![]() It could take the better part of 2013 to understand how Chat wells will model when compared to the Lime. Other exploration and production companies are also in the area such as Austex ( OTC:ATXDF) and Evolution ( EPM). Current expectations are for better production with a higher oil cut. The companies will continue to drill and complete wells in the Chat, and are good ways to follow development of this source rock. The picture above shows three operators with acreage surrounding the Nemaha Ridge. Woods and Alfalfa counties seem to be a better area and Chesapeake's wells have performed better with less water and proppant. PetroQuest gets much better results when it uses more proppant and water. The Beast well is a very good producer, which used twice as much proppant than any other well and the most water. The Novotny well was a complete failure, but also shows we are getting a large mix of results throughout the play. The four wells above provide an idea of how water and proppant overall production. The table below shows its well results to date. PetroQuest's first eastern well only produced 320 Boe/d, while the second resulted in 661 Boepd. PetroQuest's wells in its eastern prospect have not been as good. PetroQuest's eastern acreage is near a completion of Spyglass that produced 1108 barrels of oil per day. Osage Exploration's (OEDV.OB) well produced 1185 barrels of oil in the first 24 hours. Devon ( DVN) has a completion that produced 960 barrels of oil per day. A Sandridge completion with an IP rate of 885 barrels of oil per day is near PetroQuest's western acreage. Range's completions are south of PetroQuest. PetroQuest Energy ( PQ) has 27000 net acreage near Range Resources prospective the Mississippi Chat. Current 3500 foot laterals are more profitable with an NPV10 of $8 million. 2200 foot laterals have an NPV10 of $4.8 million. The economics of the 3500 foot laterals are much better than prior completions using the 9/28/12 spot price. The table below shows this data with a varying crude price. Range IRRs are among the best in the Mississippi Lime. After one year, current wells are estimated to have 360-Day IP rates of an estimated 200 Boe/d. From 2009 to 2011, IP rates averaged 330 Boe/d compared to 480 in 2012. The increased production derived from these changes are increasing IRRs. Increased stages and total lateral feet continue to increase EURs. The table above shows how well designs have evolved for Range over past years. Range's Mississippian development has provided good results. This acreage is now considered to be the best in the play. The Chat has a combination of better porosity and oil cuts. This is near the Nemaha Uplift and is prospective both the Mississippi Chat and Lime. Its acreage is located in Kay and Noble counties. Range Resources ( NYSE: RRC) may be the best way to play the Chat. It is important to separate the Lime and Chat, as economics are completely different, and should translate to higher land values. Many of the players are getting higher liquids percentages and better IP rates. The Mississippi Chat seems to be a superior formation with respect to oil production. In parts 1 and 2 of this series, I covered some of the larger acreage owners in the horizontal Mississippian. When results are used from the Chat, some believe the entire play has this type of production. ![]() Production numbers are better as is oil cuts. This is the best producing area of the play. If Sandridge is correct, this play is gassier than expected which could significantly affect the economics of the play. Sandridge has drilled more horizontal wells and been in the play as long as anyone. Sandridge ( SD) recently reduced its crude EURs due to a higher depletion rate. It is possible this has more to do with the geology, but the play has not been developed enough to know for sure. It could be operator error, which will decrease as it gets comfortable in the play. I have gone through the Oklahoma Oil and Gas site, and operators are getting a wide range of results. There are a few reasons for this selling price. Generally, I believe acreage sells for what it is worth, as it was the best deal Chesapeake could get. It is possible Chesapeake was an overly motivated seller, but where were the other offers. The problem isn't the price it is the reason for it. This is one third the value some were placing on the deal. Chesapeake's ( CHK) recent sale of its Mississippi Lime acreage was valued at $2400/acre.
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