Southwestern Energy Co. may have found the best formula for making commercial, condensate-producing wells from North Louisiana's Lower Smackover.

The Houston-based E&P that founded the Fayetteville shale play in northern Arkansas in 2004 had revealed its Dense leasehold and two, initial horizontal wells in 2010 in the brittle, upper-Jurassic-age, basinal limestone that is mixed with shale and some sand.

With its eighth well, the vertical Sharp 22-22-1 1 last summer, it may have cracked the code.

“What do I tell you? We're almost ready to declare (it) commercial,” Steve Mueller, president and chief executive officer, said in an earnings call in early November. “We're getting close to knowing the key things needed to make it commercial …

“I believe we have a new discovery and our task … is to figure out how big.”

Sharp was drilled to 9,776 feet in Union Parish, La., which appears to host the greatest reservoir pressure and highest-gravity oil in Lower Smackover, which was laid down only some 150 million years ago. It came on with a peak rate of 600 barrels of 52-degree-gravity oil, which is condensate, and 1.3 million cubic feet of 1,240-Btu gas a day. After 88 days online by early November, it was flowing 530 barrels and 1.1 million cubic feet on a quarter-inch choke.

The science well was fraced in three stages along the 450-foot Dense section and propped with resin-coated sand using cross-linked gel.

The well’s flattening decline is promising, said Bill Way, executive vice president and chief operating officer. “We remain encouraged — I’ll change that to excited — about the work that's going on in (this) exploration program.”

Sharp followed five horizontal and two vertical trials, ultimately zeroing in on the center of Union Parish where Lower Smackover — the source rock for decades of Upper Smackover production — is at about 10,000 feet. Porosity ranges from 3% to 10%; permeability, from less than 0.1 to more than 1 millidarcy.

Its first attempt — the 3,700-foot-lateral Roberson 18-19 1-15H in Columbia County, Ark., where Dense is at some 9,200 feet and bottomhole pressure is 2,750 psi — came on in December 2011 for 103 barrels of 38-degree-gravity oil and 180,000 cubic feet of gas. It cost about $7 million and remained shut in as of mid-December.

Moving south into Claiborne Parish, its second horizontal, Garrett 7-23-5H 1, was also given a 3,700-foot lateral, but where the rock is at 10,700 feet. Costing about $7 million as well, it came on with 301 barrels of 50-degree-gravity oil and 1.7 million cubic feet of gas in 2012. Bottomhole pressure was 4,100 psi. It was shut in to assess reservoir pressure and while waiting for pipe.

Then, moving farther south, Southwestern went into Union Parish with its third horizontal, BML 31-22-1 H, completing it for a peak rate of 421 barrels of 52-degree oil and 3.9 million cubic feet of 1,220-Btu gas from a 19-frac-stage, 4,300-foot lateral where the rock is at 10,400 feet and pressured at 5,700 psi. In its first 30 days, the well averaged 353 barrels and 3.3 million cubic feet a day.

Mueller told securities analysts at the time that the pressure BML encountered was “completely unexpected…There have been over 30 wells drilled previous to us [in or through] Brown Dense. They hadn't seen the high pressure. None of those wells [had] seen the high pressure …

“It caught us off guard in our … thought process out there.”

The company changed up its science project then, completing a vertical, Johnson 21-22-1 1, two miles north to test more of the 450-foot-thick formation than a horizontal could test. Using linear gel in the frac, it screened out.

About six miles east of BML, the vertical Dean 31-22-1E 1 was soon completed with three frac stages, perforating a total of 12 feet of the rock, using white sand and slickwater. It came on with a peak rate of 214 barrels and 1.3 million cubic feet on a 10/64-inch choke. Bottomhole pressure was 5,000 psi. After 70 days online, it was making 110 barrels and 700,000 cubic feet a day from a 12/64-inch choke; bottomhole pressure had become 3,000 psi.

Going back to the BML well, it spudded the horizontal Doles 30-22-1H 1 off the same pad, sending a 4,700-foot lateral in the opposite direction, putting 22 frac stages on it and spending more than $12 million, including for some 55 drill days. It peaked with 435 barrels of 56-degree-gravity oil and 2.5 million cubic feet from bottomhole pressure of 5,400 psi on a 26/64-inch choke. After 95 days online, it was producing 240 barrels and 2.2 million a day at new pressure of 4,250 psi.

By August 2013, after some 290 days online, BML was making 104 barrels and 1.2 million a day; the vertical Dean, online for 155 days, was making 82 barrels and 509,000.

Southwestern reported, “The company remains encouraged by the flattening production profiles of both…wells.”

At press time, it had two more Union Parish verticals under way as well as a vertical trial northwest of there in Columbia County, where it had made its first Dense attempt with the horizontal Roberson.

Way said in the November call, “(We will) apply what we're learning from these vertical wells to see if we can unlock more contactable reservoir volume with horizontal wells in the future. We continue to test not only different completion techniques but also different theories in each of these wells.

“While I realize the results we are reporting to you are only on a few wells with short production histories, we're excited about the potential in the Brown Dense.”

Southwestern holds 475,000 net acres in the play at an average cost of $419 an acre with net revenue interest averaging 81%. Most of the leases have four-year terms with options to extend another four years.

Pre-dating Southwestern’s work in Dense was EOG Resources Inc., which attempted the horizontal Endsley 1-24H without success in 2009 in Lafayette County, Ark., in the northwestern corner of the Dense window. Southwestern bought the leasehold but has let it expire.

Cabot Oil & Gas Corp. tried a horizontal, Denny 1-32H, in 2011 in Union County, Ark. It tested 206 barrels a day and was temporarily abandoned when its permit to flare expired. New Orleans-based Ankor E&P Holdings Inc., a business of the Korean National Oil Corp. and Samsung Oil & Gas USA Corp., acquired the position.

Southwestern’s Dense condensate production is priced at a $10 premium to WTI. There are four refineries within the area with about 135,000 barrels of daily refining capacity, combined.

Mueller believes a $12-million Dense well is profitable if making 425 barrels and 4.2 million cubic feet a day at a market price of $80 oil and $3 gas. Into sales for a year, BML looked like “we will get our money back,” Mueller said.

The second vertical, Dean, “won't make much greater return but it will make a little bit of rate of return. And then you've got this [Sharp] well that we just drilled … . It had some issues that we had on the drilling side and we also (did) a lot of science [on it] but, at $10 million, this well still is above our … economic hurdle.”

One of the new verticals, Hollis 27-22-3 1, it has spud in Union Parish might cost less than $7 million to drill and complete “and we think we can get that down to $6 million … [for] high, high, 80%- [to] 90%-rate-of-return-type numbers.”

To date, the three best wells are verticals, he added. The company plans to continue to make verticals to accelerate its schooling in the rock’s mechanics for less cost than horizontals.

He estimates the high-pressured Dense area may cover some 150,000-plus acres but the super-high pressure might not be essential. “You always want higher pressure, but we just don't know enough about the whole area yet to know what works and doesn't work.”