There are more than likely a few companies that hung their shingles in 2007 and 2008 thinking that it was a great time to start a new business in the energy industry, and it is more than likely several of those companies are, in retrospect, wondering why that ever seemed like a good idea. After all, even by oil industry standards, the fourth quarter of 2008 and most of 2009 have perfectly defined Bette Davis’ description of “a bumpy ride.”

The Rowan #85 rig drills a well for Common Resources LLC in the Haynesville shale. (Photo courtesy of Common Resources LLC)

But Roger Jarvis has no regrets. Jarvis is a veteran of the energy startup, most recently taking Spinnaker Exploration Co. from a small independent to a major player in the Gulf of Mexico, with 10 deepwater discoveries and a portfolio of prospects that far exceeded the company’s wherewithal to develop them all, particularly with deepwater day rates soaring.

Jarvis took a break after selling Spinnaker to Norsk Hydro for US $2.5 billion in 2005. But adventure came calling two years later, this time in the guise of the developing resource plays in North America. Now at the helm of Common Resources LLC, Jarvis and his management partners Elliott Pew from Newfield and Robert Snell from Spinnaker sit atop some pretty prime acreage in two hot gas shale plays — the Haynesville and the Eagle Ford, both in Texas.

‘Living in the core’

Jarvis is a veteran of the energy start-up, most recently taking Spinnaker Exploration Co. from a small independent to a major player in the Gulf of Mexico.

The philosophy behind his latest venture is to find “the core” of a play and carefully exploit it. To this end, he deployed a strategy of assembling a sophisticated technical team, being the “early mover” in a play, and having project development skills.

Additionally, it helps to have some seed money. Jarvis relied on two former Spinnaker supporters, Howard Newman, the past energy chairman for Warburg Pincus, and Mike McMahon, who used to be on Spinnaker’s board of directors. Both men now work for Pinebrook Road, a private equity provider, which in tandem with EnCap and Common’s management funded the original $500 million equity commitment.

“You’ve got to pick your partners pretty carefully,” Jarvis said. “Not every day is a good day in a private company. You want to know who your partners are on those bad days.”

Despite the downturn in the economy less than a year into Common’s history, the company stayed its course, taking stakes in the Haynesville and Eagle Ford.

Though the Haynesville is the more mature of the two plays, Common took a gamble by examining the entire expanse of the play and obtaining every shred of data available, including existing 2-D seismic data, well logs, and core samples. Chesapeake and others were already active in the northern part of the play, but based on its regional analysis, Common chose an area 70 miles (112 km) south of Chesapeake’s discovery well known as the Shelby Trough.

“We were reconstructing the southern part of this basin looking for the James Lime and Travis Peak and trying to understand generation and migration history,” Jarvis said. “As we reconstructed that basin, we logically focused on source to make that relevant. When we did, we got focused on the Haynesville as a potential reservoir.”

The company was already working on a major joint venture when Chesapeake announced its discovery. Most of the other players moved both west and east of this well, enjoying quite a bit of success, mostly in the Elm Grove field, while Common stayed on track in its southern portion. Its results have ultimately proven the concept.

“Finally the industry is focused on the Shelby Trough,” he said. “So being that early mover is good. But 18 months is a long time to wait for the world to think you’re right, particularly with start-up capital.”

Jarvis’ G&G team, experts all, obviously did their homework well because the Shelby Trough is now the location of some of the very best wells in the trend. Common has drilled several wells in the area, most of which have demonstrated initial potentials between 15 and 21 MMcf/d and with potential EUR of 8.5 to 10 Bcf.

One of the keys to success in resource plays is continuously applying new learnings to subsequent projects. Common’s first well in the Haynesville was a “geologic”

success, but microseismic imaging showed that the eight-stage frac job could have been more effectively conducted. Newer wells have shown more effective fracs, and the production numbers speak for themselves. In fact, the third well, the 619, “changed everything for the Shelby Trough,” Jarvis said. That well’s initial production was 16.7 MMcf/d, and it is produced more than 1 Bcf in its first 75 days of production.

The lagniappe to the Haynesville in this area is the Middle Bossier shale. Jarvis showed a well log indicating general porosity, gas saturation, etc., in the Haynesville and the Middle Bossier sections. The Middle Bossier, which is at a shallower depth, shows even greater promise. It is not a development target yet but will certainly be exploited in the future.

“The industry is drilling defensively as we are trying to save acreage,” he said. “One would not begin a Middle Bossier development at this time. While we will assess and selectively complete the Middle Bossier, we prefer to drill the deeper Haynesville so that all horizons are held by production.

“But this Middle Bossier has gotten our attention from the very start. We think the rock properties are actually better than the Haynesville in this part of the play. It’s effectively a doubling of resource in the Shelby Trough.”

Eagle Ford

This play employed similar regional studies, and the goal was lofty — in the 15 million gas-saturated acres of the Eagle Ford shale, how does a small company find its niche? For Common, the niche carved itself out nicely between two regional geological events — the Edwards shelf edge and the Sligo reef trend.

Everything updip of the Edwards shelf edge, Jarvis said, is largely in the oil window and is thermally immature. “Somebody’s going to make that oil play work,” he said. “But the science of getting long hydrocarbon chains out of nano-pore spaces constitutes a risk that we’re not really set to take.”

Downdip of the Sligo reef, Eagle Ford shale exists, but it’s at such a depth that drilling economics, particularly for horizontal wells, are more challenged.

So Common found a wedge of acreage in between these two barriers, now known as the Hawkville field after a PetroHawk discovery there, and is extremely bullish on the potential. Jarvis said that the environment between the shelf and the reef was a nasty, smelly place but very rich in organic material. “The richness of that rock is unique in this whole trend,” he said.

The shale is thick — 180 to 380 ft (55 to 116 m) thick, with high total organic carbon and on average 18% porosities. “There’s not another place, to our knowledge, where these events are coincident,” he said. “The rocks are thick, rich, porous, and thermally mature.”

Activity is not as far along in the Eagle Ford, but so far average daily production hovers around 13 MMcf/d, and new wells will come online steadily.

Currently Common has about 1,200 locations in the Haynesville, including potential Bossier developments, and about 600 locations in the Eagle Ford. “Operations are improving, we understand the rocks, we’re getting better at what we’re doing, and we’re having terrific well results,” he said.

Has the last year been a bit frightening? No doubt. But Jarvis said that never was there a question of backing off of the original plan. “The long and the short of it is that we made it through that period with almost no disruption,” he said. “Common captured what was relevant at the moment — the resource plays. I don’t think we’ll alter that theme now.”