Stetson Mercury Prospect

The Mercury Stetson Prospect contains two of the premier shale formations in the US – the Woodford and Barnett shales – in geological extensions of the core producing areas in the Arkoma and Fort Worth Basins.  The Barnett and Woodford shale formations have been at the heart of the incredible growth in US shale gas production over the past ten years.

This project is particularly exciting as it includes both the Barnett and Woodford shale formations in a single project area.  The production from both these formations has been extensively demonstrated, and the properties of the shale in the project area are consistent with the best of these.”

The gas in place in this project area is massive, and given the proven recoveries seen by other operators in both shales, this project has the potential to be a multi TCF resource with the presence of both shales improving the potential economics.

The key well on the Mercury Stetson Prospect was drilled in 1978 before the development of any of the shale gas plays in the US. It identified that both shales present in the well had the same log signatures, geochemical characteristics and thicknesses as those found in the core producing areas of both the Barnett and Woodford shales.

The prospect is located in a small pocket in between two uplifted areas, the Muenster Uplift to the south (which provides the northern boundary of the Fort Worth Basin), and the Arbuckle Uplift to the north (which provides the southern boundary to the Arkoma Basin).  The presence of both these shales within this pocket has not been commonly recognised, as there has been only the one historic well which penetrated the formations within the prospect area.

The preliminary extent of these formations has been mapped via existing seismic, however additional seismic is required to fully define the prospect area.

Figure 1 : Stetson Location Map

Barnett shale

The Barnett shale was the first recognised shale gas play in the world and has a proven production history in the Fort Worth Basin.

Evaluation of the 1978 well drilled on the Mercury Stetson Prospect has identified a total of 415 ft of Barnett shale and has similar thickness, total organic content, maturity and mineralogy to the Newark East Field, the core area in the Fort Worth Basin immediately to the south of the Muenster Uplift.

There are over 14,000 gas wells in the Fort Worth Basin.  Publicly available data indicates that the average Barnett shale well has an Estimated Ultimate Recovery (EUR) of more than 3 BCF per well in the core area.  Operators within the core areas have been increasing the predicted recovery factor of the Original Gas in Place (OGIP) from 15-20% initially to as high as 40% in recent times with well spacing being decreased.

Figure 2 : Stratigraphy in the prospect area compared to Fort Worth Basin

Note: TOC results are from cuttings – Actual TOC expected to be ~ 100% higher based on experience with analysis of results in the Barnett shale.

Woodford shale

Whilst the Woodford shale has only more recently been developed, it is also one of the premier shale plays in the world and has a proven production history in Oklahoma with over 500 producing wells.

The same well also intersected 180ft of Woodford shale which had similar total organic content, maturity and mineralogy to the Woodford production in Arkoma, Anadarko and Ardmore basins in Oklahoma.

Future Plan

The initial focus of the Joint Venture is to extend and renew the existing leases across the area to provide control of the prospect with long term leases. This is expected to take 3-4 months.

Once this has been substantially completed, the first operation will be to re-enter the existing well on the Mercury Stetson Prospect and redrill through the Barnett and Woodford shales.  Modern electrical logs will be run, sidewall cores collected and geochemical analysis performed.  The well will be fracture stimulated, completed and connected to a nearby sales gas pipeline.  This well is planned to be drilled in late 2011 or early 2012.

A seismic program will be run in early 2012 to assist in delineating the geophysical features across the prospect.

A second well be drilled during the course of 2012, following a review of the data from the first well and the seismic data.

In the event that the Phase 1 exploration program is successful, the Joint Venture Agreement provides for a joint Phase 2 program to further explore the prospect.