Now
that independent wildcatters have proved the Barnett Shale natural
gas field is so vast and rich, it's beginning to attract some bigger
players. Driller Eric Vernon works at a Chief oil rig site in Azle.
Chief is the No. 3 producer of the Barnett Shale.
The turning point came this year as Royal Dutch Shell PLC and Marathon
Oil Corp. each bought operations in the North Texas field. With a
couple of big leases up for sale in coming months, other energy multinationals
are expected to search for drilling opportunities in the cow pastures
and suburban back yards of the Dallas-Fort Worth area. "Everybody's
been traveling to the far reaches of the world. Lo and behold, they've
been sitting on this the whole time," said Joseph Christopher,
president of Oil America Group, which finds financing for a tiny independent
producer in Mineral Wells.
Experts anticipate some leading producers - perhaps even giant Exxon
Mobil Corp. - will swoop in, potentially reversing a decades-old trend
among major firms to shift operations off of U.S. soil.
"The Barnett Shale is the modern natural gas equivalent of the
East Texas oil field," said Trevor Rees-Jones, chief executive
of Chief Oil & Gas, the No. 3 producer of the Barnett Shale.
Some independents welcome the added attention. Mr. Rees-Jones, for
example, stands ready to sell his leases and wells and start over
from scratch. But the global players also could shake up traditions,
including the network of relationships that independents have built
in local communities over the years. "People like doing business
with people they've known," said Mr. Rees-Jones.
Major source
A
formation composed largely of tight, black rock, the Barnett Shale
represents the energy industry's largest and most active domestic
play in natural gas.
The field - which extends from Denton County south to Hill
County, and as far west as Palo Pinto County - supplies more than
2 percent of the natural gas used in the United States.
"It's living up to its hype," said Jack Lafield, executive
vice president of Crosstex Energy, which operates natural gas pipelines
in the Barnett Shale area. Mitchell Energy first drilled the Barnett
in the early 1980s, as founder George Mitchell experimented with technology
to fracture the tight shale and release natural gas. Devon Energy
Corp. bought Mitchell in 2001 and kicked off the Barnett rush as the
company developed new drilling techniques and became the largest producer
on the field.
In the past four years, more than 100 independent producers have risked
their fortunes, and sometimes their lives, for the thrill of hitting
it big on the Barnett Shale. The Barnett attracts wildcatters because
the technology to drill and crack the shale is relatively simple.
With natural gas prices near record highs, even a low-producing well
can make money for a small company.
"Barnett is actually a pretty low-risk operation. You'll nearly
always get some gas," said William Fisher, dean of geosciences
for the University of Texas. "Small increment yield is normally
more profitable to small operators." But some analysts say the
way to make the most of the Barnett field is to acquire a huge tract
of land, increasing the odds of hitting a sweet spot. In August, Shell
acquired 25,000 acres in Parker County to explore the Barnett. The
company says it's interested in diversifying its portfolio with "a
fast-growing North American resource."
And last week, Houston-based Marathon said it had acquired Barnett
leases as well.
Officials at Exxon Mobil declined to comment on whether the Irving-based
energy concern would be interested in Barnett. "If somebody who's
a bigger company, let's say a Shell or a company you might think of
as an international player, is successful in this bidding, that may
signal some of these companies that have spent the last decade or
so international, they may retrench and refocus on North America,"
said David Pursell, an analyst with Pickering in Houston.
Local relationships
A
major oil company, with few ties to North Texas, may approach the
Barnett Shale communities differently than the native independent
producers. The independents take pride in how they have educated residents
about natural gas fields, including how the rigs work, how long they
might be in use and how the royalty process works. They also address
environmental concerns.
Like many independent producers, Mr. Rees-Jones, a Dallas native,
knows many of his landowners personally and says some business has
come his way due solely to his reputation and network of friends.
Although the Dartmouth-educated former lawyer aims to sell his Tarrant
County leases and wells, he will probably keep the Chief brand (named
after his late Labrador retriever), retain his Highland Park office
and find new land to drill. Already Shell and other potential bidders
have called, he said.
Dallas/Fort Worth International Airport is also collecting bids to
lease mineral rights on its 18,000 acres.
Officials say the airport has received inquiries from both independent
producers and major oil companies. The airport plans to factor into
its choice whether the bidder is local or at least commits to hiring
local contractors.
A spokesman for Devon, still the largest producer of the Barnett,
said the Oklahoma City company is taking a look at Chief and is "monitoring"
the D/FW Airport lease process. Devon pays particularly close attention
to community relations, partly because of some water contamination
lawsuits against Mitchell, which were overturned.
The company instituted community education programs and scholarship
funds. When residents complained about ugly Devon equipment in their
neighborhood, Devon painted everything green to blend in.
George Jackson, an operations supervisor with Devon's Bridgeport office,
spends so much time with some landowners, he even knows what some
plan to do with their royalty payments. He said one landowner urged
him to begin production quickly so she could keep her promise to buy
her best friend a Cadillac.
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REPRINTED WITH PERMISSION OF THE DALLAS MORNING
NEWS.
THE DALLAS MORNING NEWS
11/29/2005
ELIZABETH SOUDER
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