Tuscaloosa Marine Shale Stocks

Brian Hicks

Written By Brian Hicks

Posted July 23, 2013

The Tuscaloosa Marine Shale (TMS) stretches across southeast and central Louisiana and southwestern Mississippi. Experts believe it holds at least 7 billion barrels of oil in its 2.7 million acres.

The TMS has been on the radar for decades, but the play carries most of its gas and oil at depths between 10,000 and 15,000 feet – something far too out of reach until recent years with the inception of hydraulic fracturing and horizontal drilling methods.

shale gas 19The exact amount of recoverable resources is still uncertain, but companies are revving up for what they believe is substantial; daily production levels are estimated right around 1,000 barrels per day for each producing well.

Making things even more fruitful, state officials in Mississippi have extended a tax break to all energy producers prepared to drill in the TMS in hopes of uncovering Texas-like results in both oil and natural gas. The state is so ramped up for oil that it’s dropped these companies’ taxes by a whopping 80 percent.

The Magnolia State expects a lot of commotion from companies vying for its coverage in the state and hopes for a flurry of activity that will bring businesses and jobs back to the state.

When I say “Texas-like results,” I’m talking about the Eagle Ford. The TMS is very similar in geological age and is close to the Gulf of Mexico. Better yet, the hydrocarbons found in the formation are of premium quality – sweet crude – that fetches top dollar on the market.

In theory, the Tuscaloosa Marine shale could be part of one continuous band of shale that connects to the Eagle Ford, and that would make them one in the same. Not all experts are sold on this, but wells are being drilled to find out.

The one certainty: about 7 billion barrels are in the ground, and they will make the TMS one of the most active shale plays in the United States for years to come.

Tuscaloosa Lease-holding Companies

Goodrich Petroleum Corporation (NYSE: GDP) out of Houston is fully committed to the Tuscaloosa Marine shale play. Things aren’t yet finalized, but the company is making a deal with Louisiana that would send $26.7 million to the state for a working interest in 277,000 gross net acres, according to nola.com. When the transaction closes at the expected date of August 22, it will bring Goodrich’s total net acreage in the play to 320,000.

Goodrich, in a first quarter earnings report last month, said it is expecting a big summer into fall for 2013.

The company also says the tax drop-off will benefit its bottom line and lower the cost per well. It’s started a new well, the Smith 5-29H-1 in Amite County, Mississippi, just east of its Crosby well, and it has plans to drill three more to be operated in 2013.

Encana Corporation (NYSE: ECA), which is running neck and neck with Goodrich, has stated that the 80 percent tax break will save the company between $700,000 and $800,000 of additional cash flows for each well it puts in operation after July 1, according to the Mississippi Business Journal.

Encana held 290,000 net acres though 2012, has six deep ground horizontal wells in place in the TMS, and plans for two more in this quarter.

Other companies active in the TMS include Denbury Resources Inc. (NYSE: DNR) and EOG Resources Inc. (NYSE: EOG).

Moving to Production

The Tuscaloosa Marine shale is currently in the developmental stage. While it still leaves a lot of questions and is underexplored, the place is on the verge of breaking out. Companies know where the hot spots are, and with all the talk swirling around its likeness to the Eagle Ford, it’s definitely headed straight for production. It’s just waiting for the clock to strike twelve.

Louisiana and Mississippi are set to see their economies soar as production levels begin to pick up, creating tens of thousands of jobs and raking in the money.

One significant advantage the two states already have is their amount of infrastructure that has been built over the decades. They have pipelines, refining, and workers that have experience with rigs.

Now it’s up to the companies to kick things off.


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