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Mid-Cities Tech Club December 3, 2008
Tarrant County Urban Drilling
22
Shale Plays
New Albany Shale
FayettevilleShale
Barnett / Woodford
Shale
FloydShale
MarcellusShale
BarnettShale
HaynesvilleShale
Woodford Shale
EaglefordShale
33
Barnett ShaleIndustry Overview
Average over 3.5 Bcfe/d – 30% annual increase(1)
Average household uses Mcf each month
Over 1,200 new completions reported in 2008
Major activity focused on Tarrant, Johnson, Parker, Denton, Wise, Hood, Hill and Erath counties
Peak at 5 BCFD in 2010-2012?
Jack
Palo Pinto
Erath
Wise Denton
Parker
Tarrant
Hamilton
Bosque
Johnson
Hill
Hood
Somervell
Ft. Worth
(1) Based on 2008 data provided by the Texas Railroad Commission.
44
Barnett ShaleContinuing to Grow
Total Newark east
field production
(gas & oil) from
public records
Denton/Wise
volumes flat
Tarrant surpassed
Denton & Wise in
March 2006
Johnson surpassed
Tarrant in
November 2006
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
00 01 02 03 04 05 06 07 08
MM
CF
ED
Wise Denton Tarrant Johnson Parker Hood Other
Source: Texas Railroad Commission
Regional Geology
WEST
ProductiveArea
Barnett Shale overlies Ellenberger formation
Ellenberger is water-bearing in this area
Geologic features such a faults allow potential communication between Barnett and Ellenberger
Viola formation acts as barrier between Barnett and Ellenberger
66
Barnett ShaleCarrizo Leases / 2008 Industry Completions
Jack
Hood
Somervell
Erath
Johnson
Hill
Parker
Tarrant
Wise
Denton
Carrizo lease
Industry completion
Ft. Worth
77
Barnett Shale Tarrant County Urban Development Overview
PantegoUT-Arlington
Fort Worth
DFW
Carrizo acreage
Existing drillsite
Completions
Permits
Pipeline
Future pipeline
Thickest most gas-rich part of the Barnett sits under the urban areas in SE Tarrant County
20 sq mile area with surface partially or completely developed
Most surface owners also still own the mineral rights beneath their property
Urban Drilling
Development of this resource not possible without horizontal drilling technology
Urban Drilling - UTA
Barnett Urban Project Lifecycle
Identify & acquire rights to drillsite
Lease mineral rights surrounding drillsite
Acquire subsurface seismic data
Formulate development drilling plan
Permit wells and facilities
Drill wells
Complete wells
Install facilities
Produce natural gas!
UTA Drillsite
1212
Urban Drilling - Project Leasing
Once geologic model confirms area as prospective
Carrizo uses company and third party land professionals to coordinate mineral leasing
In urban areas, drillsite acquisition most difficult - NIMBY
Typically business or PLM degreed individuals
Mineral leasing
– Negotiate the “lease” of minerals which gives operator the right to drill and produce the minerals under property
– Lease bonus – paid to lessor (mineral owner) up front when lease is signed; in Barnett as high as $6,000 for 0.2 acre lot
– Royalty – typically 25% of all gas produced by lessee (Carrizo); 2 – 4 times the lease bonus over life of well
– UTA lease paid lower bonus and higher royalty
– Lease in effect as long as well produces
Barnett Urban Project Lifecycle
Identify & acquire rights to drillsite
Lease mineral rights surrounding drillsite
Acquire subsurface seismic data
Formulate development drilling plan
Permit wells and facilities
Drill wells
Complete wells
Install facilities
Produce natural gas!
Barnett Shale
3D Seismic
Uses sound waves to create an image of subsurface
Mathematical model of how quickly various subsurface formations reflect waves created by seismic source
Receivers are placed all around source allowing modelling in 3 dimensions
3D Seismic
Faults
3D Seismic
Faults
Remember – faults in Barnett are a possible pathway into Ellenberger and water
Barnett Urban Project Lifecycle
Identify & acquire rights to drillsite
Lease mineral rights surrounding drillsite
Acquire subsurface seismic data
Formulate development drilling plan
Permit wells and facilities
Drill wells
Complete wells
Install facilities
Produce natural gas!
Development Planning
Engineers model projected reserves from each well
– Analysis of geology from other nearby wells
– How much gas is in-place and how much of it can each well produce
Engineers estimate the cost to drill and complete the wells
Engineers run economics to assess project viability
– Use computer programs
– Requires understanding of commodity market (natural gas)
Engineers get management approval to spend capital
1919
Urban Drilling - Project Permitting
Carrizo project engineers coordinate
Work closely with local municipality to secure approval to drill
Usually requires approval of city planning staff and city council
uses company and third party land professionals to coordinate mineral leasing
Very detailed ordinances address traffic, noise, safety, screening for drilling and production operations
Carrizo engineers must understand all facets of operations to prepare and get permits approved
NOISE SOURCEDECIBEL
LEVEL NOISE EFFECT
Jet takeoff (25 M) 150 Eardrum rupture
Aircraft carrier deck140 Earphones at high
levels
Jet takeoff (100 M) 130
Thunderclap, live rock music,120 Human pain threshold
Chain Saw, Steel Mill, Riveting, auto horn at 1 M110
Jet takeoff (305 M), outboard motor, power lawn mower, motorcycle, farm tractor, jackhammer, garbage truck
100 Serious hearing damage (8 hrs)
Busy urban street, diesel truck, food blender90 Hearing damage (8 hrs)
Garbage disposal, dishwasher, average factory, freight train (15 M)
80 Possible hearing damage
Freeway traffic at 15 M, vacuum cleaner 70 Annoying
Conversation in restaurant, office, background music60
Quiet suburb, conversation at home 50 Quiet
Library 40
Quiet rural area 30
Whisper, rustling leaves 20 Very Quiet
Breathing 10
Project Permitting - Noise
Project Permitting - Transportation
0
10
20
30
40
50
60
0 20 40 60 80 100
120
140
160
DAYS
Location Construction
Rig Move
1st Well 2nd Well 3rd Well 4th Well 5th Well
Rig Demob
Completion Ops
Tru
ck
s/D
ay
Barnett Urban Project Lifecycle
Identify & acquire rights to drillsite
Lease mineral rights surrounding drillsite
Acquire subsurface seismic data
Formulate development drilling plan
Permit wells and facilities
Drill wells
Complete wells
Install facilities
Produce natural gas!
Barnett Urban Project Lifecycle
2424
Drilling
Engineers design wells
For horizontal drilling, industry engineers have designed motors and mud systems to allow drilling up to 6,000 feet from surface site
Complex system of mechanical equipment integrated with computer technology allows drilling with minimal “footprint”
Engineers monitor ongoing daily drilling in real time to make sure wellbore is in correct location
Steering well complex – only possible with modern computing capabilities
Fracture Stimulation
Drilling rig is composed of Several Sections
– Power generation
– Derrick and draw works and sub structure
– Rotational system
– Drill string
– Mud system
– Well control equipment
– Pipe handling
– Living quarters
Drilling Rig
Fracture Stimulation
Rig is on a track which allows the rig to complete one well and commence drilling another in 4 to 6 hours vs. 3 days for a conventional skid move using bull dozers
Barnett Urban Project Lifecycle
Identify & acquire rights to drillsite
Lease mineral rights surrounding drillsite
Acquire subsurface seismic data
Formulate development drilling plan
Permit wells and facilities
Drill wells
Complete wells
Install facilities
Produce natural gas!
Fracturing Process
Fresh water
Sand
Friction Reducers and Stabilizing Chemicals
Combined in a
Blender
Transferred to pumps
with increase the pressure of the mixture
Mixture is pumped down hole and into the formation
causing cracks in the rock
The sand props the
crack open and provides a
conduit for gas to escape from the rock
Engineers determine how much sand and water to pump and at what rates and pressures to produce the most natural gas from each well
Fracture Stimulation
3131
Fracture Stimulation
Wellbore Pumped Frac Fracture Event
Fracture Stimulation
Barnett Urban Project Lifecycle
Identify & acquire rights to drillsite
Lease mineral rights surrounding drillsite
Acquire subsurface seismic data
Formulate development drilling plan
Permit wells and facilities
Drill wells
Complete wells
Install facilities
Produce natural gas!
Engineers design equipment for separation of gas from water and other impurities
Engineers design equipment for compression of gas for sale into gas pipeline
Engineers supervise construction and installation of these facilities at the wellsite after drilling and completion operations are finished
Production
Production