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An Investing Primer on the Tuscaloosa Marine Shale
The Tuscaloosa Marine Shale is in Louisiana and Mississippi and is one of the most undeveloped shale plays in the United States today.
What is it?
What is it?Geology is comparable to the Eagle Ford, but with 90% oil. Unfortunately, it’s at depths of greater than 14,500 ft.
It hasn’t been developed until recently because it’s a technically challenging
formation. But, high oil content, promising well results, and proximity to the St. James
trading hub (higher price per barrel than WTI) makes it a very promising play
Photo Source: NASA
Loads of Activity in TMS
Photo Source: NASA
The Big Players
Photo Source: NASAPhoto Credit: Wes Peck via Flickr. com
Halcón Resources
Photo Source: NASAPhoto Credit: Wes Peck via Flickr. com
Halcón ResourcesWhat you Need to Know:• Halcón’s net acreage in Tuscaloosa Marine Shale—314,000 acres—
is greater than all of its other holdings combined
• Apollo Global Management recently bought $150 million in preferred stock for Halcón to develop Tuscaloosa Marine position, could become a $400 million deal
• Company has been searching for third position to supplement its production in Bakken/Three Forks and El Halcón (East Eagle Ford) for several years, looks like TMS could be that third play
Photo Source: NASA
Goodrich Petroleum
Photo Source: NASA
Goodrich Petroleum
Photo Source: NASA
Photo Credit: Wes Peck via Flickr. com
What you Need to Know:• Goodrich is the most levered company to TMS, acreage position 3x
larger than any other holding for the company
• 80% of 2014 capital budget dedicated to developing TMS ($225-$300 million
• Overall production at the company has declined since 2011 because company is shifting away from natural gas production in Haynesville-Bossier shale to more oil production from Eagle Ford and TMS shales
Encana
Photo Source: NASA
Encana
Photo Source: NASA
What you Need to Know:• ECA’s 200,000 acres is rather small position compared to its other
holdings in Canadian Shale (750,000+ acres in the Montney and Duvernay shales)
• Taking it slow in TMS, only $125-$150 million for 2014 while it de-risks acreage, about 5% of total budget
• Could become more important part of production portfolio as company shifts away from low margin natural gas to oil. ECA estimates its acreage could sustain oil production of 50,000 barrels per day
What does this all mean to me?
Goodrich Petroleum, Halcon Resources, and Encana have all posted very promising well results, suggesting that they have “cracked the code” in the Tuscaloosa Marine Shale. Each company is likely to hit some bumps along the road in developing this shale play, but long term it will likely provide each company with strong production similar to Encana’s estimate (50k bpd) in high-margin oil. For Goodrich and Encana, it will help to move their production portfolios away from gas and more towards oil. Halcón’s position should help it maintain its astronomical production growth
Photo Source: NASA
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