Energen Corporation will write off in the second quarter of 2010 unproved capitalized leasehold associated with its deep Conasauga shale acreage. The non-cash charge will total $10 million after-tax ($16.1 pre-tax), or 14 cents per diluted share.

The decision came following an analysis of the flow rate from completions performed this year in the Marchant 22-16 #1 in Bibb County, Alabama. The company performed three acid etchings and two C02 stimulations in five zones spanning some 4,000 feet at depths of approximately 7,500-11,500 feet.

Energen established a flow rate of 300-400 thousand cubic feet per day at pressures of 120 to 180 pounds per square inch (PSI). "We were looking for encouragement, but our best efforts indicate that the deep Conasauga formation in Alabama is not economically viable given associated capital costs and the outlook for natural gas prices," said James McManus, Energen's chief executive officer.

The Conasauga shale in Alabama is a Mushwad formation. It appears to be very tight compositionally, with limited permeability and porosity. The Marchant well originally was drilled and completed in 2008 by Chesapeake Energy Corporation in conjunction with Energen.

Later this month, Energen plans to complete a thick, uphole interval in the Marchant well. This zone, deposited at depths of 3,000 to 4,000 feet, is a non-deformed Conasauga interval with low structural dip rates and a higher shale content than the deeper intervals. Meanwhile, Energen plans to complete its Westervelt 19-2 #1 well in Tuscaloosa County, Alabama, over the next several weeks as it works to determine the economic viability of the Chattanooga shale. Energen's remaining capitalized, unproved leasehold associated with its Chattanooga shale and the shallow Conasauga shale is $14.4 million after-tax ($23.2 million pre-tax), or 20 cents per diluted share.

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