ipaa austin, texas october 28, 2004 hallwood petroleum, llc ipaa austin, texas october 28, 2004...

IPAAAustin, Texas

October 28, 2004HALLWOOD PETROLEUM, LLC

IPAAAustin, Texas

October 28, 2004HALLWOOD PETROLEUM, LLC

•Barnett Shale gas is an unconventional resource

•Johnson County has long been known to have Barnett Shale

•This Barnett Shale was known to contain gas

•Missing Viola and Forestburg frac barriers

•Six wells targeted the Barnett Shale

•Yielding two marginal producers and a few shut in wells

•Barnett Shale gas is an unconventional resource

•Johnson County has long been known to have Barnett Shale

•This Barnett Shale was known to contain gas

•Missing Viola and Forestburg frac barriers

•Six wells targeted the Barnett Shale

•Yielding two marginal producers and a few shut in wells

JOHNSON COUNTY, TEXAS Unconventional Barnett Shale

JOHNSON COUNTY, TEXAS Unconventional Barnett Shale

•Produce gas without Ellenburger water

•Cut costs

•Improve on results

•Cut costs

•Improve on results

•Repeat these steps one as often as possible. . . . .

•Produce gas without Ellenburger water

•Cut costs

•Improve on results

•Cut costs

•Improve on results

•Repeat these steps one as often as possible. . . . .

OBJECTIVESIn the Johnson County Barnett

OBJECTIVESIn the Johnson County Barnett

•Acquired approximately 25,000 net acres

•Drilled four exploratory wells

•Designed completions that avoided conventional wisdom

•Avoided Ellenburger water in three out of four wells

•Established commercial gas production

•Built our own infrastructure

•Acquired approximately 25,000 net acres

•Drilled four exploratory wells

•Designed completions that avoided conventional wisdom

•Avoided Ellenburger water in three out of four wells

•Established commercial gas production

•Built our own infrastructure

HALLWOOD’S APROACH THROUGH 2002

HALLWOOD’S APROACH THROUGH 2002

•First gas sales February 2003

•Continued drilling vertical wells to evaluate shale

•Evaluated various frac techniques

•Each design built upon the last, both good and bad

•Micro polymer, foamed gel, slick water

•Varying rates, sand concentrations, sand sizes

•Varied perforating strategies

•First gas sales February 2003

•Continued drilling vertical wells to evaluate shale

•Evaluated various frac techniques

•Each design built upon the last, both good and bad

•Micro polymer, foamed gel, slick water

•Varying rates, sand concentrations, sand sizes

•Varied perforating strategies

TIMELINE THROUGH 2003TIMELINE THROUGH 2003

SUBSEA DEPTH

WEST EAST

-6200

-6100

-6000

-5900

-5800

-5700

-5600

-5500

-5400

-5300G

odle

y 1

Bet

hany

1

Smit

h 1

Cod

y-

Mar

y A

nn

Chi

ldre

ss 1

Cod

y

Fla

vel 1

Lig

htfo

ot 1

Coo

per

1

Miz

e A

1

Miz

e A

2

Bro

wn

1

Par

nell

1

Han

na 1

Ken

non

1

Cit

y of

Wor

thin

gton

Man

n

THICKNESS

0

100

200

300

400

500

600

700

God

ley 1

Sm

ith

1

Mary

Cod

y

Lig

htf

oot

Miz

e A

1

Brow

n 1

Han

na 1

Cit

y o

f

Man

n

30/60/90 DAY PRODUCTION

VERTICAL WELLS

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

S M

an

n #

1

E B

row

n #

1

Co

dy H

un

ter

#1

C o

C #

1

Ch

ild

ress #

1

Co

op

er

#1

Miz

e A

#1

Falv

el

#1

Go

dle

y #

1

Wil

liam

s #

1

Co

dy H

un

ter

#3

Wil

liam

s #

2

Mcf

30 days 60 days 90 days

From first to most recent drilling

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

0

20

40

60

80

100

120

140

160

180

200

Gallons Pumped Pounds of Sand Avg Rate

FRAC STATISTICS HORIZONTAL WELLS

HORIZONTAL COMPLETIONSHORIZONTAL COMPLETIONS

DAYS ON MMCF

CEDF 1 30 42,231

Childress 1 30 19,294

McAnier 1 30 101,467

Buffalo Ridge 2H 30 85,270

Falvel 2H 30 103,699

Lakeview 1H 30 124,876

Godley 2H 30 157,451

Williams 3H 30 196,491

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

CE

DF

#1

Ch

ild

ress

#2

McA

nie

r#1

Bu

ffal

o#2

H

Fal

vel

#2H

Lak

eviw

1H

Go

dle

y2H

Wil

liam

s3H

Mcf

30 days 60 days 90 days

30/60/90 DAY PRODUCTION

HORIZONTAL WELLS

HORIZONTAL COMPLETIONSHORIZONTAL COMPLETIONS

DAYS ON MMCF

CEDF #1 335 221,981

Childress #1 293 464,131

McAnier #1 261 654,334

Buffalo Ridge 132 357,787

Falvel #2H 122 420,467

Lakeview 1H 102 464,981

Godley 2H 57 269,395

Williams 3H 30 196,491

TOTAL ACREAGETOTAL ACREAGE

Cleburne

Godley

Rio Vista

Lakeview 1

Harrison 1

•No markets•No markets

Unconventional resources may occur where there is no

infrastructure.

Unconventional resources may occur where there is no

infrastructure.

HALLWOOD ENERGY CORPORATION

HALLWOOD ENERGY CORPORATION

Compressor Station Construction

Cleburne Facility Facility is Operating at 70 MMCFD Designed for 140 MMCFD and suction 40 psi

Godley Facility Facility is Operating at 40 MMCFD Designed for 50 MMCFD and suction 30 psi

Rio Vista Facility Facility is Operating at 25 MMCFD Designed for 50 MMCFD and suction 30 psi

– Entire system to run at 80-200 psi at wellhead.

PIPELINE FACILITYPIPELINE FACILITY

HALLWOOD ENERGY CORPORATION

HALLWOOD ENERGY CORPORATION

North Half of Northern Acreage

Ponderosa Pine Power Plant

Lake Marti

City of Cleburne #1

CEDF #1

Worthington SWD

City of Cleburne #2H & #3H

Cooper #2

Cooper #1

Williams #1

Cleburne Compressor StationKennon #1

Williams #2

Buffalo Ridge #2

Buffalo Ridge #1Lightfoot #1

Tucker #1

Brown #1

Cody Hunter #3

Mary Ann #1

Godley #1EOG EOG

R Smith #1

HALLWOOD SWD, INC.HALLWOOD SWD, INC.

Cleburne Disposal Site

Next SWD Well

City of Cleburne #1

HEC Office

Ponderosa Pine Power Plant

Worthington 1 SWD

•No markets

•No water disposals

•No markets

•No water disposals

Unconventional resources may occur where there is no

infrastructure.

Unconventional resources may occur where there is no

infrastructure.

CLEBURNE DISPOSAL FACILITY

CLEBURNE DISPOSAL FACILITY

CLEBURNE DISPOSAL FACILITY

CLEBURNE DISPOSAL FACILITY

BB

LS

Fully Automated for fresh water loading or salt water disposal

•No markets

•No water disposals

•An uninformed public

•No markets

•No water disposals

•An uninformed public

Unconventional resources may occur where there is no

infrastructure.

Unconventional resources may occur where there is no

infrastructure.

•Lease forms that are simple, yet fair to everyone

•Equitable bonus and royalty terms

•An opportunity to educate

•Lease forms that are simple, yet fair to everyone

•Equitable bonus and royalty terms

•An opportunity to educate

An uninformed public - positivesAn uninformed public - positives

•The education process can be frustrating and time consuming

•We may be viewed as the stereotypical JR Ewing

•Visions of Jeb Clampett

•The neighborhood real estate attorney begins practicing oil and gas law

•The education process can be frustrating and time consuming

•We may be viewed as the stereotypical JR Ewing

•Visions of Jeb Clampett

•The neighborhood real estate attorney begins practicing oil and gas law

An uninformed public - negativesAn uninformed public - negatives

•No markets

•No water disposals

•An uninformed public

•An hour drive to the nearest bull plug salesman

•No markets

•No water disposals

•An uninformed public

•An hour drive to the nearest bull plug salesman

Unconventional resources may occur where there is no

infrastructure.

Unconventional resources may occur where there is no

infrastructure.

•Lower vertical drilling costs

•Lower horizontal well costs

•Lower vertical drilling costs

•Lower horizontal well costs

UNCONVENTIONAL GAS MEANS

CONTINUING EDUCATION

UNCONVENTIONAL GAS MEANS

CONTINUING EDUCATION

DRILLING COMPARISONDRILLING COMPARISON

Vertical – Air vs Mud

0

1000

2000

3000

4000

5000

6000

7000

8000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Dep

th (F

T)

Cooper 2-Air

Cody Hunter 3-Air

Rigby 1-Mud

Cates 1-Air

Airport 1-Mud

Mayfield 2-Mud

Drilling Days

DRILLING COMPARISONDRILLING COMPARISON

Horizontal – Air vs Mud

0

2000

4000

6000

8000

10000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

Dept

h (F

t)

CEDF 1-Mud

McAnier 1-H-Mud

Childress 2-H-Mud

Buffalo Ridge 2-H-Air

Lakeview 1-H-Mud

Falvel 2-H-Air

Days Drilling

•Lower vertical drilling costs

•Lower horizontal well costs

•Evaluate perforating strategies

•Optimize horizontal well spacing

•Optimize horizontal frac volumes

•Lower vertical drilling costs

•Lower horizontal well costs

•Evaluate perforating strategies

•Optimize horizontal well spacing

•Optimize horizontal frac volumes

UNCONVENTIONAL GAS MEANS

CONTINUING EDUCATION

UNCONVENTIONAL GAS MEANS

CONTINUING EDUCATION

We should not be surprised when doing the same as we have always done yields the same results we have always gotten.

We must innovate.

We must continue to improve.

IPAAAustin, Texas

October 28, 2004HALLWOOD PETROLEUM, LLC

IPAAAustin, Texas

October 28, 2004HALLWOOD PETROLEUM, LLC