National media outlets continue to discover and weigh in on the Permian Basin energy boom, as the Reuters news service did in December.
Apache Corp. was the primary focus in a report that highlighted the heightened activity and new ways of conducting business in the oil fields of far West Texas and Southeast New Mexico.
Apache’s Permian Region team is developing innovative ways to reduce drilling and completion costs in a very active drilling program targeting the Wolfcamp Shale in the Barnhart area. “The shale boom that over the last five years has revived old Texas oil fields has largely made the unpredictable world of wildcatting, or looking for oil in new fields, a thing of the past,” Reuters reported. “Instead, the widespread use of hydraulic fracturing and horizontal drilling have turned oil production into something closer to a very expensive manufacturing process—where companies with the lowest well costs and fastest drilling times win.”
The report highlighted Apache’s practice of awarding large cash bonuses to employees who come up with big ideas to cut costs.
Reuters noted that at Apache’s Ketchum Mountain field office in Irion County in the Permian Basin, “the company’s 450,000 acres atop the Wolfcamp serve as a laboratory where workers are free to experiment.”
“If we are going to pump 40 frac stages, if I can save $3,000 a stage, that’s $120,000. That’s big money,” said John Christmann, a petroleum engineer who has more than two decades of experience in the Permian and was recently named to head up all of Apache’s North American operations.
West Texas Intermediate oil has fallen almost 11 percent since its peak this year of about $110 a barrel in August as producers pump more crude, so companies are trying to bring down costs to maintain profitability.
Apache’s costs on its Barnhart project in the Permian Basin—where it plans to drill about 70 wells into the Wolfcamp shale out of a Permian total of more than 800 wells—have fallen $1 million per well, or about 13 percent, to about $6.8 million in the last year and a half.
“We are not a one-trick pony,” Apache’s Christmann told Reuters. “There are always things that we are testing.”
Apache’s Fourth Quarter
Apache announced on Jan. 16 that downtime caused by severe winter storms and outages at third-party owned infrastructure adversely affected the company’s oil and gas production from its Permian Basin and Central Region operations during the fourth-quarter 2013. The company experienced widespread power outages primarily in West Texas and New Mexico in late November and early December, with icy road conditions contributing to delays in immediately resuming operations. In addition, in the Texas Panhandle and Western Oklahoma, Apache temporarily reduced drilling activity in its Central Region during the quarter as part of a capital discipline program.
Fourth-quarter volumes will also reflect recent divestitures by Apache, including the sale of a one-third minority participation in its Egypt oil and gas business that closed on Nov. 14, divestment of its Gulf of Mexico Shelf operations that closed on Sept. 30, and the sales of selected Canadian assets, which closed in late September and mid October.
Permian Region impact
Apache estimates that the combination of downtime and pipeline outages caused from severe weather in its Permian Region somewhat offset new production added through its drilling program. As a result, a production increase of approximately 1,000 barrels of oil equivalent per day (boepd) or more is expected for the Permian in the fourth-quarter 2013 compared with the third-quarter 2013, when the region averaged 131,700 boepd. This represents an increase over the fourth quarter 2012, in which the region averaged 117,900 boepd.
Central Region impact
Severe weather and downtime issues also caused disruptions to company operations in the Texas Panhandle and Western Oklahoma. Capital discipline resulted in a scaling back from 31 drilling rigs in the third quarter to 25 in the fourth. The combination of unusually severe weather, pipeline outages, and reduced drilling in the Central Region resulted in a slight decrease in production for the fourth-quarter 2013 compared with third-quarter 2013, when the region averaged 94,800 boepd. This represents an increase over the fourth-quarter 2012, in which the region averaged 79,300 boepd.
Asset divestiture impact
Quarter over quarter, Apache anticipates asset sale volumes will reflect an approximate 134,000 boepd reduction in total production volumes from the third quarter when adjusting for amounts attributable to the sale of a one-third, non-controlling partnership interest in Apache’s Egypt oil and gas operations. For reference, the Gulf of Mexico Shelf averaged 91,200 boepd and Egypt averaged 147,700 boepd of production during the third-quarter 2013.The Canadian properties that were sold averaged approximately 18,000 boepd during the third-quarter 2013.