CD 201200790, 201202484 - Oklahoma Corporation Commission

Transcription

BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA
APPLICANT:
MEWBOURNE OIL COMPANY
RELIEF SOUG
DRILLING AND SPACING UNITS
(HORIZONTAL UNIT)
LEGAL DESCRIPTION: SECTION 28, TOWNSHIP 15
NORTH, RANGE 16 WEST,
CUSTER COUNTY, OKLAHOMA
CAUSE CD NO.
201200790
FILE
1
JUL 302012
APPLICANT:
SANGUINE GAS EXPLORATION,
L.L.C.
COURT CLERK'S OFFICE - OKC
CORPORATION COMMISSION
OF OKLAHOMA
RELIEF REQUESTED:
HORIZONTAL DRILLING AND
SPACING UNITS
CAUSE CD NO.
201202484
LEGAL DESCRIPTION:
W/2 OF SECTION 21 AND W/2
OF SECTION 28, BOTH IN
TOWNSHIP 15 NORTH, RANGE
16 WEST, CUSTER COUNTY,
OKLAHOMA; AND E/2 OF
SECTION 21 AND E/2 OF
SECTION 28, BOTH IN
TOWNSHIP 15 NORTH, RANGE
16 WEST, CUSTER COUNTY,
OKLAHOMA
REPORT OF THE ADMINISTRATIVE LAW JUDGE
These Causes came on for hearing before Susan R. Osburn,
Administrative Law Judge for the Corporation Commission of the State of
Oklahoma, on the 9th and 10th day of May, and the 5 th day of July, 2012, at
8:30 a.m. in the Commissions Courtroom, Jim Thorpe Building, Oklahoma
City, Oklahoma, pursuant to notice given as required by law and the rules of
the Commission for the purpose of taking testimony and reporting to the
Commission.
CASE SUMMARY:
CDs 201200790 & 201202484
Mewbourne & Sanguine
These are competing horizontal spacing applications with Mewbourne seeking a
640 acre horizontal unit for the Cottage Grove covering Section 28, T15N,
R16W, Custer County, Oklahoma and Sanguine seeking irregular 640 acre
horizontal units for the Cottage Grove, Douglas (Upper Tonkawa) and the
Tonkawa (Lower Tonkawa) in Sections 21 and 28, T15N, R16W, Custer County,
Oklahoma, consisting of two units with Unit #1 being a stacked irregular 640
acre unit comprised of the W/2 of 28 and the W/2 of 21 and Unit #2 comprised
of the E/2 of 28 and the E/2 of 21. Mewbourne plans to drill a horizontal
Cottage Grove well at an off pattern location with a lateral around 4100' which
is what they have done in Oklahoma in a number of wells in the past.
Sanguine wants to have their spacing in the hopes of drilling a very extended
lateral; they have horizontal drilling experience in a few wells in Oklahoma and
a number of wells in Wheeler County, Texas with laterals ranging from an
average of about 3500' up to a maximum of around 4800'. Both sides agree
the Cottage Grove underlies both Sections 28 and 21, but they dispute how
development should occur.
RECOMMENDATIONS:
That the application in CD 201200790 of Mewbourne Oil
Company seeking an order creating a 640 acre horizontal
drilling and spacing unit for the Cottage Grove common
source of supply underlying Section 28, T15N, R16W, Custer
County, Oklahoma, with said unit to be formed by a
governmental section with permitted well location at a point
no closer than 660' to the unit boundary be granted.
2.
That the application in CD 201202484 of Sanguine Gas
Exploration, L.L.C. requesting an irregular 640 acre
horizontal units be established for the Cottage Grove,
Douglas (Upper Tonkawa) and Tonkawa (Lower Tonkawa)
common sources of supply underlying Sections 21 and 28
with said units comprised of irregular 640 acre units one in
the W/2 of Section 21 and W/2 of Section 28 and another
unit in the E/2 of Section 21 and E/2 of Section 28 all in
T15N, R16W, Custer County, Oklahoma, be denied.
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CDs 201200790 & 201202484
3.
That the depth of the top of the Cottage Grove common
source of supply be shown as 8515' as provided by the
Mewbourne engineer's testimony using the base of the Avant
as reflective of the top of the Cottage Grove.
4.
That the legal location of the horizontal unit comprised of
Section 28 be established as no closer than 660' from any
unit boundary.
HEARING DATE(S):
May 9 & 10 and July 5, , 2012
APPEARANCES:
Richard A. Grimes, attorney, appeared on behalf of
applicant, Mewbourne Oil Company
Eric King, attorney, appeared on behalf of Sanguine
Gas Exploration LLC
Nancy Lambert, appeared by phone and entered a Pro
Se appearance on behalf of Mack M. Braly
FINDINGS AND SUMMARY OF EVIDENCE
CD 201200790 is the application of Mewbourne Oil
1.
A.
Company seeking an order creating a 640 acre horizontal drilling and spacing
unit for the Cottage Grove common sources of supply underlying Section 28,
T15N, R16W, Custer County, Oklahoma, said unit to be formed by the
governmental section with permitted well location to be at a point not closer
than 660' to the unit boundary.
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CDs 201200790 & 201202484
CD 201202484 is the application of Sanguine Gas
B.
Exploration, L.L.C. requesting that irregular 640 acre horizontal units be
established for the Cottage Grove, Douglas (Upper Tonkawa) and Tonkawa
(Lower Tonkawa) common sources of supply underlying Sections 21 and 28.
That the units be comprised of an irregular 640 acre unit in the W/2 of Section
21 and the W/2 of Section 28 and another unit in the E/2 of Section 21 and
the E/2 of Section 28, all in T15N, R16W, Custer County, Oklahoma. That the
legal location for each unit is to be no closer than 660' to the unit boundary.
2.
The Commission has jurisdiction over the subject matter and
notice has been given in all respects as required by law and the rules of the
Commission.
3.
The following numbered exhibits were accepted into
evidence:
1.
A production plat centered on Section 28 reflecting the
wells throughout that nine section area.
2.
An isopach map of the gross Cottage Grove Sand
centered on Section 28.
3.
A structure map of the Basal Cottage Grove Sand
centered n Section 28.
4.
Sanguine's Exhibit "A-i" modifying their Exhibit "A" to
their application for Section 21.
5.
Sanguine's Exhibit "A-2" modifying their Exhibit "A" to
their application for Section 28.
6.
Sanguine's Cottage Grove Gross Sand isopach with
structure top superimposed.
7.
Sanguine's Tonkawa Gross Sand isopach.
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CDs 201200790 & 201202484
8.
A copy of a wellbore drawing made during the hearing
for demonstration purposes.
That Chuck Falkenstein, a landman qualified to testify
4.
A.
in matters of this kind, appeared on behalf of applicant. He stated that
Mewbourne had the right to drill owning 187.5 acres in Section 28 and that
Sanguine also had the right to drill owning 375 acres in Section 28. The
Exhibit "A" attached to the application reflected all the owners entitled to share
in any Cottage Grove production from Section 28 other than Mewbourne; that
all parties had proper notice for this hearing. He explained that they had
found a new address for respondent #7 and had given them timely notice and
that they were unable to locate a current address for respondent #5 explaining
that when he had checked the records in Texas it showed a last address in
Texas as the unclaimed money fund for the State of Texas (that this interest
used to belong to Nelson Hunt who had gone through bankruptcy and he was
unable to find anything further).
On cross regarding respondent #5 he said that he did
B.
not check the bankruptcy records although he was aware that Mr. Hunt had
gone through bankruptcy and he agreed that possibly that would be a logical
place to check further but he didn't do that. Mewbourne's 187.5 acres were
obtained through three year leases which they acquired starting around the
end of 2011 up to March of 2012. He agreed a delay here, even as late as
January of 2013, would not cause them to lose any of their acreage nor would
Sanguine, since their leases don't begin to expire until June of 2014.
Mewbourne will later be seeking a pooling order designating Mewbourne as
operator. He denied that Mewbourne had a stated policy to not participate in
wells drilled by other operators and he denied that this was contrary to what he
had told Vaughn Martin. He believed Section 21 to the north had existing
Cottage Grove nonhorizontal 640 acre spacing; they have filed to pool that unit
and believe the Cottage Grove is prospective there.
On redirect he confirmed the application to pool
C.
Section 21 included the Cottage Grove and other zones; it was filed April 16,
2012 and set May 7th, but was protested by Sanguine. He reiterated that
Mewbourne does not have a policy to not participate in wells drilled by other
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CDs 201200790 & 201202484
operators, although in his nine years at Mewbourne they had not participated
during that timeframe in wells drilled by other operators.
A.
Gerrard Medina, a consulting petroleum geologist
5.
qualified to testify in matters of this kind stated he had been hired by
Mewbourne to do a study of this area and to appear at their Cottage Grove
hearings; he had worked as a consultant for them for the last 5 or 6 years. He
identified Exhibit 1 as his production plat with each of the wells color coded for
production; the blue numbers under each well reflected the numbers on page 2
of the exhibit which contained a line of information with the operator's name,
well number, the zone producing and oil and gas cume information; this
separate information page avoids cluttering the production plat. The Section
28 Coit well is coded to show three zones that produce and since it had 3
different zones there were three different lines applicable on page 2. Section 28
also shows the north to south track of the proposed horizontal Cottage Grove
well. Exhibit 2 is his isopach map of the gross Cottage Grove Sand based on
log review. From his experience in areas of horizontal drilling of shaly sands it
was better to have a gross interval map which is a better reflector of the
geometry of the underlying formation and better for picking well locations at
the start of horizontal development. The Coit well shows 38' of gross Cottage
Grove and red numbers by each of the wells reflect the gross Cottage Grove
found in the log. To the west is the newly drilled Dotson #29 1-H horizontal
Cottage Grove well which is currently being tested and the engineer will have
further information on it later. Exhibit 3 is his structure on the base of the
Cottage Grove based on publicly available logs. The Cottage Grove structure
becomes a little higher to the east in Section 28 and that is one of the factors in
their request for 640-acre horizontal spacing; that they anticipate the Cottage
Grove to have a lot of oil content and oil is heavier than gas so for production of
oil the engineering is different and structure helps in its production. He did
not pick the proposed location but believed the petroleum engineer helped.
The Dotson well in Section 29 has not been completed and he has
been advised there was a strong indication of crude oil with water, but he
didn't know if that was formation water or load water. He believed the Cottage
Grove would be susceptible to oil production even before the Dotson well based
on development in the general area. The Section 22 well is up dip to Section 28
and was oil productive. When vertical units are established and they believe it
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will be oil productive there are limits on the unit size based on depth; Section
22 Cottage Grove is spaced on vertical 640-acre gas spacing; in Section 28
currently there is no 640 acre spacing for the Cottage Grove at all. For vertical
Cottage Grove oil spacing the maximum size unit they could establish in
Section 28 would be 80 acres based on the top of the Cottage Grove at 8,650';
that would allow a very short lateral of about 2,640'; they have proposed to
develop Section 28 with a 4,000' or greater lateral length. The Section 21
Cottage Grove is spaced 640 acres and they can drill a horizontal well there
and Mewbourne has a location exception for Section 21; they are seeking
horizontal spacing for the Cottage Grove in Section 28 since they believe it will
produce oil. This horizontal spacing in Section 28 would allow a legal location
of no closer than 660' to any unit boundary for a conventional reservoir and for
a nonconventional reservoir they can drill even closer to the unit boundary the
Cottage Grove is a sandstone with a lot of shale and carboneous material and
Mewbourne is not claiming it is a nonconventional reservoir. Mewbourne has a
pending location exception request for their proposed well in Section 28 which
will encroach both the north and south unit boundaries
He has worked this region since 1980 and has reviewed the
Cottage Grove. During that time he worked for Woods Petroleum and they did
not like drilling for the Cottage Grove because it was a tight fine grain sand
with some shale interspersed and not good for vertical development. He had
not seen evidence of natural fracturing in the Cottage Grove but based on his
studies of the Cleveland he would not be surprised if there were some small
natural fracturing. The Cottage Grove is better for horizontal development due
to the nature of the rock; while it might make a certain amount of production
over a 100 years through a vertical well, there would be more efficient
development and better profitability to develop horizontally.
His Exhibit 2 shows the Cottage Grove underlies all of Section 28.
That Sections 29 and 21 are already spaced on a 640-acre basis for the Cottage
Grove and they have drilled the Dotson #29-1H off pattern well in Section 29
and they have an order for an off pattern well in Section 21. The Dotson well is
the only horizontal Cottage Grove well in this nine section area and is currently
being completed so there's not a lot of production data and he hasn't done a
drainage study of the Cottage Grove. Mewbourne wants to drill both Section
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CDs 201200790 & 201202484
21 and 28 for the Cottage Grove. Their requested spacing for Section 28 will
prevent waste and protect correlative rights.
On cross when asked whose correlative rights this
B.
requested spacing would protect he said it would protect mineral owners in
Section 28. When asked about mineral owner correlative rights in Section 21
he said interest owners in Section 21 would not be entitled to share in
production from Section 28. He was aware Sanguine had filed to establish
irregular horizontal spacing consisting of the W/2 of Section 21 and the W/2 of
Section 28 as one 640-acre unit and the E/2 of 21 and the E/2 of 28 as a
second 640 acre irregular unit. He did not know when the Section 21
Mewbourne location exception was filed, nor whether it was prior to the drilling
of the Section 29 well. The proposed Section 28 horizontal lateral would be
about 4000' and approximately located as shown on his exhibits. When asked
if Sanguine's proposed irregular unit in the E/2 of 21 and E/2 of 28 could have
a much longer lateral, he said Sanguine could attempt that. As to laterals of
over 4000', he was aware in western Oklahoma there had been one well drilled
in another zone that exceeded that; in eastern Oklahoma, which is a different
type reservoir development, there were some but they were all to zones other
than the Cottage Grove. He had earlier indicated horizontal spacing was better
here than vertical spacing because the horizontal rules would apply so the well
can be closer to the unit boundary than in vertical units and its lateral longer..
He believed the top of the Cottage Grove Sand was around 8640' or
8650' based on the Coit #1-28 well. That there was Cottage Grove formation
found at 8608', but the reservoir quality begins at about 8640' or 8650'. For
his Exhibit 2 gross map he did not use porosity logs. The 38' in the Coit well
shown on Exhibit 2 did not represent the entire gross sand package, since his
isopach did not include all the Cottage Grove. When asked what that 38'
represented, he said based on his experience in shaly sand horizontal plays he
has had to change the way he maps these sands; that he could not map those
type sands within a traditional net porosity cutoff. That he uses a combination
of the resistivity log and the Sp deflection to the left and from those he derives
his thicknesses shown by each of the wells on Exhibit 2. To explain further he
checks the Sp on the one inch presentation for an area of no deflection to
determine his zero base line both above and below the interval and that would
represent the Cottage Grove; then he identified a kick to the left in the Sp
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CDs 201200790 & 201202484
curve; when the resistivity curve reaches 8608' on the Coit there's a resistivity
increase on the log and the decrease on the resistivity curve and that area
within the Cottage Grove zone represents the footage he picked for his
Exhibit 2. For Cottage Grove resistivity reading he used a standard of 15 to 20
ohms. That the 38' on his Exhibit 2 would therefore represent their target
zone. He disagreed if one looked at just the Sp curve on the Coit well that it
would show 80'. When he saw a significantly greater differential when looking
at the two curves he would count that, but not just a slight increase. He
agreed normally when one sees a gross isopach without a net porosity cutoff
that one expects it would include all the sand from the top to the bottom; that
for shaly sands he would include some shale in his picks but he did not do that
here. That he had compared his evaluation with the porosity logs and they
didn't strictly agree. If he had used a porosity cutoff for a vertical case he
would have used an 8% porosity cutoff, that for a horizontal case he does not
use porosity cutoffs. In the Coit well the 38' of Cottage Grove would be found
from 8642' to 8680'. The 30' of Cottage Grove in the Section 21 Floyd H Jones
well was from 8618' to 8648'; in the Section 21 #1-Jones Floyd Unit the 30'
was found from 8650' to 8680'; the 32-1 Hutton D 30' of Cottage Grove was
found from 8780' to 8810'; that the Christensen 32-1 had 35' from 8781' to
8816'; the 35' in the Hutton B well was from 8795' to 8830' and in the SE/4
the #1 Hutton C 25' of it was from 8779' to 8804'. His Cottage Grove picks in
these various wells were in block areas and no sands above or below those
areas met his parameters based on the Sp and resistivity curves. In the Section
33 Triad RF Custer well he found the 20' of Cottage Grove from 8720' to 8740'
and for the #1-33 McElmurry well he found 35' of gross sand from 8659' to
8694'.
His 1970-1980 Cottage Grove study did not include this particular
area. He doubted his testimony about his Cottage Grove well study in western
Oklahoma estimated a cume average of 4,000 barrels because he had not done
averaging of Cottage Grove cumes; however he would estimate that such
vertical wells would probably cume about 10,000 BO. Page 2 of Exhibit 1 line
for the Ward Petroleum Hutton well in Section 32 showed a cume of 17,045 BO
and for the 32-1 Hutton D a cume of 34,698 BO and he agreed in the area
there are some large cumes; he had spoken about averages over a larger area
and the Section 22 Boyd Miller showed a cume of 3,538 BO while the May
Petroleum Coit showed 2,556 BO cume and the Christensen #32-1 a cume of
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CDs 201200790 & 201202484
Mewboume & Sanguine
5,430 BO and the #32-1 Hutton B a cume of 977 BO; so there were also low
producers in the area. Regarding the Ward Petroleum 1 Hutton B in Section
32 he was asked if that 1.9 BCFG was from deeper zones and he said IHS
reported it from the Cottage Grove. He was then given a scout card on that
well and it had been originally drilled to the Hunton and completed in the
Cottage Grove for 172 BOPD and then it appeared that Ward did a work over
on this and produced gas from the Springer with initial potential of
1 MMCFGPD so it appeared the gas was not from the Cottage Grove. He could
not say when production stopped for the 977 BO cume, that he would have to
do further study to determine that.
That structure went up a little to the east in this area and
structure was a factor in determining their proposed location. For drills here
they preferred to be up dip; he admitted their Section 29 well was down dip to
the proposed Section 28 well by about 50'. He reiterated that he did not help
pick this location, that Mewbourne independently chose it. He noted in the
nine section area their location was only relatively down dip. That the Section
28 proposed location would be up dip to the wells in Section 32.
He was not aware of laterals over 4000' in western Oklahoma, that
most of the ones that he is familiar with in sandstone plays are horizontals
only in a 4000' range. When asked if he was aware that in Woods and Alfalfa
Counties Continental is drilling laterals over 4000' in the Cottage Grove he said
he couldn't speak to that. There have been strong indication of oil production
in the Dotson 29 #1 H well; they are fracing it with water and currently getting
their load water back. As to Sanguine's request for the two irregular 640 units
he was asked if there was any geological impediment to that spacing and he
said there are riskier geological conditions in the W/2 of 21 and W/2 of 28
compared to the E/2 of 21 and E/2 of 28. Early in these plays it is important
to drill wells near control; that in the NE/4 of Section 29 the Dotson well is
drilled near the 1-29 Davis control and in Section 28 the well control is the Coit
1-28 and to the north in Section 21 there are two control points. He did not
see any geological objection to a well in Sanguine's E/2 of 21 and 28 proposed
Unit #2. He had seen Sanguine's isopach maps and believed they had probably
used sound geological principles for their maps. For his structural map he
used structural subsea data; for example in the NE/4 of Section 28 he showed
-6852' while Sanguine's showed -6766'; his was based on the base of the
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Cottage Grove; that Sanguine's exhibit referenced structure on top of the
formation and he said if he assumed that he would have no argument with that
interpretation. He agreed Sanguine's request could represent another way to
develop the Cottage Grove under Sections 21 and 28.
C.
On redirect he reiterated average vertical Cottage
Grove production might be around 6 MBO or higher; the average production of
the five Cottage Grove wells in the nine section area was 12,653 BO but that
average did not change his opinion that vertical well production was not very
good. That horizontal development of the Cottage Grove is better and both
Sanguine and Mewbourne were seeking to develop it horizontally here. He
hadn't thought the Cottage Grove was a structural play, although structure
was a factor in development of these wells. The Coit well is their control for
locating their first well in Section 28; they still plan to develop the W/2 of
Section 28 if necessary and structure has not condemned any part of Section
21 nor the W/2 of Section 28 for Cottage Grove development. That his net
Cottage Grove is not as thick based on his method as Sanguine's maps; that all
of Section 28 is underlain on their map and on his, so both maps reflect
potential for Sections 21 and 28.
A.
6.
Cody Owens, a Mewbourne petroleum engineer
qualified to testify in matters of this kind appeared and explained that
Mewbourne drilled their first horizontal Cleveland well in 2007 and since then
they have drilled 375 horizontal wells, about 275 in the Anadarko Basin and
Panhandle of Texas and about 65 in western Oklahoma; their first Cottage
Grove horizontal well is the Dotson #1-29H well. He helps plans these
horizontal wells and also helps in the drilling and he is in almost daily contact
with the field people on these wells and is involved in the completion. He
helped pick the Dotson location and had consulted with Mr. Medina and with
in-house Mewbourne geologist Marvin Woody and with Tyler Hill. The location
was picked to maximize lateral length and to be near known control; to land
the horizontal well as they wanted they drill vertically to their kickoff point and
then build their curve so they need to know the structural top of the control
and with that they can land their wellbore in sand. The Cottage Grove here is a
sand; however it might have some shale, so they want to put the curved section
behind casing because of that shale and other rock types and once they're in
sand they want to stay in the sand for the entire lateral length. Their target is
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CDs 201200790 & 201202484
in the basal portion of the Cottage Grove; as the geologist had indicated the Sp
curve exhibits permeability and that also helps to place the lateral in the best
sand. He had seen Sanguine's map but when they determined to drill here Mr.
Medina's mapping gave an area of thick that they like to target. He agreed
Mewbourne did not drill for the Woodford very often, that it is different from the
Cottage Grove; that the Woodford is a shale but the shale is a siltstone, also
the Woodford is about 200 to 300' thick so it is very different from the thinner
Cottage Grove. In the Coit well Mr. Medina found 38' of their target sand with
his method. That Mewbourne is not interested in the gross sand above the Sp
deflection because if there's a lot of shale there and they would have problems
with fracing in the shale laminations; they need to be in the sandstone and Mr.
Medina's map is most helpful in targeting that.
Currently the Dotson #1 -29H well is flowing back frac fluid; it was
not flowing back very well on its own so they pumped in nitrogen between the
tubing and casing to help in lifting the fluids out; as of this morning they had
recovered 49% of their load water from the Dotson well and it is cutting about
14 BO per hour which would be about 300 BOPD and 55 BW per hour which
would translate to about 1200 to 1400 BWPD; this water could be a mix of load
water and formation water. Cottage Grove production from vertical wells is oil
production and the horizontal Dotson well is predominantly oil, as expected.
They also expect oil production in their proposed well in Section 28. The
Dotson is off to a good start with 49% recovery of their load water, and as they
get more water off the formation they get an increase in the rate of oil and gas
production. Their method of completion for these wells is open hole multiple
packer system. It is a liner system using 4.5 inch liner with packers and
between the packers there are ports with sliding sleeves for pumping the frac
water and creating the conduit between the wellbore and reservoir. They have
done open hole completion for horizontal wells since the first drill in 2007. The
other method for horizontal completion is plug and perf, where the operator
runs a 4.5 inch liner in the 7" and cements it in place in the lateral portion of
the hole and then in the first stage the operator runs in a wire line and a
perforating gun and a plug, sets a plug, comes off the plug and perforates, and
then fracs and then repeats that process along the lateral. With this process
they have the cement against the formation and they have to perforate through
it versus the open hole with no cement against the formation where they frac
through the ports. He explained when the term point of entry is used that
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would be the heel in a lateral and the lateral termination would be the toe; to
complete a well they begin at the toe and work back to the heel and that is true
for either completion method.
The Dotson lateral length is 4025' which is comparable with other
laterals Mewbourne has drilled; Mewbourne's horizontal wells average about
4,000 to 4200' in lateral length. Exhibit 1 is generally correct as to the Dotson
well track and the proposed lateral in Section 28. He was familiar with the
Sanguine proposed irregular 640s Units #1 and #2. That Section 21 is already
spaced on a 640 acre nonhorizontal basis and Mewbourne has obtained an
interim order for a location exception to be drilled in the E/2 of 21 no closer
than 1400' from the east, running a north-south lateral and located just to the
west of the two existing wells in the E/2 of Section 21. He helped pick that
location to horizontally develop the Cottage Grove Sand. Their Section 21
location was based on known control from the #1 Jones Floyd Unit well in the
NE/4 and was to be drilled north to south to land near the Floyd H. Jones well
with a terminus no closer than 330' from the south boundary. Their Section
28 location is based on the Coit well and is drilled north to south entering the
Cottage Grove no closer that 600' FNL which is only 60' off pattern to the
north. Although they had chosen to develop in Sections 21 and 28 using
location exceptions in the E/2 of each of those sections, that did not indicate
they believed there were no recoverable hydrocarbons in the W/2; their
interpretation indicates possible Cottage Grove reserves in the W/2 of each
section. The one other horizontal Cottage Grove well in the area is in 16N17W, where Chaparral reentered a well to the Cottage Grove and drilled a short
lateral to the southwest and it was not a very good well and other than it, the
Dotson is the first well in Custer County horizontally drilled to the Cottage
Grove. He can't determine with great confidence how much horizontal wells
drain on an east-west basis until there's more information from the Dotson
well, so they don't know if they will need more wells in Section 28 or 29 but
they have set up these proposed locations to leave flexibility to move west,
especially in Section 28, if further development is necessary. Sanguine's
spacing application does not indicate where they plan to drill their well other
than a legal location under the order of no closer than 660' from the unit
boundary; nor was there any indication about the length of their proposed
lateral other than a statement in arguments on previously heard motions that
their lateral would be between 6000 and 7000'. Mewbourne's two proposed
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wells in Section 21 and Section 28 together would penetrate about 8000' total.
They preferred to drill in a direction of the least principle stress so when they
fracture the well the fractures would be perpendicular to the welibore, therefore
they prefer to drill north-south and have fractures generate east and west. In
determining the direction of least principle stress for the Cottage Grove they
rely on experience in other formations in the Basin, so most of the wells they
drill are on a north-south basis. If Sanguine drilled a 6000 to 7000' lateral in
either of their proposed irregular units, whose length would be about 10500'
from the north to south, that lateral would leave 3500' to 4500' unpenetrated;
that Mewbourne's two 4000' proposed laterals would leave about 2000'
unpenetrated so their drill would be the least wasteful since it would penetrate
a greater amount of sand and develop longer total lengths than Sanguine's
would. Additionally he is concerned about a lateral length of 6000' to 7000'
because as one drills farther horizontally it is harder to control or steer the bit;
the bit will travel up and down and with distance the more tortuous the path
can become and the harder the drilling is to control. He acknowledged in
Oklahoma there have been wells with lateral lengths of 5000 to 8000' and
additionally in the Bakkin shale in North Dakota there have been wells drilled
with 5000' laterals, but that was in a different formation; that they want to be
in the best Cottage Grove sand and sand that will fracture; in the Bakkin and
Woodford they can stay in the interval more easily and there's less difficulty in
cracking the rock. The shale in the Cottage Grove is less brittle and more
ductile and flexible, that is why they need to be in the good sand and out of
those type shales. By doing this they can avoid the sloughing, getting stuck, or
losing the well and having to sidetrack, all of which can be costly and risky in
longer laterals. With experience they know more about how to handle this type
situation, but here they have less experience in the Cottage Grove, that there
are only 18 Cottage Grove horizontal completions in Roger Mills, Ellis and
Dewey Counties and those have average lateral lengths of about 3000' and he
doesn't know of any that are in the 5000' range. Mewbourne does open hole
completions because for the reservoirs they develop they believe this is ideal to
have rock exposed to and open to the welibore. In comparing the results of
their wells in the same formation with other operators using plug and perf they
find their wells do just as well and their completions are cheaper than plug and
perf; with plug and perf they have the cost of the cement and have their
perforation on wire line with trips in and out of the hole and that takes time
and costs more compared to open hole completions. There would be problems
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in completing open hole with a 6000 to 7000' lateral because it would be
difficult to get their completion assembly to TD, that they have a 4.5 inch liner
for their open hole drills with packers that are larger than that, so if they did a
6000 to 7000' lateral they would probably have to do a plug and perf.
Based on limited information about Sanguine's irregular unit and
plans for development for their longer lateral he had tried to do a cost analysis
comparing Mewbourne's costs with what Sanguine's costs would be based on
their type drill and the length of the drill. Mewbourne's AFE costs would be
$3,955,200 for a completed lateral of about 4000' using an open hole
completion. For Sanguine he had assumed an 8500' lateral drilled north to
south in their 10560' length unit which would leave about 1000' in each onehalf section not drilled; he also assumed that they would use the plug and perf
method since he doubted one could use open hole for an 8500' lateral length;
with those assumptions the costs would be about $7,851,000 for a completed
well. That this is almost double Mewbourne's costs and would be about the
cost of two laterals, one in Section 21 and one in Section 28 as Mewbourne is
proposing. The long lateral cost compared to the two proposed Mewbourne
laterals are about a wash, however the concern he has is that the plug and perf
method, which would really be necessary for the longer lateral, is more risky
and more costly as he previously explained. He reiterated that Mewbourne had
drilled a total of 375 horizontal wells in the Permian Basin and Anadarko
Basin; 275 of those wells were drilled in the Anadarko Basin, which is where
Section 28 is located, and 65 were in western Oklahoma and of those 65 all but
one were drilled as open hole completions. That the one well of those 65 drilled
in western Oklahoma was a slick drill where they ran in 4.5 inch liner pipe and
cemented it rather than running in 4.5 inch liner with packer so in essence the
slick drill is a plug and perf. He agreed that the Cottage Grove from his
experience has specific issues for drilling since it is a sandstone; of the 65 wells
drilled in western Oklahoma all but one were sandstone wells so Mewbourne
wants to identify the Cottage Grove sand which is more susceptible for
development and with better permeability so it is a narrower interval which is
targeted. If the entire Cottage Grove had good production through-out they
would be less concerned about targeting only a part of it; but here they need to
target a limited 40' interval and they can do that with a 4000' lateral and have
done so at least 64 times in western Oklahoma as open hole completions; one
can efficiently and safely do that with limited risk. However if they add another
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3500 to 4000' lateral length it becomes riskier; additionally here the Cottage
Grove sandstone has abrasive rock which causes friction and the more lateral
added to a well the more friction one deals with, which creates excessive drag
and torque making it harder to stay within the 40' interval with better porosity
and permeability. If one drills outside that target there's more shale which
creates greater torque and drag and increases the problem. In the Cottage
Grove the shale is ductile which means it's gummy, so it's harder to drill
through with a longer lateral and there would be problems in completion.
If the Commission spaces this area as Sanguine has requested the
spacing will communitize rights to share in production and with the issues that
he has described in the Cottage Grove the well cannot take equally from each
one-half section. From experience Mewbourne knows they can drill a 4000'
lateral and complete it open hole with less cost and less risk and therefore he
would recommend Mewbourne's application be granted based on their
experience with open hole completions. IHS records show Sanguine has drilled
25 horizontal wells, 17 of which were completed; he recognized public records
are sometimes delayed so current numbers may be off somewhat. Most of
these wells are located in Wheeler County, Texas, and four are located in Roger
Mills County and Beckham County. These wells were drilled mostly to the Des
Moinesian Granite Wash and there was one Marmaton well and one Missourian
Granite Wash, but none were Cottage Grove, Cleveland Sand, nor Tonkawa
Sand wells. They were completed as plug and perfs, so he checked from first
perforation to last and lateral lengths ranged from 1164' to 4851', with an
average of 3456'. None of these wells were in the range of 6000' to 8000' and
none were in the Cottage Grove type sandstone. He recommended denial of the
Sanguine application and the granting of the Mewbourne application.
On cross he said that in reviewing IHS for the
B.
Sanguine wells he checked the production decline on those wells and that two
were producing over a 1000 barrels a day. When asked if it were possible that
some of these wells were reported as Lower Granite Wash or Des Moinesian but
could be Cottage Grove wells, he said only if there were erroneous reports, that
the Des Moinesian is lower age so any report like that would be an error. When
asked if the Cottage Grove Sand thickness averaged about 80' he said their
target Cottage Grove for the Dotson well was not that thick, that there they set
casing well below the top of the Cottage Grove which on Sanguine's map would
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be at 6912? and at that point there was still 45% sand and 55% shale. Asked
again how thick the Cottage Grove would be, he responded that the Cottage
Grove interval is defined at the top by the Avant, that he did not have those
depths with him and noted again that the 40' thickness the geologist had
testified about was their target. He explained that the questions on direct
regarding an 80' thickness did not reference the target, that the target 40' was
within that 80' referenced earlier, and he did not have depths for the interval
top, the target top, nor the age top of the Cottage Grove. He explained that a
common source of supply was a reservoir of a certain age that is hydrocarbon
bearing and separated from other common sources of supply; he agreed shale
could be what is separating the reservoirs and that within the entire Cottage
Grove the targeted 40' is separated from the rest of the Cottage Grove by an
impermeable and thick shale, although he could not recall how thick that shale
would be above and below the 40' target.
Completions by packers plus or by plug and perf both include
fracture treatments; that Mewbourne uses a number of different type fluids for
fracing and the fracture lengths depend on the size of the stage, the amount of
frac fluid pumped into the formation, the size of the formation and the rock
properties. When asked if fracture treatments in sandstones usually reach out
250' to 300' he said one could not say that as a fact, that there are a lot of
variables that affect the frac half length, that it all depends on the design of the
frac job. That his estimate of $3,955,200 for Mewbourne's 4000' lateral
completion costs included 17 to 20 frac stages. When asked about the number
of stages for the estimate he made on Sanguine's 8500' lateral length he said
that is an entirely different design that it technically has 10 stages but each
has perforation clusters so the total number of fractures depends on the design
since each stage can have one to five frac perf clusters. When he checked for
Sanguine horizontal completions through IHS he said they mainly did plug and
perf, that it was really hard to tell the number of stages from public
information. When asked the number of perforations Sanguine used in their
completions he said public information only gave the first (toe) perf and the last
(heel) perf. When asked what the distinction was when he was talking about
Mewbourne horizontal wells drilled in the Anadarko Basin and in western
Oklahoma, he said western Oklahoma is part of the Anadarko Basin and
development in Custer, Roger Mills, Ellis, Dewey and Harper Counties
represents Mewbourne's development in western Oklahoma. He reiterated that
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63 of the 64 horizontal completions there were open hole and the Dotson #129H was their only Cottage Grove horizontal completion. Of those 64
horizontal completions 63 were sandstone drills all with logs similar to the Coit
well. The Exhibit 1 isopach represented a continuous package of Mewbourne's
targeted Cottage Grove; he agreed Cottage Grove above or below that might
contribute to production, although it would be a lesser contribution than the
targeted interval.
The Dotson well had 19 ports and 19 fracs and Mewbourne ran a
tool to measure gamma ray when they started building their curve. He helped
in determining this prospect and was in constant communication with the
geologist who is steering that well and once it reached TD he was responsible
for working with the geologist to determine where to place the ports for fracing;
from Dotson well information they determined the target interval under Section
29 was about 30' thick. When asked how far out the fracs on the Dotson 291H would go and he said he did not "know" but thought they would not extend
over 600' on either side of the wellbore. While he agreed the area of least
resistance would be more prone to opening up under fracing, he noted there
were other factors involved; that control of the direction of the frac is not an
exact science and it was possible the frac could go up or down and outside
their 30' target, rather than going out just laterally. While Mewbourne is
looking for a specific target within the Cottage Grove he said the reference to
40' was based on a reference to a drawing on the board which had been
presented to him, that in fact the thickness of the target could vary.
That the Section 28 location was based on control from the Coit
well in the NE/4; he was part of a discussion in choosing the lateral location in
Section 28 and was in agreement with the location chosen. That geology was
part of the discussion about the location selected; when reminded he had
previously testified that Mr. Medina had input for locating this well, the witness
said that if he did say that he would apologize because in fact Mr. Medina
worked the area and had discussed the Cottage Grove with him, however
locating the lateral was an internal decision and in fact the location had been
set when Mr. Medina was hired for this Commission work in Section 29 and
28. He reiterated that structure was very important, not in picking a location
but in the drilling of the well so they can place their lateral in the target
interval. When Mewbourne reaches kickoff and begins to build the curve, it is
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important to them to land the kickoff near control so that they can know the
subsea depth of the target interval; that as they move away from control the
subsea depth is more of an interpretation so to land near well control reduces
their risk. In Section 33 the #1 Miller "W" was a permitted location, but was
never drilled. The Section 27 JF Davis well and the Section 33 Triad Custer
well are control points for their proposed bottom hole and are also subsea
points of control for structure. He acknowledged as they drill their location to
the south it is going down dip. When reminded Mr. Medina had said they
needed to be up dip, the witness said he did not recall that testimony but it
was not of concern to him in picking a location, though it is important in
drilling the well and staying within the target interval.
The thickness of the basal portion of the Cottage Grove is
important and in Section 28 it is about 30 thick based on the Coit well.
Regarding his concern about shale laminations he was asked what empirical
evidence he had regarding shale laminations in Section 28 and he said he had
no empirical evidence. His concern was based mainly on the Coit 1-28 well log
with the shale laminations seen at 8618' to 8620' which is above their target
from 8643' to 8672'. That Mr. Medina had said the target was from 8642' to
8680' and he was asked why he would exclude some of that and he said he had
been asked to show his target interval, not Mr. Medina's target. He was asked
to identify the top and base of the Cottage Grove and he explained that the
Avant marker is the top of the Cottage Grove interval at 8515' and the Cottage
Grove base is at about 8750'. Regarding his previous testimony that he had
concerns regarding shale laminations below the target zone he identified that
on the Coit log at approximately 8690' and it is about 40' thick so it is not just
a lamination. He agreed shale laminations above the target would be about 2'
thick at 8618' to 8620' and from 8620' down to shale found below the target
would represent about 70'; that the resolution on the log did not provide
enough information to see all shale laminations, so there could be laminations
in that 70' interval.
Yesterday the Dotson had a 49% return of frac water and as of
today it had a 52% return with production of 315 BO, 1200 BW and 85 MCFD;
he believed the well was still cleaning up. That today's 315 BO was less than
the previous day, but he doubted it would be lower on a 24 hour basis.
Regarding the ductile shale as being less brittle, he was asked if it was the
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same in Section 28 based on the Coit log and he said he couldn't make that
statement based on the Coit log but he had noted those conditions in the
Tonkawa and Cleveland Sands. That they have penetrated the Cottage Grove
numerous times in drilling the Cleveland and found the shales to be
problematic and that was why they ran casing and placed those shales behind
casing. Earlier he had run costs for an 8500' lateral using a plug and perf
completion; he had not run costs on a 8000' to 8500' lateral with packers plus
completion but said it would be less costs than the plug and perf method. He
had done economics on horizontal Cottage Grove wells but he did not know
offhand how many barrels of production would be necessary to reach payout.
He had prepared an AFE of $7,851,000 for an 8500' lateral completed with
plug and perf method and that cost assumed 10 stages with four perforation
clusters per stage. When asked if those 40 perf clusters were more than
double the perforations under his packers plus AFE for $3,955,200 on a 4000'
lateral open hole completion and he said actually they do not perforate in
packers plus completions. Since they need flexibility they never know the
number of ports that they are going to need but usually there are 17 to 20; that
there is a cost associated with each port.
Dotson well costs as of this date are at $4 million and the well is
completed and selling down line. When he identified the target interval depths
he used similar methods to Mr. Medina, that he picked the interval with the
highest Sp and low Rt, where they expected the best permeability. He
acknowledged that he got about 8' more using this method than Mr. Medina
did. In drilling their well, to determine where they are within the target zone,
he said they relied on the gamma ray in combination with the structural
mapping and the mud loggers sample of the sands. He was asked to use an
8% cutoff in the Cottage Grove from 8515' to 8750' to determine the number of
net feet of sand using the Coit log and he said he couldn't do that since that log
does not have the caliper measurement.
He had found 17 Sanguine horizontal completions and to his
knowledge Mewbourne had not participated in any of those wells. To clarify
earlier testimony he said they were looking for a 30' to 40' target interval in the
Cottage Grove because outside that targeted area were more shale problems,
that the shale was gummy and there were sloughing problems. He didn't think
Mewbourne drilled the Dotson well outside the target area after they set their 7
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inch casing. Their target was based on Sp deflection which indicated
permeability but if there was 8% porosity Cottage Grove outside that, it could
possibly contribute to production. As to inequality of sharing based on
inequality of lateral length in the irregular 640 acres proposed by Sanguine he
agreed such inequality could be leveled out if a second well were drilled in the
irregular 640 acre unit. When reminded that type of irregular spacing and
development occurred at the Commission he said this was his first experience
with stacked 320 acre units requested for an irregular 640 in Oklahoma.
C.
On redirect he explained the difference between an
open hole completion and a plug and perf completion, noting in either case the
well is drilled through the vertical portion in a similar manner. As the curve is
beginning for open hole they set their 7 inch intermediate through the curve
until they land in the sand and then they drill the well on out to TD without
casing; they then run a 4.5 inch liner inside the hole from the end of the 7 inch
to TD and that liner has packers against the formation and between the
packers there are ports with sliding sleeves; for completion they open the first
sleeve in the toe and frac that stage, close it off and move back to the next port
and sleeve and repeat that process. That for the perf and plug they have the
same type of vertical drill, the curve, and the horizontal; but they set a 7 inch
casing against the formation all along the lateral, they run a 4.5 inch which is
cemented; to provide a conduit from the wellbore to the formation they perf and
frac, starting at the toe for the first perforation stage, seal it off, they then come
off that plug up to the next perforation interval where they perf and frac again
and repeat the process of plugging and perfing up the hole. The primary
difference is that there is no cementing and no casing along the lateral in the
open hole completion, whereas there is perforation and fracing and running in
and out of the hole with tools for plug and perf.
Regarding the Coit log and identifying the shales above and below
the target zone he noted there were other horizontal wells for other zones that
penetrated the Cottage Grove and those also furnished control information to
identify the shale laminations; additionally they had mud loggers information
for the Cottage Grove in the vertical section of those horizontal wells and also
in vertical wells. Mud loggers analyze samples and determine how much shale
content, grain size, fluorescence and other information used to identify shale
laminations in the Cottage Grove; even in the Dotson well there were areas
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where they saw 35 to 45% shale versus 65 to 55% sand in the Cottage Grove.
He reiterated he would not use packers plus completion in a 8500' lateral; that
with dip there is friction with torque and drag and it would be very difficult to
do packers plus in that type situation. To clarify Mewbourne's request for
spacing he said they were not trying to limit the spacing to their targeted
interval, that they want to space the entire Cottage Grove interval which does
contain their target; their target interval is where they can maximize recovery
from the Cottage Grove Sand. To clarify further, the top of the Cottage Grove
which they are seeking to space would be found at 8515'.
D.
On recross regarding Cottage Grove shale laminations
in the Dotson, they were not found just at the base, they were also found at 6911' where the sandstone was 35% and shale was 65% and also when they
started building the curve at -6919' it was 45% sandstone and 55% shale; as
they drilled further they found much cleaner sand. While they would prefer to
drill north to south, that they drilled south to north in the Dotson well; that the
Dotson well had been staked at two locations in the NE/4 but both of those
locations ended up close to residences; they found if they wanted to drill from
north to south they would have to move south of both of those residences and
drill a much shorter lateral, so they decided they would drill south to north and
have a longer lateral. They want to land their curve near control but in this
case they were not able to stake it in the NE/4.
Mr. King called as his first witness Josh Clark, a
7.
A.
landman with Sanguine qualified to testify in matters of this kind. He
explained that this is his area of responsibility and as to the Section 28
application and Sanguine's application for Sections 28 and 21 he had
requested a title opinion for both sections and now he had that for Section 28.
The title opinion was dated May 7, 2012; he had checked the title opinion list
against Mewbourne's Exhibit "A" list to see if all parties had been named for
this application. He explained that Sanguine always obtains a drilling opinion
before filing either a pooling or a spacing, rather than relying on broker reports.
In the comparison he agreed Sanguine's title opinion also did not reflect an
updated address for respondent #5 Eucalyptus Mineral Company. However the
title attorney found eight mineral owners not named on Mewbourne's Exhibit
"A" and that would represent 32.833 net mineral acres. That list would include
Blue Valley Energy Corporation with 7.5 net mineral acres, Whitehorse Oil and
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Gas Corporation with 7.5 net mineral acres, Randow Living Trust with 5 acres,
the Eva J. Johnson Trust with 1.25 net mineral acres, the Lewis H. Whitwer, III
Trust with .833 net mineral acres, SemSim LLC (which may be a successor to
the Simon Brothers) with 5 acres, Brett Braddy with 5 acres, Mason
Engineering Corporation with 2.5 acres and CMJ Oil Properties with 2.5 net
mineral acres. Mr. King agreed the witness could furnish the tracts where
these entities own to Mewbourne for them to verify ownership and determine if
notice had been given to the proper entities on their Exhibit "A".
B.
Mr. Grimes said there had been an off the record
discussion with both attorneys and land witnesses and Sanguine feels there is
at least one entity furnished today which may not have received notice; that
their landman is currently driving to Custer County to further check the
records there; they felt the other entities were covered in that there may have
been transfers of interest. They need to verify if any of these parties might be
entitled to notice and if that is the case they will renotify all entitled. Both
sides agreed to a continuance and Sanguine would also set their spacing on
that date so the causes can be combined for hearing without objection.
C.
On July 5, 2012 Mr. Clark was recalled for further
direct examination and he stated they have now obtained a title opinion for
Section 21 and can show a complete list of owners in both Sections 21 and 28.
That Sanguine owns the right to drill in the E/2 and W/2 of both Sections 21
and 28 for the named zones in their application. Exhibit 4 is his updated
Exhibit "A" for Section 21 with the updated information and addresses shown
in red; he went through the list identifying each respondent which either had
no better address after return or showed the current addresses. Exhibit 5 is a
similar exhibit with updated information for owners in Section 28 and he went
through that list. He explained the efforts made for determining the owners
and their proper addresses for each section based on a review of all primary
sources of information at the county clerk and court clerk's office as well as
internet sources, phone records and other secondary sources. He requested
publication notice be accepted for those parties they were unable to locate; he
noted he had made a diligent effort to locate all parties in both Units. He
updated the ownership for both Mewbourne and for Sanguine based on their
title opinion. He showed the working interest of Sanguine in Section 21 was
57.34954% (367.0374 acres) and in Section 28 it was 58.59375% (375 acres);
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that the Sanguine working interest in the W/2 of Sections 21 and 28 would
represent 33.13078% (212.03704 acres) and in the E/2 of 21 and 28 that
would be an 82.8125% interest (530 acres). Updated information for
Mewbourne showed they had in Section 21 a 7.7285% working interest
(49.46296 net acres) and in Section 28 a working interest of 28.2552%
(180.83334 acres). That this would represent an interest for Mewbourne in the
W/2 of Section 21 and W/2 of 28 of 28.71817% (183.79630 acres) and in the
E/2 of 21 and E/2 of 28 a working interest of 7.2656% (46.5 net acres). When
asked why the Section 21 Mewbourne interest percentage is as low as it is, he
explained they found Mewbourne took leases from four different parties in the
SW/4 of Section 21 that is HBOP on leases that occurred prior to the statutory
Pugh clause and that covers about 110 acres for all the named zones in
Sanguine's application for which they did not receive working interest credit.
As to the parties he had named in his May 10 th testimony that may not have
received notice under Mewbourne's application he said that he had noticed all
those and since they consolidated these cases for hearing he believed notice
was good for the consolidated hearings.
D.
On cross about respondent #20 on Exhibit 5 and
notice to the Park Avenue address in Clinton, Oklahoma, which Mewbourne
believed was a good address, he said if it had been a return they would have
shown the party as not locatable; that he thought they had sent it to the Park
Avenue address but he would verify that and note it for the record later,
Regarding his testimony about the quantum of interest, he was
asked whether or not that was relevant in determining whether a particular
size or configuration of a spacing unit was necessary and he explained that
when it comes to operations, the owners of the greatest interest should be
granted operations, as should the party with the greatest geological
information. He understood in a spacing there was no designation of operator.
When asked what the quantum of interest would have to do with whether or
not a party would have the better geological information he said he was not a
geologist and couldn't answer that question. It was noted to the witness that
the determination of spacing by the Commission is not based on ownership
and that was the law of Oklahoma and he agreed that the information he had
given regarding the quantum of interest was not a spacing issue.
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E.
After a break in the hearing, Mr. Clark was recalled to
testify regarding the Simon Brother notification. He noted that SemSim LLC
was the successor to Simon Brothers so Sanguine would dismiss their
application as to Simon Brothers. He agreed notice was proper and neither
party objected to the testimony regarding notice of the other party.
A.
8.
That Mike Barber a geologist with Sanguine appeared
to testify and stated he was familiar with area development and had heard Mr.
Medina's geological testimony and had reviewed his Exhibit 2 gross sand
isopach. He had testified at the Commission as a geologist since around 1984
and to him the term gross sand isopach meant a map of all the sand in a given
zone regardless of the porosity, from the top to the bottom of that rock. The
Cottage Grove top is the Avant marker, a hot shale, and at the bottom is the
Hogshooter shale, also a hot shale; that within the Cottage Grove sandstone he
identified an "A" sand in the top and a second member which he calls the "B"
sand. He opined the Mewbourne geologist's identification of a net sand within
the gross Cottage Grove sounded subjective. That his own identification and
interpretation of the Cottage Grove intervals was readily identifiable. He had
looked at the logs after he had heard Mr. Medina's testimony to evaluate what
had been presented to the Commission as a gross sand isopach and he
disagreed with Mr. Medina who did not count the upper member "A" zone
which is part of the pay sand package. Sometimes Mr. Medina calls part of the
upper sand lens as within the "A" and sometimes he calls part of the lower
sand within the "A"; however clearly one can see there is a break between the
"A" and "B". That there is an Sp above and below but it does not meet his
cutoff; he noted that the part outside of his cutoffs also is within the Cottage
Grove "A". His own map does not include the Cottage Grove "B".
In the Coit #1-28 well Mr. Medina identified 38' of gross sand from
8642' to 8680' whereas he identified 80' of gross sand from 8610' to 8690' as
shown on his Exhibit 6. His gross 80' would start from the top sand marker to
the basal sand marker and include all of the Cottage Grove "A" to the top of the
Cottage Grove "B", that he did not include any of the Cottage Grove "B" in any
of his picks. His Exhibit 6 shows all Cottage Grove producers as a dark red
circle and Cottage Grove shows as half red circles. The Section 21 Floyd H
Jones shows 69' of gross, which he determined was from 8587' to 8656'
whereas Mr. Medina gave that well 30' of gross; the Johnson #1-21 Cottage
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Grove penetration was a cased hole and he gave it 79' but he did not have Sp
so he had used the gamma ray only for that determination. That in the NE/4
of Section 21 is the Floyd Jones Unit well also with 69' of Cottage Grove found
from 8617' to 8686' and Mr. Medina had given it 30' of gross from 8650' to
8680'.
In Section 32 there are three producers; in the NE/4 NW/4 is the
Hunton "D" where Medina picked 30' of gross sand from 8780' to 8810' while
he picked 80' in the Cottage Grove "A" only from 8746' to 8756' and 8758' to
8828'; that Mr. Medina did not testify about two groupings in the gross Cottage
Grove, he only spoke of one. In the Section 32 Christensen Mr. Medina showed
35' of gross Cottage Grove from 8781' to 8816' while he showed 67' from 8756'
to 8816' and from 8832' to 8839'; and he explained between those two lenses
he showed strong shale and he explained this can be interpreted as one large
sand but his interpretation was two separate packages. For the Hunton "B" in
Section 32 Mr. Medina showed 35' of gross Cottage Grove from 8795' to 8830'
whereas he showed 70' of gross sand in the "A" from 8760' to 8830' based on a
modern log and of that 70' of gross he found 67' represented net 8% porosity or
greater. For the Section 32 Hunton "C" dry hole Mr. Medina picked 25' of gross
Cottage Grove from 8779' to 8804' and he picked 65' from 8756' to 8753', 8766'
to 8806', 8616' to 8827' and 8835' to 8842' all within the "A" package of the
Cottage Grove. The Section 33 RF Custer well log did not go to the base of the
Cottage Grove "A" so his numbers could be larger, that Mr. Medina picked 20'
of gross Cottage Grove from 8720' to 8740' whereas he picked from the Cottage
Grove "A" 8714' to 8752' though that pick could be more since the log did not
penetrate all of the "A". For the Section 33 McElmurry dry hole Mr. Medina
picked 35' of gross Cottage Grove from 8659' to 8694' whereas he picked 60'
from 8654' to 8660', 8662' to 8667', 8670' to 8695', 8708' to 8714' and 8718' to
8736'. His gross picks were larger in general and the gross sands he picked
are potential Cottage Grove producers and limited to Cottage Grove "A", that he
did not use the "B" lens in his study. He thought the "B" lens would be
productive in the area but not here so he used only the "A"; in the surrounding
logs the "B" has not been established as productive. He agreed his geology was
very different than Mewbourne's.
His Exhibit 6 has structure based on the top of the Cottage Grove
and the fault to the north is found at the Cottage Grove interval. Both Sections
Page 26
CDs 201200790 & 201202484
21 and 28 are entirely underlain by the Cottage Grove, that the thickness in
the W/2 of 21 and W/2 of 28 would be around 80' to a little more than 80' and
in the E/2 of 21 and E/2 of 28 the thickness would range from 70' to 80' and
there are no permeability barriers through that area. Sanguine is requesting
the irregular 640 acre horizontal units because they believe in the future when
engineering frac treatments and drilling techniques continue to improve that
will allow Sanguine to better capture reserves in such an irregular type unit.
Further it will allow Sanguine to better use their resources and potentially
capture reserves at that time. From a geological standpoint he believed this
would be the optimal shape for a unit by allowing them to drill an extended
north-south lateral for improved development.
Exhibit 7 is his Tonkawa gross map which shows the Tonkawa
underlies their proposed units and it is potential therein. They seek to space
the Douglas (Upper Tonkawa) and the Tonkawa (Lower Tonkawa) and there are
no permeability barriers within those two sections. Sanguine believes their
proposed units are the optimal size and he recommended the legal location be
designated in their order as no closer than 600' from any unit boundary.
He noted that in a broad sense the zone with the highest Sp has
the most salt water conductivity and here the zone at the top of the Cottage
Grove is finer grain sand and has less percentage of salt water and that zone
has greater hydrocarbons than the lower zone. Based on the Dotson well and
others there is salt water in the Cottage Grove as well as oil and gas which is
100% resistive with a reduced Sp, so he believed not including the upper zone
where the Sp is reduced would be potentially excluding the largest hydrocarbon
part of the Cottage Grove. He believed Mr. Medina was subjective in reading
the Sp, that it was sometimes in the upper portion and sometimes in the lower
portion although it was always within the "A" part of the Cottage Grove. As to a
porosity cutoff he noted that lowering the porosity cutoff would not eliminate a
sand zone; in earlier times low porosity intervals would have been ignored,
however given today's technology it would not be ignored. As an example he
noted that in 1999 to around 2004 there was a play just like this and logs
showed that it was potential but very tight, so they tested 75' away from that
wellbore and most of the other owners got out of the well; however Sanguine's
cutoff was 2% but he noted that it was a carbonate and went down to -4% to 6% so Sanguine tested it at 17 MMCFD; so it was very tight looking on the log
Page 27
CDs 201200790 & 201202484
but in actuality was quite productive. In fact he had mapped the Cottage
Grove and used an 8% porosity cutoff, however the problem with a net map is
that things appear very tight but in fact are potentially part of the reservoir,
therefore he used the gross mapping for his isopach based on that potential of
productive reservoir.
Regarding Mewbourne's Exhibit 2 starting with Section 20 he
compared his gross or net picks with Mr. Medina's gross picks for all the wells
through Sections 21, 22, 27, 28, 29, 32 and 33 noting generally his were
thicker. He could have used a lower porosity cutoff for the Cottage Grove in his
mapping but that would have increased his net sand footage numbers and he
agreed Cottage Grove with porosity below 8% would contribute to production.
For straight hole wells it was believed porosity below 8% would not contribute
to production, however now with horizontal development tight rock was
prospective. As to his example about the successful well with 2% porosity he
said that was in the Atoka portion of the Granite Wash and was located in 11N25W. He saw no real correlation between Mewbourne's gross numbers and his
own gross and net numbers other than the fact that they were all within the
Cottage Grove. He disagreed with the Mewbourne evaluation of the Cottage
Grove gross sand because Mewbourne's geologist did not use all of the Cottage
Grove, he only used part of it. For determining gross sand he noted that Sp is
a good tool for determining if a zone has porosity but it is not a good tool for
determining the total amount of porosity within a zone. As to the Mewbournes
use of the resistivity tool he said it was his understanding it helped identify the
larger pore throat; that Mr. Medina used a 20 ohms cutoff but there were wells
in the area that produced from 10 ohms and below so he believed Mr. Medina's
interpretation was very subjective and led to different conclusions as to the
Cottage Grove "A" interval. For his Exhibit 6 Cottage Grove gross isopach he
looked at the gross from the top of the interval to the bottom using the gamma
ray and the resistivity. That he could use a lower cutoff in doing his evaluation
but he believed a gross map was more reflective of the productive capability
here. That Sanguine did not intend to present engineering testimony for this
hearing since both Mewbourne and Sanguine agree that 640 acre unit size is
proper, although there is disagreement as to the configuration of the unit.
On cross the witness agreed in the spacing
B.
applications the Commission would want to know first if Sections 21 and 28
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CDs 201200790 & 201202484
were underlain by the zones and maps presented by Sanguine and Mewbourne
show that they are. Regarding the last couple of hours in which the witness
criticized the methodology and mapping of Mr. Medina, the witness disagreed
and said it was not a criticism, that he had been commenting on the
differences of his and Mr. Medina's interpretation. When asked what in fact
the ALJ should take from his testimony to determine whether or not the
horizontal 640 acre unit or the irregular 640 acre units should be established
for the Cottage Grove, he said he believed, with the greater thickness, that a
lateral across the irregular unit Sanguine is proposing will see greater reserves
for production. After a series of questions he agreed Sanguine was interested
in identifying the top of the Cottage Grove to the base of the Cottage Grove and
within that area to land and drill laterally; that if the Cottage Grove were 100'
thick versus 40' thick that still one would need to know the favorable area
within such thickness to drill their lateral. Regarding the Exhibit 8 drawing
prepared by Mr. Medina and his testimony concerning his mapping of the
Cottage Grove, he admitted Mewbourne's mapping was more specific in
targeting an area than just identifying the top and base of the Cottage Grove;
that Mewbourne's gross Cottage Grove numbers would be smaller than the
numbers that he himself had used because of the methodology that Mr.
Medina had explained. Based on his direct testimony he was asked how the
Court would differentiate between a regular 640 acre horizontal unit compared
to an irregular 640 acre unit and he said it had to do with how much reserves
would be available and how much recovery Sanguine would expect to get by
drilling a longer lateral. He was reminded that Mewbourne seeks to drill a
4100' lateral in each of the Sections 21 and 28 and to open those laterals up to
production. Since it was Mewbourne's intention to drill a 4100' lateral in
Section 28 and there was a proposed location exception in Section 21 which
they hoped to see drilled, also with a 4100' lateral, he agreed if such occurred
in the E/2 of 21 and the E/2 of 28 they would have a total of 8200' lateral
across the two units. He agreed Mewbourne had successfully done such a
lateral drill in Section 29 with the Dotson well and the same would be
accomplished if Sections 21 and 28 were drilled on a regular 640 acre basis.
When asked if Sanguine's Unit #1 (W/2 of 21 and W/2 of 28) was drilled what
Sanguine's proposed lateral length would be, he said that it was up in the air
at this time and would be dependent upon the outcome of these cases; that
Sanguine experience suggests the longer the lateral sometimes the better the
success; they want a possibility for now and in the future to have an extended
Page 29
CDs 201200790 & 201202484
lateral over the length of their proposed units rather than drilling two wells.
Again asked what that length would be, he said their proposed irregular
horizontal unit would be 10560' long and if one adjusted for drilling within the
legal boundary that would leave 9240'. When asked if it was their intent to
drill a 9240' lateral, he said if in the future Sanguine deems it is feasible and
the risk is worth taking, based on the reserves, that would be one outcome.
When asked by the ALJ if that was their plan, he said there has been no
internal decision made regarding that.
Since both applicants were seeking a final spacing order, he was
asked if he was now saying that Sanguine's request is based on some future
determinants and the witness said that Sanguine wants an irregular stacked
640 acre unit and they want the possibility of drilling a lateral greater than
4100' in length. When asked if Sanguine proposed a 6000' lateral in Unit #1 if
each stacked 320 acre area would have half that length and he said there was
no reason for symmetry, that as long as they stayed 660' off the unit boundary
lines they could have a little bit in one-half of the unit and more in the other
half. That if Sanguine received their requested spacing those owners within
Unit #1 would share equally as would those in Unit #2, although in that
previous example they might not symmetrically contribute to production; he
said if they drilled a second well in Unit #1 they would have two wells in their
irregular 640 and all would share in that. When asked about the spacing of
the wells one to another on an east-west basis in order to maximize
hydrocarbon recovery he said that actually they would hope to get the 9000'
lateral drilled, but if that is not possible, they would want to drill more than
one well in their unit.
That earlier he had said hopefully, in the future, the drilling
technology and completion techniques for horizontal wells would improve to the
point that Sanguine could drill as he suggests; he said that was true, although
he was not saying it can't be done today, that other operators in this general
area are already drilling standup 640 acre units as Sanguine has requested
here. When asked if he meant a 9000' lateral he said that wasn't what he
meant, that other operators are drilling on a standup 640 acre irregular
horizontal unit and they are longer wellbores and he believes drilling longer
laterals will result in better recovery. Since the witness had used terms like "in
the future", "possibly", or "maybe", he was asked when Sanguine would know
Page 30
CDs 201200790 & 201202484
with any certainty how this interval should be developed and the witness said
that Sanguine plans to drill a well here as soon as the results of this hearing is
known and it is their intention to get a standup 640 acre irregular unit. He
explained that he is not the owner of the company and cannot make a call
regarding the length of the lateral and currently the company has not made a
decision as to the length.
Regarding the Brady #1-25 well in Beckham County, the Bank's
#4-15H well in Roger Mills County and the Sweetwater #3-24H well in Roger
Mills County and he was asked if those were the only horizontal wells drilled
and completed by Sanguine in Oklahoma and the witness said that there may
be one or two others, but those were a good representation of Sanguine's
horizontal drills in Oklahoma. He agreed their longest lateral in Oklahoma was
4905'. As to 22 other horizontal wells drilled in Wheeler County, Texas by
Sanguine it was noted to the witness that the Texas Railroad Commission
shows the longest lateral of those named wells was 4850' and he agreed
Sanguine's experience in lateral drills was less than 5000' in length. When
asked if today Sanguine wants to space and vest rights based on the idea that
someday in the future they might be able to double the lateral length of their
wells, the witness said they were hopeful in that.
As to Mr. Owens' testimony regarding Mewbourne's concerns in
drilling a lateral beyond 4500' in length he said Sanguine also had those
concerns. He said he did not speak for the company in terms of stating
whether or not Sanguine would drill an 8000' lateral; however Sanguine
believes today it can be done and they have the technology for a length of
lateral like that and that is why he keeps saying they possibly will do that, it's
not because he doesn't think it's possible technologically. He acknowledged
that he is the only technical witness to appear and Mr. Grimes could not ask
Sanguine owners their plan for longer laterals, which would justify their
requested unit size here. He reiterated that Sanguine knows they can drill that
length, but the decision to do so has not been made. He previously indicated
that part of the issue here for drilling this length of lateral would be economic,
however he could not state what the costs would be, that he is a geologist, not
an engineer. However Sanguine does believe the available reserves would
justify the drill here as they are requesting; that at this point there is no proof
that drilling this well as Sanguine has requested would not be merited. He
Page 31
CDs 201200790 & 201202484
Mewboume & Sanguine
denied that this was an experiment Sanguine wanted to pursue and they
needed an irregular unit to do so, that Sanguine wants the opportunity to drill
this lateral length and if they do they may find the numbers so improved in
their return that this type spacing might become their standard.
He agreed in the nine section area Mewbourne already has a
horizontal Cottage Grove in Section 29 and Sanguine has an interest in that
well and has received daily information on it until about four weeks ago and
the reports were good and Sanguine was excited about the Dotson well. He
agreed Mewbourne had drilled a successful Cottage Grove horizontal well in
Section 29; he understood they wanted to drill two more horizontal wells, one
in Section 21 and one in Section 28 each with about 4100' laterals for a total
length of 8200' and they had also furnished the cost for drilling each of those
wells in earlier testimony. It was pointed out evidence showed Mewbourne
could economically drill a 4100' lateral successfully and he said Sanguine
could do that also. When it was noted that Sanguine wanted to establish an
irregular 640 acre unit in order to drill a longer lateral, the witness responded
that Sanguine's wells could be 4100', 5000' or 9200', that they believed the
Cottage Grove is a good target and this is a good time to try the longer lateral
development if possible. After several questions about whether Sanguine had
identified their target zone within the Cottage Grove, he finally indicated that
their target would be within the Cottage Grove "A" and for Unit #2 (E/2 of 21
and E/2 of 28) that would be the 40' from 8630' to 8670'. He said if their
lateral is a mile long that they would be able to stay within that 40'; that
Sanguine has never asked him to refine it down to a 8' to 10' target.
When asked about his time frame for the improved technology for
drilling these longer laterals that he had previously referenced, he said
Sanguine has not tried to space irregular units like this or drill such long
laterals, but they have seen other operators do that in this general area and
Sanguine is interested in doing that. When asked what other operators had
done that, he said he could not say, nor could he tell what counties those
drillings occurred, nor could he say the lateral lengths, although he did think it
was to one of the Upper Pennsylvanian sands. After several questions
regarding his comment about Mr. Medina's map not being for the entire
Cottage Grove common source of supply of supply, he finally admitted his
mapping also did not cover the entire Cottage Grove sand, that the "B" interval
Page 32
CDs 201200790 & 201202484
was not included. When asked where the closest Tonkawa horizontal wells
would be in relationship to Section 28 he said it would be about 10 to 15 miles
away from here; that Sanguine does not operate nor participate in those wells.
That he did not know the lateral length of those Tonkawa wells nor if those
wells were drilled on irregular stacked 640 acre units as requested here. Since
he had not testified whether the Tonkawa was oil or gas productive in this area,
he said the wells that have come in have been significant oil producers and
significant gas producers so it kind of depends on where they are located. The
nearest Tonkawa producer straight hole in this area is in 15N- 17W and it is oil
and probably gas and gas condensate production. He understood for oil
horizontal spacing that they need to establish the Tonkawa will be productive
of oil and he said that they don't know that until they drill and test the well.
He was asked in summary if he was testifying that they don't know the lateral
length, which will be proposed if they get this unit, that Sanguine has no well
plan at present and they do not know the well cost or have any kind of
economic review and he agreed that was the case. He also agreed that with
this lack of information Sanguine is seeking to space an irregular unit in the
hopes that in the future there will be improved technology to drill longer
laterals.
C.
On redirect the witness testified that the top of the
Cottage Grove was at 8610', the top of the Douglas (Upper Tonkawa) was at
7192' and the top of the Tonkawa (Lower Tonkawa) was at 8456' and all of
these intervals are oil and gas productive. It is Sanguine's plan for Unit #1 to
drill part of the lateral in the W/2 of 21 and part in the W/2 of 28, but he
didn't know the length that would be drilled; that he personally would
recommend Sanguine drill a well in Unit #1 as close to the western boundary
as legally possible because that would be close to the Dotson well as a control
point. Mr. Medina had said Mewbourne's location in Section 28 was picked to
stay close to the Coit ft 1-28 well in the E/ 2 of that unit but the witness did not
think the Coit well was the best control; that Sanguine believed their Section
29 control at the Dotson well was good for a successful Cottage Grove well. If
Sanguine's spacing is granted their location will not be an off pattern well; he
opined there was no greater risk in drilling at a legal location in their proposed
Unit #1 compared to Mewbourne's requested location exception for Section 28.
As to Sanguine horizontal drills in Oklahoma and Texas, he acknowledged the
Page 33
CDs 201200790 & 201202484
longest lateral they had drilled in Oklahoma was 4509' and the longest in
Texas was 4851'.
Over the lunch break the witness checked for wells drilled recently
with laterals greater than those lengths drilled by Sanguine; in Section 11-8N12W Caddo County Chesapeake drilled the Guy BIA #1-H well to Section 2 with
an 8237' lateral in the Hoxbar. All Sanguine's Wheeler County, Texas wells
were successful so he did not consider a 4800' lateral as an experiment. He
believed economics did play a role in lateral lengths; their straight holes are in
more permeable formations, but the horizontal wells are drilled in rock which is
so tight that the longer the lateral the more successful the well; they have had
great success with their horizontal wells. That it is just a matter of time before
Sanguine drills a lateral over 5000'.
Since their target interval in Unit #2 was 8630' to 8670' he was
asked what it would be in Unit #1 and he said that in Section 28 the target
would be 8630' to 8670' and in Section 21 it would be from 8630' to 8680'.
Although on cross Mr. Grimes indicated in his summary that costs would be an
issue in determining spacing size, he disagreed that it was an issue in spacing,
that spacing is to determine the top and bottom of a zone and the configuration
of a unit for development of that zone. In summarizing Sanguine's position
here, he said they believed their requested irregular 640 acre horizontal unit
would allow them to optimize recovery and ultimately get reserves efficiently
and avoid economic waste; due to the nature of the rock this type of
development could speed up the return on investment and help recover costs
more quickly and encourage development in the area.
After spacing is established and development occurs, sometimes
there is a need for additional wells to more completely develop the spaced unit,
that is part of the evaluation process. If Sanguine gets their requested spacing
and drills their initial well with a lateral in the range of 5000' in the west part
of Unit #1, that if technology improves it might be possible to drill one, two or
three additional wells based on the need and they might be longer lateral wells
based on technology. From experience Sanguine sees a larger capture rate
with horizontal wells so hopefully they would need to drill less wells with better
capture by the initial well.
Page 34
CDs 201200790 & 201202484
D. On recross he was again asked where Sanguine
intended to drill a well and he said it would be in the W/2 of Unit #1 at a legal
location, no closer than 660' to Section 29; that he couldn't speak for the
company about the distance to the eastern boundary, that it would be
Sanguine's call on that. It was noted to the witness that based on the spacing
Sanguine has requested that they are limited on where to locate wellbores on
east-west basis if density wells are necessary and he was asked if Sanguine
obtained their spacing and drilled a well at a location somewhere between 660'
and 1320' from the western unit boundary of their proposed unit where they
would put a density well to the east and his response was that each well that is
drilled limits the location of any density well after that. That Sanguine's
requested stacked 640 acre irregular unit does eliminate a portion of the
middle of each section but he noted that they were gaining flexibility northsouth; when questioned further about this he finally admitted that the eastwest flexibility was more limited for density wells in Sanguine's proposed unit.
Asked why Mewbourne's requested regular 640 acre horizontal spacing
wouldn't then be better, the witness said Sanguine's 640 acre standup long
unit would have a new set of conditions so in the beginning drilling these
irregular 640 acre horizontal units would be different from normal, but after a
while it would become normal; that there was a process in trying to see if units
like this would work. If in the future they drilled these irregular units and
found three wells were necessary for the Section 28 area, he was asked where
they would drill the third well and in which unit and he said they could in fact
drill four wells in those two stacked units and that would be better than
drilling four wells in those two 640 acre units as proposed by Mewbourne.
When it was noted that he didn't know the cost of any of those wells he said he
couldn't speak to costs. On direct there had been questions about economics
and speeding up the rate of return on investments; he agreed the calculation
for a rate of return on investment includes well costs and therefore he had to
know costs in order to talk about increasing or decreasing the rate of return on
investment. As to the one well that had been drilled in Oklahoma that was
over 8000' in lateral length in Caddo County, the witness noted that there are
other wells to the Woodford that Newfield had drilled over 8000'. He did not
know the well cost for Chesapeake's 8237' well nor did he know the well's
production. When asked how he could say if it was economic or not without
knowing that, he said it has been Sanguine's experience that the longer the
well lateral the better the production. As to Chesapeake's 8237' lateral well as
Page 35
CDs 201200790 & 201202484
support of Sanguine's case here, for which he did not know well cost nor
results, he said that testimony was evidence that this case is not experimental.
The drilling of this lateral length has been done although Sanguine hasn't done
it yet. When asked if he was saying their spacing should be granted because it
is possible to drill this type well, even though they don't know well cost or if the
drill will be economic and he said they believe the Cottage Grove underlies
these sections and they are trying to figure out if drilling a longer lateral will
help them capture reserves quicker and more efficiently.
Asked if the Wheeler County Sanguine wells had an average lateral
length of 3536'; he responded that he is in every one of those wells and the only
wells drilled shorter than a 4100' lateral length are wells drilled on 160 acre
units. The question was then repeated to the witness about the average lateral
length of 3536' and he then said he had no way of knowing. Sanguine wanted
the proposed well for Unit #1 to be near the Dotson well for control; he
admitted such a well near the Dotson could also be drilled on a regular 640
acre spaced unit for the Cottage Grove in Section 28. He had heard
Mewbourne obtained a location exception for the E/2 of Section 21 for the
Cottage Grove. Both Mewbourne's locations in Sections 28 and 21 would be no
closer than 660' from the east boundary of those sections; he agreed they could
also drill a location exception in Section 28 close to the Section 29 control.
When it was noted Mewbourne indicated the length of their
laterals, potential locations and the costs of those wells, but they had none of
that information regarding Sanguine's proposed wells, the witness responded
that Sanguine has a number of economic wells drilled in the Texas play,
although he cannot specify the costs of those wells, that he is not an engineer.
That Sanguine would be willing to furnish the cost information when they come
to a pooling hearing.
On further direct regarding his initial testimony about
E.
the experimental nature of these longer laterals, he said the Chesapeake well
which is over 8000' in length showed the industry is improving in the drilling
technique, that experimentation is now becoming fact. Sanguine's proposed
unit and the drilling of a much longer lateral can be done and they would like
to encounter this possibility for development. Regarding the average length of
the Wheeler County Sanguine drills at around 3500', he explained when they
Page 36
CDs 201200790 & 201202484
drill a 160 acre unit horizontally they are limited in lateral length; that Mr.
Grimes did not question him about the lateral length of the wells in the 640
acre units in Texas. In Unit #1 Sanguine would drill their well near the
western unit boundary to be near the Section 29 Dotson well; that if Sanguine
can drill their Unit #1 well as proposed it will cover parts of Sections 21 and 28
in the W/2 but he did not know the length of that proposed well nor the
amount of lateral to be drilled in the W/2 of 28, nor the length of lateral to be
drilled in the W/2 of Section 21.
He agreed Sanguine had more north-south options for a long
lateral in their proposed irregular horizontal unit, but for a regular 640 acre
horizontal unit there would be more east-west flexibility. He believes Sanguine
can drill laterals over 4800' now; that other operators have drilled over 8000'.
As to including economics in a spacing application as Mewbourne has tried to
do here he said Sanguine believes the economics warranted the drilling here or
they would not want to drill the well or space it as they have requested.
9.
The AU took the cause under advisement and closed the
record.
RECOMMENDATIONS AND CONCLUSIONS
After taking into consideration all the facts, circumstances,
evidence and testimony presented in these causes, it is the recommendation of
the ALl that Mewbourne's application in CD 201200790 seeking to space the
Cottage Grove in Section 28 on a horizontal basis be granted. That the top of
the Cottage Grove be determined to be found at 8515' and that the legal
location for the horizontal spacing of the Cottage Grove be no closer than 660'
from any unit boundary. It is the further recommendation of the ALl that
Sanguine's application in CD 201202484 seeking irregular horizontal 640 acre
units covering Sections 21 and 28 be denied. It is the opinion of the ALJ that
both Mewbourne and Sanguine presented evidence to show that Section 28
and Section 21 are underlain by the Cottage Grove and that the Cottage Grove
is a good candidate for horizontal development. Sanguine's plan of
development as first presented was for a very long lateral, but later testimony
revealed that the lateral length could be much shorter and at the present time
Page 37
CDs 201200790 & 201202484
there was no plan by Sanguine regarding a specific length or location for
drilling their proposed irregular units. On the other hand Mewbourne
presented evidence of a more specific plan with a projected lateral length,
location, and type of completion. The first horizontal Cottage Grove well in the
nine section is a recent well drilled in Section 29 and it appears to be a
successful completion and was drilled by Mewbourne in a manner that they
indicated will be used for their proposed development in Section 28.
Additionally Mewbourne has moved forward to obtain a location exception for a
horizontal Cottage Grove well to be drilled in Section 21 also in a manner that
they have proposed in Section 28. Mewbourne has more extensive experience
in horizontal wells, particularly in Oklahoma, than Sanguine has. Sanguine
indicated that they hoped to one day drill laterals ranging in the 6000' to 8000'
range, but they have never done that, nor was their witness able to commit
that the company would do that. A couple of other operators have drilled
laterals in Oklahoma in the 8000' range but not in this area and not in the
Cottage Grove. It was noted by Mewbourne that the Cottage Grove has ductile
shales which can make controlling the bits in longer laterals more difficult and
more risky. The AW is not persuaded by the testimony that Sanguine has a
clear plan to develop their proposed irregular 640 acre horizontal units with as
a long lateral as 6000' to 8000'. Sanguine's testimony indicated a "hope" to
"someday" try drilling a lateral 6000' to 8000' given improved horizontal drilling
and completion techniques. Mewbourne not only has vast experience in
drilling 4000' plus laterals in 640 acre horizontal units, they have recently
done that in an offset and have a proposed plan to do that here in Section 28.
The ALJ found Sanguine's plans too nebulous and indefinite to support their
request here.
It is the opinion of the ALJ that the proposed 640 acre horizontal
unit spacing for Section 28 would allow more flexibility in placement of later
wells if density development proves necessary. This would allow for more
efficient later development and avoid waste. The requested irregular 640 acre
horizontal units allowed little east-west flexibility in the event Sanguine
obtained their spacing and then failed to drill the long lateral they said they
might someday attempt.
Page 38
CDs 201200790 & 201202484
The testimony regarding the Tonkawa was very limited and the AU
cannot recommend the requested Tonkawa spacing.
RESPECTFULLY submitted this 30th day of July, 2012.
Susan R. Osburn
Administrative Law Judge
SO: ac
xc: Richard A. Grimes
Eric King
Mack M. Braly
Office of General Counsel
Michael L. Decker, OAP Director
Oil Law Records
Court Clerk - 1
Commission Files
Page 39

CD 201200790, 201202484 - Oklahoma Corporation Commission

Transcription

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