WOODBINE-EAGLE FORD ARKANSAS. Marion. Upshur. Harrison. Gregg. SABINE Panola UPLIFT Shelby. Rusk. Nacogdoches. San. Augustine Angelina. Sabine.

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1 EAST TEXAS WOODBINE-EAGLE FORD At the southern edge of the historic East Texas Basin, operators are discovering how to turn challenging geology into solid economic returns. ARTICLE BY STEVE TOON PHOTOGRAPHY BY MIEKO MAHI The Woodbine sands dipping south from the East Texas Basin and the Eagle Ford shale trending northeast overlap in Madison County, the epicenter of new drilling targeting both of these zones. lbarger Baylor han n lloch err Mason Bandera Brown Archer Eastland Gillespie Wichita Young Comanche Blanco Bexar Clay Jack eford Stephens Map Palo Pinto TEXAS Area O San Saba Mills Llano Kendall Erath 40 Miles Hamilton Lampasas Burnet Hays Comal Montague Coryell San Marcos Arch Guadalupe Wise Somervell Ah, East Texas in the springtime a vibrant green blanket of rolling hills laced with oak trees, abundant wildflowers splashed across fields, a warm blue-sky day with a cool breeze blowing and more than a thousand feet of potential oil pay down below. It doesn t get any better. The East Texas Basin Woodbine sands have been a long-time target of conventional oil producers, but down in Madison and surrounding counties, below the Angelina-Caldwell flexure, the unconforming sandstone interlaced with shale is significantly tighter and harder to produce than the historically prolific fields to the northeast. While attempted conventionally, much resource remains. In fields like Kurten and Halliday, developed with vertical wells in the 1970s and 1980s, typical wells flowed 50 to 75 barrels of oil per day, with total recovery of 37,000 barrels on average. But today, modern unconventional technology is being brought to bear. Led by private independents, companies are revisiting Bosque Bell Cooke Johnson Williamson Travis Tarrant Bastrop Caldwell Gonzales Denton Hill McLennan Milam Falls Grayson Dallas Ellis TEXAS Austin OKLAHOMA Lee Fayette Lavaca Collin Rockwall Limestone Brazos Grimes Burleson Colorado Fannin Kaufman Navarro Robertson Hunt Freestone Detail Area On Page 44 Washington Henderson Leon Madison Austin Waller Lamar Bowie Delta Franklin Titus Morris Hopkins Cass Camp Rains EAST Van Zandt TEXAS BASIN Anderson Walker Harris Fort Bend Wood Cherokee Houston BRAZOS Angelina-Caldwell Flexure BASIN Edwards-Sligo Reef Montgomery Red River Smith Upshur Trinity San Jacinto Gregg Rusk Polk Liberty ARKANSAS Marion Harrison SABINE Panola UPLIFT Shelby Nacogdoches San Augustine Angelina Sabine Tyler Hardin Jasper Jefferson Houston Chambers Newton Orange Galveston Galveston Source: ZaZa Energy Corp. LOUISIANA conventional Woodbine fields near historic production and turning in initial production (IP) rates ranging from 500 to 1,500 barrels of oil equivalent (BOE) per day in certain areas. Unconventional activity blossomed within Kurten Field in Madison County, where early-movers like PetroMax Operating Co. and Woodbine Acquisition Corp. attracted attention with 1,000-barrel-a-day and higher IP rates. Recently, operators have begun exploring deeper into the more shale-like rock, which is contiguous across the basin, with promising but varied results. The Eagle Ford shale, a star productive zone in South Texas, is present here. Large independents like EOG Resources Corp., Apache Corp. and Devon Energy Corp. have joined the small privates that re-opened the play, with drillbits aimed into this laminated shale interval. The East Texas Woodbine-Eagle Ford is, in fact, three emerging unconventional resource plays, with multiple oil-bearing targets adding to its appeal. In addition to the Woodbine sandstone and the Eagle Ford shale, a host of oilbearing targets exists in the Lower Cretaceous formations. Halcón Resources Corp. is the most active operator in the play with six rigs on the ground, targeting two of the intervals. This young company has quickly grown to a $5-billion enterprise value. Halcón president Steve Herod says the resource here is a pillar of the company s growth plans. The East Texas Woodbine and Eagle Ford are critical to what we re doing, he says. We have nothing but high hopes. Crimson Exploration Inc. chief executive and president Allan Keel is another satisfied customer. The economics here are very, very good, he says. With the success we ve had last year and so far this year, we feel this is going to be the cornerstone of Crimson going forward. One chief executive of a small, private company expressed this confident view: This play stands to be one of the best emerging plays in the U.S., considering the multiple oil- and gassaturated horizons in the area. We re looking at multiple millions of barrels of oil that we should be able to recover. We anticipate building our company around this.

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3 Crimson Energy chief executive and president Allan Keel says the Woodbine sands are going to be the cornerstone of Crimson going forward. Previous page, floor hands on Helmerich & Payne Rig #398 drill Bumble Bee 1H, targeting the Eagle Ford shale, for Halcón Resources Corp. in Brazos County, Texas. ZaZa Energy Corp. Halcón Resources EOG Resources BlueStone Crimson Energy Partners Crimson Exploration Devon Encana SM Energy Navidad Resources Woodbine Acquisition Corp. Halex Gastar Exploration Other With leases largely blocked up by now, both small and large operators are finding paydirt in the Woodbine sands, Eagle Ford shale and Lower Cretaceous trends. Crimson s sandsilt plays With 85% of its total budget aimed at the Woodbine sands in southwestern Madison County and northern Grimes, you could say Crimson Exploration is confidently putting most of its drillbits in one basket. The experience we ve had here in the last 18 months has been very positive. The recoveries we expect to receive from these wells are robust, says Crimson chief executive Keel. We think the economics in this play, when compared to other opportunities in our portfolio, are superior to anything in our inventory. Houston-based Crimson holds 19,000 net acres in three different areas of the play, about 6,000 acres each, of which more than half is a held-by-production legacy position. Its favorite and most active area, called Force, lies in western Madison County in Madisonville-West Field, and is offset by highly successful Woodbine Acquisition Corp. wells. Located in a field with historical vertical production, Crimson has drilled six wells here targeting Woodbine sands, with average 30-day IP rates of 900 BOE per day. We feel the Force acreage is completely proven, Keel says. Crimson s Force area is proving to be a sweet spot for the company. The latest two wells brought online illustrate the optimism. In early April, Nevell-Mosley #1H flowed at 1,164 BOE per day IP (1,021 barrels of oil, 77 barrels of gas liquids, 392,000 cubic feet of gas) Woodbine-Eagle Ford Acreage By Operator FALLS MILAM ROBERTSON BURLESON LIMESTONE Source: ZaZa Energy Corp., DrillingInfo TEXAS BRAZOS LEON from a 6,000-foot lateral with 22 fracture stages. It s about 90% black oil, Keel says. In 45 days it s produced over 44,000 barrels equivalent; we re very pleased with that. About two miles offset, Mosley B #1H, with the same length lateral and stages, flowed 1,143 BOE per day, and was holding above 1,000 daily barrels three weeks out. At $7 million per well and an average 400,000 barrels equivalent estimated ultimate recovery (EUR), Keel likes the 150% rate of return at current commodity prices. We re confident with the wells drilled in our Force area. Every well we ve drilled there is in line with our type curve. But Keel confirms that the stratigraphy in the sands varies, and the Force sand pinches out across a ridge moving east. The company s Chalktown area in this direction is prospective for a completely different Woodbine-age sand lens in the Lewisville formation. It s not homogenous. O ne well drilled here last year encountered mechanical problems, but showed oil. With an eye to producing wells drilled by third-party operators north and south of the block, Keel is not deterred. We are comfortable with the potential of Chalktown and plan to drill a well there this year, maybe more. We still need to do more work to prove Chalktown. Moving into Grimes County just south and down dip, production from Crimson s Iola- Grimes project is decidedly wet gas with condensate. Its second well there targeting Lewisville sand is producing 5.9 million cubic MADISON GRIMES HOUSTON WALKER MONTGOMERY Miles TRINITY SAN JACINTO

4 feet (MMcf) equivalent per day (4 MMcf of gas, 310 barrels of condensate and liquids) on a restricted rate, waiting on a refrigeration unit to process liquids. If we wanted to, we could produce that well at 10 million a day, he says. At least one more is planned this year. Crimson well costs have trended down 34%, now at some $6.5 million on the latest two wells, due partially to declining proppant costs, but also to fewer days drilling, from 35 to 27 typically. With one rig running, Crimson plans to drill an additional six wells this year, four in Force, and more if capital comes available. The company currently has $50 million in capex earmarked for Woodbine drilling, but hopes to refinance debt, sell equity or sell other conventional assets to extend the program. We want to improve our liquidity through one of these means because the economics are so good here, Keel says. Besides the Woodbine sands and when capital is available Keel sees upside opportunity in the laminated shale formations and the Lower Cretaceous zones below, namely the Buda, Georgetown and Glen Rose; he anticipates all to be horizontal targets. With nearly 500 locations identified in those three target zones, the company projects more than 110 million BOE of net resource potential on its Woodbine acreage. With three zones to pursue, it s like we have 57,000 acres, says Keel. The Woodbine is critical to our growth plans. With the success we ve had, we feel that this is the cornerstone of Crimson going forward. The Hawk Barely a year and a half old, Houston-based Halcón Resources Corp. has compiled a 270,000-acre position in the East Texas Basin and high-graded two of its related plays as top priority for capex and development, right alongside its more mature Bakken program in importance. The reason? Large pools of easily accessible reserves can be turned into cash flow quickly. It is a place where we could put together a large, contiguous land position where drilling costs are reasonable, says Halcón s Herod. We can have a program here ongoing for several years. And, of course, it s oily. H alcón is essentially a restart of the former Petrohawk Energy Corp., an early shale leader preceding its sale in 2011, and it is stocked with much of the same executive and technical team. The new company differentiates between the Woodbine sands and the East Texas Eagle Ford shale as strategically different plays, but the programs share rigs and capital. In southern Leon County, after testing the edges to delineate the commercial boundaries, Halcón now considers its Halliday Field in the Woodbine sand play to be substantially derisked and proven. With some 30,000 net acres concentrated here, the company is aiming for a 40-foot thick section of the upper Woodbine sands, the second sand below the base of the Austin chalk, beginning at 6,200 feet depth. Once it s defined, it s proven drilling, says Herod. Its economics compete with any other play for capital, and you can get great economics for the capital invested. Anybody would like something like that in their portfolio. Abundant vertical well control attracted Halcón, which acquired its position from privately held Fort Worth, Texas, companies Petromax Operating and CH4 Energy LLC, just a month after forming. The field had produced 2.2 mil- A mud engineer checks drilling fluid at Halcón Resources Bumble Bee 1H in Brazos County, Texas, one of the early wells in the company s El Halcón Field. Overleaf, a completions crew from Nabors Industries checks equipment between fracturestimulation stages on Hedge Hog 1H, an 8,000- foot horizontal lateral well for Halcón Resources in Brazos County, Texas, in the East Texas Eagle Ford shale.

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7 Halcón Resources executive vice president of exploration Charles Cusack says the Woodbine sands come and go across the play, and anticipates the company will find other deposits as rich in resource as its Halliday Field in southern Leon County. lion barrels of oil conventionally, about 50,000 barrels per well. We felt it was tight enough that you could come back in and exploit that with horizontal wells, says Charles Cusack, executive vice president of exploration for Halcón. Here at the southern end of the East Texas Woodbine sands, he says, the rock is of lower permeability than those produced further north, leaving more hydrocarbons behind. The vertical wells probably got about 3% to 4% recovery; we should be able to recover 20% to 25% with horizontal wells. But true to the varied nature of the Woodbine sandsilt, such rich deposits are contained within stratigraphic traps, and are not ubiquitous across a large geographic extent as are shale plays. It s not a resource play, Herod says. It s not like the Haynesville shale or (Eagle Ford) Black Hawk Field where you have 100 miles across. We had to drill some wells around the edges to better define it. A nd while not all the surrounding acreage will be as productive, once defined, he likes the results. As you get into the heart of the field, you have a well-developed sandstone. Pointing to a bulge in a gamma ray log, he says, That s the mother lode right there. First-quarter results averaged 438 BOE per day after 30 days. The company has drilled 51 horizontal wells to date 14 in 2013 with 36 on production. The average lateral length for wells completed year-to-date is 6,700 feet. Halcón models Halliday Field economics on 562,000 BOE EUR. That s more than half a million barrels for about $6.5 million or so (per well), a 130% IRR for $90 oil, Herod points out. That s plenty good. The company has averaged five operated rigs here in 2013 on a $390-million budget, with plans to spud up to 65 operated wells. With no expectation that every Woodbine sandstone acre in its portfolio will be equal, Halcón does anticipate finding other sweet spots across the play like Halliday. It is currently conducting a 330-square-mile 3-D seismic shoot across southern Leon, central Madison and northern Grimes counties to identify other stratigraphic targets within its broader acreage block. It s a different kind of play down here, observes Cusack. The Woodbine sands dip deeper into a bowl-like deposit moving south from Halliday Field. Each one of these plays is a little different, but we re optimistic we re going to have other areas of the southern Woodbine Halcón Resources, the leader in the play by rig count, models a 60% internal rate of return at $90 oil for Eagle Ford wells in its El Halcón Field in Brazos County, and a 130% IRR in Halliday Field targeting Woodbine sands in Leon County. East Texas Woodbine And Eagle Ford Type Curves Woodbine North Type Curve Detail (First 24 Months) El Halcón Type Curve Detail (First 24 Months) Halliday Field (Leon County, TX) Oil (Bbl/d) 200 Gas (Mcf/d) 100 NGL (Bbl/d) Months Source: Halcón Resources Corp Oil/NGL (Bbl/d) 200 Gas (Mcf/d) Oil/NGL (Bbl/d) 400 Oil (Bbl/d) Gas (Mcf/d) NGL (Bbl/d) Months Gas (Mcf/d)

8 that will work for us. In April, Halcón debuted El Halcón Field ( The Hawk ), a 50,000-acre play in northern Brazos County targeting the Eagle Ford shale at 9,000 feet subsurface. The Eagle Ford here is a cousin to its famous South Texas neighbor, a geologically analogous deposit east of the San Marcos arch, which divides the two. C usack describes the zone as a 200-footthick section with high oil saturation and good porosity overlaying the Maness shale. Unlike the sometimes fickle Woodbine sands, Halcón s East Texas Eagle Ford shale is homogenous like a resource play across a broad area. It was laid down like a blanket, says Cusack. It covers a large area and should be productive over most of it. The wildcard, though, is the reserves. Unlike the South Texas Eagle Ford trend, rock properties here are more varied, with a higher clay content and a mix of laminated sandstone. The reservoir quality of the rock is not as uniform, he notes. There s going to be some trial and error to define that. You have to work the details to understand where the better parts are. Herod is confident in the company s ability to do so, and on a wide scale, having been a technical leader in the original Eagle Ford discovery. Early announced results seem to bolster the claim: Two producing wells completed in 2013 average 1,028 BOE and 831 BOE per day for IP and 30-day rates, respectively, and are 90% oil. These are from 6,400-foot average laterals with 33 frac stages. We think we can repeat that, Herod says. Currently, seven Eagle Ford wells are producing, with seven more drilling or completing. The recently drilled Bumble Bee 1H, waiting on completion at press time, will have an 8,900-foot completed lateral, and is indicative of future wells. We feel good about 8,000- to 9,000-foot laterals here, he says. It s going to cost more than the 6,500-foot wells, but that s fewer verticals you have to drill to get the same lateral length and reserves. That s the best bang for the buck. These wells feature 371,000 BOE of esti- A Texas mesquite tree frames a Clayton Williams Energy Inc. producing well in the overlapping Woodbine and East Texas Eagle Ford plays in the pastoral setting of Brazos County.

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10 thickness. Yet it s the 150- to 250-foot section of silicarich, laminated shale immediately above the Buda that has attracted ZaZa s interest. ZaZa calls it the Lower Eaglebine. Our Lower Eaglebine is Halcón s El Halcón, says ZaZa chief executive Todd Brooks, clarifying the terminology. And it s very oily. W hile the sandsilt play being developed by others lies up hole, for now that remains upside only to ZaZa. The sands are not continuous, although we have shows in them. We target the organic-rich shale because it s a continuous, repeatable opportunity with more storage capacity, says Brooks. Thomas Bowman, executive vice president of evaluation, geology and geophysics for ZaZa, adds, From all we ve seen, the potential has always been in that shale, the lower part. Right on top of the Buda is where the resistivity increases. Tests indicate the acreage will yield gas condensate or volatile oil, he says. By nature, it s a resource play; it has to work statistically. In December, ZaZa drilled its first horizontal well into the Lower Eaglebine at a vertical depth of 11,800 feet, but lost the lateral to a casing failure. The well has since been sidetracked as a vertical and is producing from deeper zones. The company s interpretation of the well log results using Schlumberger s ELAN analysis tool, however, indicated an estimated 21 billion cubic feet of gas and 29 million BOE per section in place, or 980,000 BOE EUR of recoverable reserves, based on a recovmated recoverable reserves, drilled for about $7.5 million each, a 60% IRR at $90 oil. Halcón s Eagle Ford oil is 40 API gravity, and receives a premium to the Nymex price. Halcón expects to drill 20 wells on a $100- million budget for the remainder of With up to 500 potential drilling locations, that s a lot of years of drilling. We re in development mode at this point, with multiple wells coming off of pads. Seeing the potential, the company is aiming to triple its current landholdings to 150,000 acres. This will be a core area for us, Herod emphasizes. We like it, we know it, and we think it s highly economic. It s a real building block for us. Betting on Eaglebine With its origins as a small, private start-up in the early days of the South Texas Eagle Ford shale, ZaZa Energy Corp., now a $200-million public company, is laying its bets on this East Texas play. The company was also a first mover in acreage acquisition here, having accrued some 140,000 gross acres concentrated in northwestern Walker County. ZaZa has since partnered with a large independent to help finance development of its position. ZaZa has its own nomenclature for its targeted intervals, dubbed the Eaglebine, which is a combination of the Eagle Ford and Woodbine groups and represents strata from the base of the Austin chalk to the top of the Buda lime. This interval contains conventional formations interlaced with organic-rich source rock. At its thickest, the Eaglebine can exceed 1,000 feet in Steve Herod, Halcón Resources president, reports two Eagle Ford wells drilled in 2013 in the company s El Halcón Field averaged above 1,000 barrels a day at initial production. We think we can repeat that, he says. Left, Halcón s Bumble Bee 1H is at 7,700 feet vertical depth and aimed at the Eagle Ford shale with a 9,000-foot lateral. Below, a floor hand readies pipe in the mouse hole.

11 ery factor of 18% to 20%. To accelerate development, in March, ZaZa partnered with experienced shale-player EOG Resources Inc. (disclosed via public filings, although ZaZa is contractually mum) in a threephase, measured joint venture that could potentially carry the smaller company through nine wells. If all options are exercised, EOG will receive, in total, up to a 75% working interest in 55,000 net acres in return for $50 million in cash payments, plus carrying ZaZa s well costs and a portion of ZaZa s other related work costs. The potential multiple-stage cash payments will allow ZaZa to continue to participate after our sequential carry runs out without having to immediately raise new capital. That, combined with the sales of select (South Texas) Eagle Ford assets, means we re fully funded for quite a while, says Brooks. T he first joint-venture phase involves $10 million in cash for 20,000 net acres and a three-well commitment, and the subsequent two phases are at EOG s election. Below the Eaglebine, ZaZa sees ample resource potential in the Lower Cretaceous formations including the Buda, Georgetown, Edwards, Glen Rose, as well as the Kiamichi GEOLOGICAL STEW Above top, ZaZa Energy Corp. chief executive Todd Brooks is focusing company resources on the Lower Eaglebine play in Walker County. The Eaglebine is the asset from which we will create our production base and grow this company. Above, Thomas Bowman, ZaZa executive vice president of evaluation, geology and geophysics, says, The potential has always been in that shale, the lower part. T he East Texas Woodbine-Eagle Ford geology is a swirl of Cretaceous rock gumbo. In a word it s complex. A mini-basin situated at the foot of the East Texas Basin, the Brazos Basin dips below the southern edge of the Angelina- Caldwell flexure, bordered by the Edwards- Sligo rim to the south, the San Marcos arch westward, and the Sabine uplift going east. The underlying Buda formation defines the bowl. It is the Cretaceous-period rock stew that creates confusion, both geologically and in nomenclature. According to a Core Laboratories Woodbine regional study, the sand bodies forming the Upper Cretaceous reservoirs are erratically distributed in the section and represent various environments from fluvial to marine, with stratigraphic fingers interlacing the strata. Within the basin lies an organically rich but unconforming sand and siltstone mix above the Buda limestone and below the Austin chalk. The lower portion, known as the Woodbine group, consists mainly of sandstone and shale of marine origin in this region of the East Texas Basin, according to a regional report by Scotiabank. The Eagle Ford group of formations overlies the Woodbine, and consists mainly of marine, gray to dark-gray shale with fine- to mediumgrained, porous to nonporous sandstone members. Formations include the Harris Delta and Sub-Clarksville. One active area targets productive sands at Kurten Field found in the upper part of the thick section of black marine shale of the Woodbine-Eagle Ford section, just below the Austin chalk, says Tim Pish, author of the Scotiabank report. The sandstone interval here is some 800 feet thick. Woodbine Acquisition, led by a team of former Encore Acquisition executives, turned heads with its Pavelock #1H that Eaglebine Cross Section WEST A Robertson Co. Brazos Co. Madison Co. Grimes Co. Walker Co EAST A ZaZa Energy defines the sandsilt zone beginning at the base of the Austin chalk, which trends to a laminated shale above the Buda limestone, as the Eaglebine. Below that, many have termed the Lower Cretaceous formations down to the Glen Rose strata as the Buda-Rose Woodbine Sand/Silt Play Lower Eaglebine Leon Robertson Madison A TEXAS Houston Walker Brazos Grimes Burleson Montgomery A Lower Cretaceous Upper Eaglebine Datum Base Austin Chalk Lower Eaglebine

12 and Paluxy shales. These form a column some 1,500 feet thick the Buda-Rose, per the company s lingo. The company s first well through the zone, at 13,500 feet total depth, was drilling and to flow back before publication. It s stacked pay and commingled zones in a vertical well, says Brooks. I m excited about the prospectivity of the Buda-Rose. At the heart of the play, ZaZa also holds up to a 100% working interest in approximately 20,000 additional net acres surrounding its two existing operated wells. Considering the combination of ZaZa s 100% acreage position with its partnerships, including a 25% interest held the program in second-half 2013 as it evaluates practices and results. We think we have some level of inventory, says Jeff Wojahn, Encana executive vice president and president of its USA division, but we don t know how good it is relative to something the company is going to pursue. We re testing that right now. E ncana s position encompasses 124,000 net acres, all held by production from its legacy Deep Bossier and Cotton Valley gas play in Robertson County. In 2012, the company drilled three wells into the shallower sandsilt portion of the Woodbine, averaging 200 BOE per day after 30 days. Since, it has turned its efforts to the deeper laminated shale, analogous to Halcón s Eagle Ford drilling, with five more wells on production and two completing. Results have trended upward, though not yet to the levels seen by neighbors south in Brazos County targeting the same zone. We ll look at a strategy of pursuing Woodtopped 1,800 BOE at IP. The lower Woodbine section consists of more shale, laminated with sand and clay, and is represented by formation names such as the Dexter shale, the Pepper shale and the Maness shale. It is this deeper, organically rich and more consistent interval that is recently attracting operators. Some operators reference these lower strata above the Buda as the Eagle Ford, a continuation of the South Texas shale, or lower Eaglebine, illustrating the commingled and undifferentiated nature of the Eagle Ford and Woodbine groups within the basin. A 2011 American Association of Petroleum Geologists study, Regional Stratigraphic and Rock Characteristics of the Eagle Ford Shale, by Tucker Hentz and Stephen Ruppel, describes this region where the Eagle Ford transitions into the Woodbine sands: The lower Eagle Ford shale interval continues from the northeast flank of the (San Marcos) arch into the southwest East Texas Basin, where the sandstone-rich Woodbine group occurs between Eagle Ford and Maness shale. With facies pinch-out of the Woodbine complex and its equivalent Pepper shale on the basin s southwest flank, however, the Eagle Ford mudrock lies directly above the Maness. Thomas Bowman, executive vice president of evaluation, geology and geophysics for ZaZa Energy Corp., says the Eaglebine is a consistent, thick section between the Sabine uplift and San Marcos arch. We re looking at a section that is more than 450 feet thick. Compare that with the thickest South Texas Eagle Ford at less than 300 feet. Dallas-based Weber Energy first targeted this interval, including drilling the Weber- Lewis 1H with a 30-day IP of 645 BOE per day, and subsequently sold its position to Halcón. Regardless of varied geology and nomenclature, one thing is certain: These rocks contain ample oil. by Fort Worth-based Range Resources Corp. in select acreage, ZaZa now books approximately 69,000 net acres in the play and growing. The Eaglebine is the asset from which we will create our production base and grow this company, Brooks says. Decision point Calgary-based Encana Corp., with a mission to transform its production mix via organically grown oil opportunities, has its drillbits in a number of exploratory plays in the U.S., including the Eaglebine in Robertson County, Texas. But the company is taking a cautiously optimistic approach, and has yet to commit funds to Halcón Resources Catfish processing plant, under construction in Madison County, Texas, will handle associated gas liquids from the company s Woodbine sands and Eagle Ford shale production.

13 Above top, Jeff Wojahn, Encana Corp. executive vice president and president of its U.S.A. division, estimates the company has 8.6 billion barrels of oil in place on its Robertson County, Texas, acreage. Above, in eastern Madison and western Houston counties, Texas, Navidad Resources LLC president and chief executive Harold McGowen took a different tack with great success, drilling vertical wells into the Buda- Rose series in the Lower Cretaceous. Excerpted from June 2013 Copyright Hart Energy Publishing LLP 1616 S. Voss Rd. Suite 1000 Houston, TX (713) bine sands, but the real prize for Encana is the Lower Laminate, says Wojahn. Our land base appears to be in the thick of the play, but we don t yet know whether the thickest part of the shale corresponds to the sweet spot of the play. For now, the company has sidelined activity targeting the sand play and is focusing on the laminate shale. Encana estimates resource potential of 25- to 35 million BOE per section in the Lower Laminate zone, double what it has identified on its developing Tuscaloosa Marine shale project in Louisiana. That s a lot, he says. It s a very thick, large resource play with an estimated 8.6 billion barrels of oil in place on Encana s land position. The latest two wells, Loraine McMurrey 1H and 2H, drilled in the first quarter with 8,300- and 6,500-foot laterals, produced 483 and 387 BOE per day (80% oil) on 30-day rates, for an EUR of up to 426,000 BOE in the Lower Laminate. Wojahn believes he can improve that, but the clock is ticking. We re still working on unlocking the completion technology, he says. We ve drilled very long laterals with a high number of stages in the Loraine McMurrey wells, and we re trying to push that even further to improve the economics and demonstrate a higher level of commerciality. Encana sets a minimum bar of 20% returns before commercializing a project, and we re not there yet, he admits. The latest wells averaged $7.5 million, and Wojahn would like to see results closer to 550 to 600 barrels per day. We haven t yet drilled wells that would be competitive in Encana s portfolio. The subsequent Weaver 1H and 2H flowed between 400 and 500 BOE per day in their first seven days online, and two more wells were queued up during the second quarter. After those, Encana will pause to evaluate the program with 1,150 identified locations on a portfolio-wide basis. A vertical twist While surrounding operators have recently targeted the Upper Cretaceous sand and shale zones, Navidad Resources LLC settled into eastern Madison and western Houston counties in 2009 with a bent toward the Lower Cretaceous. And though the intent was to drill the Buda horizontally, it quickly discovered even more productive zones below. We originally looked at this play just for horizontal potential, but realized we had so much stacked pay that the horizontals weren t the best way to get at that reserve base, says Harold McGowen, Navidad president and chief executive. Instead, the Tyler, Texas-based Navidad went vertical after having drilled three early horizontal wells, and hasn t looked back. Today the EnCap Investments-backed company has some 50 vertical commingled wells producing 5,700 BOE per day. That productive stacked-pay column reaches 1,400 feet below the top of Buda, at drilling depths of 8,500 to 12,400 feet. In addition to Buda, pay zones include the Georgetown, Kiamichi, Edwards and Glen Rose formations. Like ZaZa, Navidad calls it the Buda-Rose, and likens it to the Wolfberry play in the Permian Basin. Before it could kick off a full-fledged drilling program, however, Navidad had to petition the Texas Railroad Commission for a Rule 10 Exception to allow commingling production. This was approved, opening the Lower Cretaceous vertical play to all operators. Today, Navidad shares 100,000 gross acres (84,000 net) evenly split with partner Burk Royalty, stretching 30 miles east of Madisonville. Each company is running one operated rig, and they are on pace to spud 30 wells this year, with seven down already. One recent well IP d at more than 1,000 BOE per day from a vertical wellbore and we think this could be a million-boe well, says McGowen. About 20% are star performers, he says, but typical wells flow from 400 to 600 barrels IP, with EURs of 200,000 barrels equivalent and greater, 70% oil and liquids. Something above 300 barrels a day is good economics. Boomer wells return greater than 100% economics, while average wells return 50%. Well costs today average $3 million, but he sees that coming down to as low as $2 million with pad development. Already, the company has knocked $1.5 million off of costs, and with a counterintuitive method. W e studied rock mechanics and the way the fracture stimulation was working, and determined we could do fewer stages. Navidad stimulates three stages in the Glen Rose, Edwards and Buda/Georgetown. We ve cut our frac cost in half over the last year, and have been able to get the same results or better with less volume. McGowen calculates he can get the same amount of pay exposed for the same dollarsper-foot with four vertical wells as with one horizontal, and with less mechanical risk downhole. Horizontals also inevitably leave behind bypassed pay zones. At the end of the day, the economics may be about the same. But Navidad is not unaware of the uphole upside in the Woodbine/Eaglebine. We have shows in all our wells in that 200-foot Dexter shale interval above the Buda, what some people call the Lower Eaglebine. We haven t been able to fully evaluate that, but it is an interval we re excited about there s just not enough bullets to hit everything. He estimates some 60- to 120 million BOE of recoverable hydrocarbons from a dozen intervals. Navidad and Burk have their entire block on the market, promoting its 500 vertical locations at 160-acre spacing, along with the tantalizing untapped horizontal play. That will be for the next guy, says McGowen.