New Sugarkane (Austin Chalk) Horizontal Well Near Stockdale


#1

Texas South Energy will be drilling a new horizontal well to the west of Nixon, in Wilson County. It will have a horizontal lateral about 4,800 feet long. They got their drilling permit approved on August 3, 2018. They’re forming an 805.85-acre pooled unit to drill it. Has anyone owning minerals in the area northwest of Stockdale been approached to grant a lease? Dula Production is attempting to take leases out there right now, but it’s pretty obvious that either (a) they don’t know what they’re doing, or (b) they’re working to give landmen a bad reputation in the area. Any mineral owners reading this have any comments? I’m trying to get a handle on the bonus rate being offered.


#2

Marsha, I’ve done a lot of work in Wilson Co. over the years and this is news to me, even with keeping a fairly close watch on Chalk activity South of SA. Pretty encouraging though, to say the least. I’d think lease offers from any group willing to really venture into this part of the county would be in the ballpark of $500 per acre, but I could be wrong. The last activity I heard of in Central Wilson County was when Kaler Energy drilled some Buda wells around Poth in 2014 with dismal results. I’ll let you know if I hear of anything in y’alls area and best of luck.


#3

Marsha,

I will be extremely surprised if TXSO brings in Richter well. Saying this is a wildcat is an understatement. The chalk at that depth is only 4,800’. What makes the chalk work so well in Karnes County is the energy to bring up the oil at the deeper depths.

In order to have a successful Chalk well the reservoir also requires a minimum amount of natural fractures. This is still a requirement if you decide to do a fracture completion. Where TXSO is setup isn’t known to have any natural fracturing. The energy just wont be there for this well. It might come on strong, but will likely peter-out after a week. Based on an 4.2M AFE, this well needs to make around 100,000 bbls/oil just to break-even. Yikes!

To answer your question regarding lease bonus, at $70/bbl oil, you should fetch around $250-300 an acre, providing for a 20% landowners royalty. I’m not convinced this well is going to work, so that would be our ceiling. I’m not familiar with Dula Production, however if they are leasing on pure speculation, good luck to them.


#4

The proposed well is slightly updip from an old chalk field. Chalk has preformed pretty poorly and would be lacking in geo-pressure at that depth. Past development has been mostly vertical so I am assuming Texas South believes they can intersect some fracture swarms with the lateral. I would be surprised if this is a fracture stimulated completion like we see in the Karnes trough. More likely an acidized open hole completion. I’m sure the have 3D covering the field and must be seeing some natural fractures. The AFE should be more in the 2M range. 75k to 100k is a probably the EUR range. The oil gravity is probably close to 38-40 degrees and with LLS pricing being over $80 maybe the operator thinks it will work or maybe they have have some dumb investor money to play with. I doubt this is the makings of a new trend but could be good for a few folks regionally. The lease bonus and royalty mentioned above sound about right.


#5

Ryan,

I researched this company as I was curious about this specific well. They plan on pad drilling with fracture completions. TXSO is giving DHC of 4.2M. No way this works!


#6

They are putting that out publicly? If so, what a joke. DI shows a rig on location and that the well has been spud. No completion information yet. at 4800’ TVD and another 4800’ of lateral- dry hole cost should be about 1M. I guess with a ton of propant and a modern completion (plus padding on the facilities, GGL etc.) you could get to that number but if that’s correct- ya I would conclude that there is no chance. I pulled a log from the field and the chalk is only about 20 feet thick if that. Going to be tough to land a wellbore and frac’ into a interval that skinny. Be surprised if the ocean does not come with it. There is a sucker born every minute though.


#7

Ryan,

They are a penny stock. Its currently trading at $0.02/share. I bought $1000.00 worth earlier in the week. The well will likely come on very good (IP >275 bpd) and the company will tout this as being a new discovery. They will give it an EUR of 450,000 bbls. Reserves will be in the millions of barrels. I guarantee this will drive the price up a few cents. Then poof, the well will go to water. The strategy is knowing when to get out.


#8

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#9

http://www.texasouth.com/wp-content/uploads/2018/10/20181016_texas_south_press_release.pdf


#10

Does anyone living near Stockdale have any insights to the status of this well? I see TXSO only filed a well record completion.