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N
orth
T
exas
E
nergy
O
utlook
Wednesday, October 29, 2014
By BARBARA GREEN
The news of the oil and gas boom in
America is not new, but 12 years into the
shale drilling revolution, there does not
appear to be a slowdown in site. Oil and
gas companies are projecting it will con-
tinue to be strong for another 20 years.
The Perryman Group, which did the
2011 economic study for the Barnett
Shale, updated its report in September
2014 showing how important one of the
first big shale plays has been to the Texas
economy and in turn the U.S. economy.
Ed Ireland, executive director of the
Barnett Shale Energy Education Council,
explains that despite reduced drilling and
fluctuating natural gas prices, production
remains stable and the annual gross prod-
uct has increased by $700 million since
the 2011 study.
Since 2001, the shale has provided
$11.8 billion in gross product per year
and nearly 107,650 permanent jobs. The
industry has been fantastic for the Texas
economy, one of the few states to thrive
during the great recession.
The state has added about 300,000 jobs
in the past year. Since 2010 the industry
has led to the creation of more than one
million jobs nationwide and cut $800 mil-
lion barrels a year off or our oil imports.
Retaining $200 billion a year in petro-
leum dollars in the U.S. instead of filling
the bank accounts of OPEC nations has
helped shrink the nation’s trade deficit.
The Barnett Shale covers more than
5,000 square miles and 17 counties. This
formation is believed to contain some of
the largest natural gas reserves in the
country, and thanks to the technology of
horizontal drilling and hydraulic fractur-
ing, it, and other shale plays have become
viable.
Since 2001, the Barnett Shale has
yielded more than 15 trillion cubic feet
of natural gas reports Perryman in the
2014 study. Oil production in 2011 aver-
aged nearly 20,000 barrels a day and
production in 2014 is averaging nearly
4,800 barrels a day.
Retail sales in Texas resulting from the
impact of oil and gas exploration, drilling,
operations, pipeline construction, mainte-
nance and operations, as well as royalty
and lease payments in the Barnett Shale,
are estimated at $30.8 billion, while gross
product was $120.2 billion, Perryman’s
report indicated.
Rigzone reports from the economic
activity provided by exploration and
production in the Barnett Shale, local
government entities receive more than
$480 million in annual tax receipts. While
the state receives nearly $645 million.
Energy production continues to play
a major role in Montague County ’s
economy. For fiscal 2012, oil and gas’s
share of total tax base in the county was
19.6 percent. The total tax base saw
1,507(millions); tax base oil and gas, 295
(millions); and tax levy oil and gas, 1.2
(millions). Statewide oil and gas made up
6.2 percent of the total tax base.
Energy company production and their
related entities continue to be the top
taxpayers in almost every entity in the
county.
For all the school districts inMontague
County, oil and gas taxes make up a large
amount of the tax base. For Prairie Val-
ley, oil and gas’ share of the tax base is
63.8 percent.
Saint Jo ISD is next at 33.4 percent;
Forestburg ISD, 27.8 percent; Gold-Burg
ISD, 25.3 percent; Bowie ISD, 8.3 percent;
and Nocona ISD, 7.1 percent.
While production can benefit a district
by expanding its tax base, it also can push
a district into a Chapter 41 School, where
it will lose state money due to generating
more local money. It is something of a
double-edge sword.
Barnett Shale oil production has gone
from 242 barrels (Bbl) per day in 2004 to a
high of 19,823 in 2011. In 2012 it dropped
to 12,180; 6,925 in 2013 and for January
to July 2014, 4,367.
Total natural gas production went
from 1,041 million cubic feet per day in
2004 to 5,683 in 2011; 5,743 in 2012; 5,347
in 2013 and it remains stable with 4,873
from January to July 2014.
While drilling activitymay have slowed
in Montague County based on statistics
from the Texas Railroad Commission
shows production remains strong.
County oil well counts as of Sept. 2014
total 3,393, which includes 2,579 regu-
lar producing, plus other shut-ins and
injection. Montague County is one of the
unique counties in the shale because it
has production for both oil and gas.
At the highest level during the last
10 years, the county produced 4,662,542
BBL in oil during 2011.
Since January 2004 to Septem-
ber 2014, the TRC reports Montague
County has produced 24,965,471 in oil
(BBL). 198,663,391 casinghead (MCF);
104,371,818GWgas (MCF); and 7,230,989
in condensate (BB).
From September 2013 to 2014, Mon-
tague County has produced 1,892,157
BBL in oil; 35,335,467 (MCF); 38,835,531
GWgas (MCF); and 1,862,545 condensate
(BBL).
The Barnett Shale still ranks in the
top three producing fields in the United
States and this production generates jobs
from the field to local restaurants.
According to the Barnett Shale Energy
Education Council website, drilling is
down because the price of natural gas is
much lower than the price of crude oil, so
drilling rigs have moved to where the oil
is: The Permian Basin in West Texas, the
oil window part of the Eagle Ford Shale
in South Texas and the Bakken Shale in
North Dakota.
Analysts indicate that prices more
than $5 per MCF will be needed for a
vigorous resurgence of drilling.
Pat Woods, vice president and general
manager, EOG Resources, Fort Worth,
says the Barnett Shale remains an im-
portant resource for the United States
and for companies with operations in
the area.
“While new drilling in the Barnett has
decreased somewhat in recent years due
to lower natural gas prices, the play con-
tinues to contribute significant volumes of
natural gas to heat our homes and gener-
ate electricity to keep the lights burning,”
explains Woods.
Tommy Fenoglio, longtime Montague
County businessman who also operates a
mineral lease company, says in his mind
the boom has just begun.
“The boom has only started, we have
a lot more productive zones we have not
even touched because we are only finding
them now,” said Fenoglio.
He continued that shipping natural
gas is going to be the next big thing and
he is not that concerned about a decrease
in drilling.
“It use to take a month to drill a hori-
zontal well, now it takes four to five days.
It also use to take 10 rigs to do what one
does now. The technology has changed
everything. I feel good about where our
county is right now,” concluded Feno-
glio.
Dr. W. Scott Meddaugh, a professor of
petroleum geology at Midwestern State
University, said production figures show
drilling has slowed and is being impacted
by the lower prices. Meddaugh calls the
Barnett “a mixed bag,” just like the Perm-
ian and Eagle Shale.
“If you have acreage in gas-rich por-
tions you may be rethinking the drilling
schedule in response to the price,” said
the professor.
Natural gas prices have been de-
pressed for a long time due to the supply.
Meddaugh said that is one of the reasons
producers are pushing to get permission
to export because prices on the world
market are considerably higher.
As for oil, he says the posted price has
fallen considerable also due to oversup-
ply; and when oversupply is real or oth-
erwise, producers with the highest costs
are affected.
Meddaugh continued that condensate
production has continued to rise as oil
production falls in the shale. There is a
demand for condensate so those portions
are actively drilling,
The Barnett Shale is a hy-
drocarbon-producing geologi-
cal formation of great economic
significance to Texas. It consists
of sedimentary rocks and the
productive part of the formation is
estimated to stretch from the city
of Dallas west and south, covering
5,000 square miles (13,000 km²)
and at least 18 counties.
Some experts say that the Bar-
nett Shale is the largest onshore
natural gas field in the United
States. The field name for the
productive portion of the Barnett
Shale formation has been desig-
nated as the Newark, East Field by
the Texas Railroad Commission.
Information from the
Texas Railroad Commission
Counties Affected
Core Counties
Denton
Johnson
Tarrant
Wise
Non-Core Counties
Archer
Bosque
Clay
Comanche
Cooke
Coryell
Dallas
Eastland
Ellis
Erath
Hamilton
Hill
Hood
Jack
Montague
Palo Pinto
Parker
Shackleford
Somervell
Stephens
Young
What is the
Barnett Shale?
History of the
Barnett Shale
John W. Barnett settled in the
San Saba County during late 19th
century and named a local stream
the Barnett Stream. In the early
20th century during a mapping
exercise, geologists noted a thick
black organic-rich shale in an
outcrop close to the stream and
named it the Barnett Shale.
The Barnett Shale has acted
as an important source and seal-
ing cap rock for conventional oil
and gas reservoirs in the area. It
was thought that only a few of the
thicker sections close to Fort Worth
would support economic drilling.
It was not until the 1980s with
new advances in horizontal drilling
and well fracturing technology used
by Mitchell Energy, a small inde-
pendent company, the potential of
the Barnett Shale was realized.
Significant drilling activity did not
begin until gas prices increased
in the late 1990s. Devon Energy
acquired Mitchell Energy in 2002,
and has established itself as the
leading producer from the Barnett
Shale.
The success that independents
have had in producing from the
Barnett Shale is beginning to at-
tract the interest of the large ma-
jors, like Exxon.
By BARBARA GREEN
A 2013 study, believed to be the most thorough assessment
yet of the natural gas production potential of the Barnett Shale,
foresees slowly declining production through the year 2030 and
beyond and total recovery at greater than three times cumula-
tive production to date.
This forecast has broad implications for the future of U.S
energy production and policy.
The study, conducted by the Bureau of Economic Geology
(BEG) at The University of Texas at Austin and funded by the
Alfred P. Sloan Foundation, integrates engineering, geology
and economics in a numerical model that allows for scenario
testing based on many input parameters.
In the base case, the study forecasts a cumulative 44 trillion
cubic feet (TCF) of recoverable reserves from the Barnett, with
annual production declining in a predictable curve from the
current peak of 2 TCF per year to about 900 billion cubic feet
(BCF) per year by 2030.
Analysts state this forecast falls in between some of the more
optimistic and pessimistic predictions of production from the
Barnett and suggests the formation will continue to be a major
contributor to U.S. natural gas production through 2030.
The Perryman Group study also looked ahead to the likely
benefits of continued exploration and production in the Barnett.
Shale. It estimates Barnett Shale activities will produce almost
$2 billion in real gross product and more than 23,000 person-
years of employment from 2014 to 2023.
Rigzone reports in the 10-year period of 2014 to 2023, activity
in the formation is projected to contribute more than $6 billion
for local governments, while the State of Texas could receive
nearly $8 billion, according to 2014 estimates.
The four core counties of Denton, Johnson, Tarrant andWise,
are likely to continue receiving the greatest share of benefits
from the Barnett Shale, but the entire region is expected to
benefit from exploration and production efforts.
EOG’s Pat Woods said with a large acreage position in the
Barnett Shale and a history of strong drilling results, EOG
expects to continue to be an active participant in the basin for
many years.
“The Barnett is a long-lived field with well-established pro-
duction characteristics,” stated Woods.
“Barnett wells will continue to produce for decades, delivering
ongoing revenues for royalty owners and important tax revenue
for local and state entities alike. Having ample supplies of do-
mestically produced hydrocarbons coming from resource plays
like the Barnett also promotes American security.
Future prospects
Status of the Shale