Is This Oil Field the Next Bakken?

A handful of energy companies are buying up land in a little known area of Louisiana. Why?

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Over the past few years a handful of energy companies have been silently buying massive tracts of land in a little known area of Louisiana.

Early estimates suggest that this oil rich region could contain 7 billion barrels of recoverable oil… putting it on par with other prolific shale fields like the North Dakota Bakken and the Texas Eagle Ford.

And their bets are starting to pay off. Many of the area’s big oil producers have reported spectacular numbers from their drilling operations. And this could be just the beginning.

Is this North America’s next big shale play?

Shale drilling has been a game changer for the U.S. energy industry. Rapid production growth from a number of nearby fields have already handsomely rewarded investors. But there’s another play that’s catching the attention of oil explorers — the Tuscaloosa Marine Shale in Louisiana and Mississippi.

The Tuscaloosa has been referred to as the Eagle Ford of Louisiana, and it’s not hard to see why. According to a 1997 study by Louisiana State University’s Basin Research Institute, the Tuscaloosa measures 3.7 million acres in size — larger than the state of Connecticut. And the field is considered to be the source rock for the Lower Tuscaloosa Sandstone and the Austin Chalk formations that have been producing oil for decades.

Over the past few years a number of energy producers have been buying as many acres as they can get their hands on.

Early drilling results from Goodrich Petroleum (NYSE: GDP), which owns about 300,000 acres in the play, have been remarkable. Earlier this week the company reported that its Blades 33H-1 well achieved a peak 24-hour initial production rate of 1,270 barrels of oil equivalent per day, or boepd. Even better is the fact that 98% of this production was oil. That’s exactly what you want to see with today’s low natural gas prices.

To put these numbers in perspective, a well is considered a true ‘gusher’ if initial production rates exceed 1,000 barrels per day. So the numbers coming out of Goodrich’s Tuscaloosa acreage is truly spectacular.

Encana (TSX: ECA)(NYSE: ECA) is also betting big on the Tuscaloosa. Earlier this year the company highlighted the field as one of its five focus plays and has budgeted about $300 million to develop its acreage. The fact that Encana, which has a diverse portfolio of assets, is willing to go so aggressively after the region is a strong endorsement.

Devon Energy (NYSE: DVN) also likes what it sees in the Tuscaloosa Marine Shale. First-month initial production targets are between 1,000 boepd and 1,200 boepd and more than 90% of that production is oil. And the region’s favourable regulatory environment and established infrastructure has also put the play high on the company’s priority list.

Foolish bottom line

Almost every company operating out of the Tuscaloosa Marine Shale is reporting blowout numbers. And the three operators I mentioned here are going all-in, spending hundreds of millions of dollars to develop their acreage. While fields like the Bakken and the Eagle Ford steal all of the headlines, the Tuscaloosa is definitely a hidden play for investors to keep an eye on.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no positions in any of the companies mentioned in this article.

More on Investing

Profit dial turned up to maximum
Tech Stocks

$1,000 Invested in Constellation Software Stock Would Be Worth This Much Today

Constellation Software (TSX:CSU) is trading above $2,000 today. Why this stock is so expensive, and is it worth buying?

Read more »

Dividend Stocks

Passive Income: 3 Top Canadian Stocks to Buy for Monthly Dividends

Companies such as Pembina Pipeline and Killam Apartment REIT pay investors monthly dividends, making them top bets for income-seeking investors.

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Stocks for Beginners

TFSA Investors: Top TSX Stocks to Buy With $6,000

Here are two safe, dividend-paying TSX stocks for your long-term portfolio.

Read more »

Gold medal
Investing

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Are you looking for growth stocks that could be huge winners in the next decade? Here are three top picks!

Read more »

Retirees sip their morning coffee outside.
Investing

Retirees: How to Make Over $95/Week in Passive Income TAX FREE!

Canadian retirees who are hungry for passive income should look to snag stocks like Sienna Senior Living Inc. (TSX:SIA) in…

Read more »

Man holding magnifying glass over a document
Investing

Where to Invest $500 in the TSX Right Now

Given the massive correction, long-term investors can start buying stocks like Shopify and goeasy to outpace the broader markets by…

Read more »

Aircraft wing plane
Investing

Air Canada Stock Is a Fantastic Deal Right Now

Air Canada (TSX:AC) is a great stock to own, as market fear turns into hope amid falling recession fears.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern
Investing

Beginner Investors: Get Passive Income by Investing in REITs!

You can get passive income by investing in REITs like Northwest Healthcare Properties REIT (TSX:NWH.UN).

Read more »