we still don’t know how close these wells can be drilled in order to maximize the lease holdings. Encana had the financial ability to continue to experiment and learn this. Does Australis?
Encana also had the financial stability to have attracted the infrastructure development needed to bring costs down to a “development” level. Fracking sand, pipe yards, chemical suppliers, and a myriad of service and technical companies were needed to be in place in the area. Will Australis inspire the investment by support companies here in the TMS?
On the positive side, Encana obviously has focused its efforts elsewhere. Australis bought the TMS property at a bargain, but implies it has higher aspirations than just producing existing wells. It suggests its intent is to expand the production through drilling and completion efforts here. No matter how good Encana may have become at bringing wells into production here in the TMS, if it had lost its “want to” then new blood was needed.
So, all in all, I’ll go with the change of ownership is a good thing for us here in the TMS. In time, when oil prices improve to roughly the $70+ level we shall see. Stay tuned!
