| Bay de Chene Field Updates
October 30, 2009. The Bay de Chene Field is one of two fields operated by Swift Energy in its Southeast Louisiana core area of operation. It is located along the common boundary of Lafourche Parish and Jefferson Parish and is about 30 miles northwest of the Lake Washington Field. We acquired 100% working interests in the field in two acquisitions in late 2004 and early 2005 and at year-end 2008 owned drilling and production rights in 17,564 net acres.
Like Lake Washington, Bay de Chene is an inland-water field that produces from multiple stacked Miocene sand layers that radiate outward and downward from the surface of a centrally located submerged salt dome.
Also like Lake Washington, the field is highly faulted, with potentially productive formations trapped in numerous isolated fault blocks, some abutting the salt dome and others located away from the salt dome. Because the field is water-driven, hydrocarbon-bearing formations are typically located in the highest regions within the sand layers, and for those fault blocks abutting the salt dome, the formations actually lie against the salt dome itself. We conduct our drilling activities with barge-based rigs, and in order to target these close formations in successively deeper fault blocks, we employ directional drilling, angling the well bore down the side of the dome. A measurement-while-drilling tool indicates the precise location of the drill bit at all times.
Our exploration and development approach in Bay de Chene is entirely seismic led. When we purchased interests in Bay de Chene, we also acquired licensed three-dimensional seismic data for the field and merged them with three-dimensional data for nearby areas obtained from several other sources, including our own proprietary data from our 2004 seismic survey in Lake Washington. We then merged the entire seismic dataset with digitized geological data from well logs over the area to develop a geoscience database for a 700-square-mile area that not only covers Bay de Chene and Lake Washington but also our recent Shasta discovery between the two fields. As a result we now have the technical expertise to identify and drill to deep targets within the database area, whereas in our first drilling efforts in Southeast Louisiana we mostly drilled to relatively shallow depths of only about 6,000 feet. (See Louisiana Geoscience Databases.)
2008 Operational Statistics
Bay de Chene was hit with two major hurricanes during the third quarter of 2008—Gustav on September 1 and Ike on September 13. As a result, the infrastructure of the field was heavily damaged and production from the field was shut in for the remainder of the year except for high-pressure gas production, which was restored in November. We estimate that damage inflicted by the hurricanes caused the company to lose 0.8 MMBoe in 2008 production from shut-in wells, primarily in Bay de Chene and the nearby shut-in Shasta discovery.
At year-end 2008, we had 19 wells in Bay de Chene that were shut in, including five successful development wells that had been drilled during 2008, the last one in the fourth quarter. Because of the hurricane damage and the simultaneous sharp plunge in oil prices and persistently high service charges, during the fourth quarter we released the two barge rigs that had been operating in the field during the year.
Bay de Chene provided 6.2%, or 618.3 MBoe, of the company’s total 2008 production of 10.0 MMBoe. In spite of the shut-in wells, this production, which consisted of 35.5% oil and 64.5% natural gas, was approximately 2% higher than the field’s 2007 production due to increased production early in the year from pre-hurricane wells being placed on line plus an agreement with a buyer for increased natural gas sales from the field.
At year-end 2008, Bay de Chene held 6.1%, or 7.1 MMBoe, of the company’s total reserves. These reserves, which were 62% natural gas and 21% undeveloped, were 51% higher than the field’s year-end 2007 reserves, despite the fact that we were required under SEC regulations to use the low 2008 year-end oil and gas prices in our reserves computations. Had we been able to use 2007 prices, more reserves would have been calculated to be economically recoverable and could have been counted, whereas with the 2008 prices they could not be counted.
We entered the year 2009 with four proved undeveloped locations (PUDs) for future drilling in Bay de Chene at depths of 7,000 feet to 13,000 feet.
Exploration and Development Activities
New Production Facility. With the severe damage inflicted on the Bay de Chene infrastructure by the two September hurricanes, it became necessary to rebuild and/or upgrade most of the field’s infrastructure, including its production processing facility (see slide show). Work throughout the field began in the fourth quarter of 2008 with the production processing facility scheduled to be replaced. Approximately six weeks in design time was saved when we decided to use the same large concrete barge design as was used for the new Lake Washington Westside Facility, which had withstood the hurricanes with little damage.
The new facility was commissioned on August 28, 2009. New production and processing equipment installed on the barge sits approximately 18 feet above the water level, which should reduce the risks of catastrophic damage from future storms. The design parameters of the facility allow a processing capacity of 12,700 barrels of fluid and 21 million cubic feet of natural gas per day for the low-pressure system; a processing capacity of 1,600 barrels of fluid and 31 million cubic feet of natural gas per day for the high-pressure system; a salt water disposal pump capacity of 14,000 barrels of water per day; and a storage capacity of 7,300 barrels of oil and 3,900 barrels of produced water.
Drilling Program. Despite the hurricane damage to Bay de Chene and our shutdown of drilling activity for 26 days, we continued with our planned 2008 development drilling program, achieving a 100% success rate with five successive development wells plus the recompletion of an earlier well. During the second quarter of 2008 three additional wells began contributing to the field’s production: a first-quarter well (VUB #150) at 1,200 Boe per day; a second-quarter well (VUB #152) at 350 Boe per day; and a recompleted well (BDC #142) at 1,000 Boe per day. During the third quarter of 2008, two more wells were drilled (VUB #153 [Rita#2] and VUC #8 [Pisces #3] but could not be placed on production until infrastructure repairs were further along, as was also the case for a well drilled in the fourth quarter (VUC #9).
During the first quarter of 2009, the VUC #9, which had been drilled to a depth of 14,809 feet and encountered 78 feet of net pay in one zone, began flowing to sales after it had tested with production rates of up to 4.8 million cubic feet per day (MMcf per day) of natural gas with a flowing tubing pressure of 1,750 psi. During the second quarter, the VUC #8, which had been drilled to a depth of 14,176 feet and encountered 66 feet of true vertical pay in two zones, began flowing to sales in mid-May. For the month of July, this well produced an average of 5.3 gross MMcf per day of natural gas with a flowing tubing pressure of 1,220 psi.
Geoscience Database Upgrade. We remain very much engaged in extracting information from our 700-square-mile geoscience database that guides our drilling program in Bay de Chene and elsewhere in the Southeast Louisiana area. We have recently (in 2009) completed a lengthy three-dimensional prestack depth migration analysis of the database with updated salt models. These depth migration analyses have significantly improved and refined our understanding of the complex traps associated with salt bodies and, combined with seismic pore pressure predictions, have increased our confidence in drilling to deeper targets, a number of which have already been identified for Bay de Chene.
This web page may contain "forward-looking statements" as defined in Section 21E of the Securities Exchange Act of 1934, as amended. Any opinions, forecasts, projections, or other statements other than statements of historical fact are forward-looking statements. Although Swift Energy Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Certain risks and uncertainties inherent in the company's business are set forth in the filings of the company with the Securities and Exchange Commission. (See Terms of Use.)
Updates (in reverse chronological order)
September 6, 2011: PRESS RELEASE. Because of the risk of adverse weather conditions caused by Tropical Storm Lee, we implemented standard shut-down procedures in several of our coastal Louisiana properties, including the Lake Washington field in Plaquemines Parish, the Bay de Chene field in Jefferson and Lafourche Parishes, and the Horseshoe Bayou, Bayou Sale, and Cote Blanche Island fields in St. Mary’s Parish. All nonessential personnel and equipment were evacuated from these fields.
Field operations necessary to safely bring production levels back to normal levels have begun. Some minor damage has been observed in certain areas but is not expected to impact ongoing operations. Current 2011 production and operational forecasts will be updated if necessary once the impact of Tropical Storm Lee on Swift Energy’s operations is known.
May 6, 2010: PRESS RELEASE. A barge rig will move into the Bay de Chene Field so that drilling operations can be resumed during second quarter 2010.
February 25, 2010: 2009 FORM 10-K. At year-end 2009, 4.1 MMBoe, or 3.7%, of the company’s total reserves were in the Bay de Chene Field. Approximately 43% of the field’s proved reserves consisted of oil and NGLs and approximately 27% of the reserves were undeveloped.
During 2009, Bay de Chene provided 1,186 MMBoe, or 13.1%, of the company’s total production.
Because of on-going repairs and the installation of a new production facility in the field, no wells were drilled in Bay de Chene during 2009. Drilling will be resumed in 2010 with two to five wells planned. At year-end 2009, we had identified three PUDs in the field.
February 18, 2010: PRESS RELEASE; WEBCAST. With oil production from the Bay de Chene Field having been restored during the third quarter of 2009, the fourth quarter of 2009 was the first full quarter of oil production from the Bay de Chene Field since the field infrastructure was damaged in 2008 by Hurricane Gustav. (High-pressure gas production had been restored in November 2008.) Fourth quarter production from the field averaged 3,374 net Boe per day, or approximately 20 million cfe per day.
During fourth quarter 2009, we began making preparations to spud a well in Bay de Chene late in the first quarter or early in the second quarter of 2010. Initial drilling will focus on oil development opportunities at depths between 11,000 and 12,000 feet.
We plan to keep at least one rig operating in the Southeast Louisiana area during 2010.
November 3, 2009: PRESS RELEASE. In the Bay de Chene Field all facilities were brought on line on August 28 following new construction and upgrades necessitated by damages caused by Hurricane Gustav. Initial crude oil production averaged approximately 2,590 gross Bbl/d along with natural gas production of 20.4 MMcf/d over the first seven days after the startup of these facilities, which was higher than expected. Field-wide production over the last seven days has averaged approximately 1,100 gross Bbl/d of oil and 17.1 MMcf/d of natural gas. No wells have been drilled in Bay de Chene in 2009 nor are any wells planned to be drilled there until 2010.
For additional information, please see the latest Form 10-K and Form 10-Q.
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