The Permian’s productive plays are newmaking and interesting in and of themselves, but they reveal unique and often-unexpected qualities when alongside the plays of outlying regions.
Pete Stark calls them the “Big Three” of the tight oil plays.
“If you look at the Bakken, the Eagle Ford, and the Wolfberry, those three plays have been adding more than 100,000 barrels [to U.S. production] for the last couple of years,” said Stark, who is senior research director and advisor for Englewood, Colo.-based IHS, which provides information and analytics for a broad spectrum of diversified businesses, including the oil and gas industry.
It is hard to pick up a newspaper or magazine today and not find an article about how the Bakken Shale, the first shale oil play to utilize horizontal drilling and multi-stage hydraulic fracturing, has reinvigorated the booming North Dakota economy.
Meanwhile, a recently released report from IHS claimed Eagle Ford Shale drilling results in South Texas average around 300 to 600 barrels per day for peak 30-day production averages and compare favorably with the Bakken.
So how do the those two plays compare to Permian Basin, where the Wolfberry play (the vertical drilling through the Spraberry and Wolfcamp and commingling the two as well as other even deeper formations in the multi-stacked pay zones in the Midland Basin) started the Permian Basin’s recent revolution and now includes horizontal drilling in other shale or tight oil plays such as the Bone Spring, Wolfcamp, and Cline Shale, the region’s newest emerging play?
“So far the Bakken and Three Forks is the most mature of the new tight oil plays,” explained Stark. “The modern play started in 2003 in Montana and evolved into the heart of the Williston Basin [in North Dakota]. It has been going longer than the other tight oil plays. It has essentially very little gas compared to the Wolfberry.”
IHS calculates estimated ultimate recovery (EUR) based on wells drilled.
“It doesn’t argue ultimate potential recovery,” added Stark, emphasizing that its estimates are not “discovered” or “proven” but just EUR calculations based on wells drilled. Using those figures, Stark said the nation’s tight oil plays have a current EUR of five billion barrels equivalent.
“The oily side of the Wolfberry has 630 million barrels EUR based on wells drilled,” he continued. “We have estimated the Bone Spring at 61 million barrels EUR and the Delaware Basin Wolfcamp at 37 million barrels. The horizontal play in the Midland Basin Wolfcamp is just getting started. Our last report two months ago estimated it at one million barrels EUR, but there is a lag in data.”
As these plays develop, the EUR projections can change dramatically, according to Stark. For example, he says the EUR for the Delaware Basin Wolfcamp went from two million barrels in 2009 to 37 million barrels in IHS’ most recent report.
Stark said it is incredible what has happened in the emerging tight oil plays around the country.
“We see 30 to 50 billion barrels that could be technically recoverable resource from tight oil plays,” he enthused. “But our numbers represent EUR calculations based on wells drilled to date. We put the EUR at 5.2 billion barrels of oil equivalent, which are 56 percent crude oil or condensate and 44 percent natural gas. All of the ‘Big Three’ are very big, somewhere in the range of 10 billion barrels equivalent or more. We haven’t seen billion-barrel numbers onshore since Prudhoe Bay [in Alaska in the 1970s].”
Stark claimed there are probably other plays around the country, such as the emerging Mississippi Lime in Kansas and Oklahoma, that might be considered marginal compared to the “Big Three” but can still be profitable.
“The Granite Wash [in the Texas Panhandle and western Oklahoma] may be large, but we just don’t know yet,” he added.
Growing in the basin
A number of companies, including Concho Resources, Apache Corporation, Pioneer Natural Resources, Devon Energy, and Cimarex Energy, just to name a few, have huge footprints in the emerging tight oil plays in the Permian Basin. The numbers they are reporting match or exceed the numbers reported in the Bakken or Eagle Ford.
For example, John Christmann, regional vice president of the Permian region for Apache, told those attending the company’s analyst/investor day in June that Apache’s Permian production as of April had crossed the 100,000 mark for net barrels of oil equivalent, at least four or five months ahead of schedule.
“This morning, I’m running 34 rigs,” Christmann said at the June conference, “so that is an almost sevenfold increase over a two-year period. In terms of horizontal drilling, in 2010 we stepped out and decided we would drill 20 horizontal wells, and most of those were on the Central Basin Platform. We expect to drill over 120 horizontals in 2012. Over that time period, our total well count has tripled from 263 to almost 706.”
Apache has more than one million acres in the Midland Basin, including its hugely successful Deadwood Field in Glasscock County. It plans to drill 448 vertical Wolfberry wells in 2012, and Christmann stated that Apache has 3,000 feet of productive section and is producing everything from the Upper Spraberry down through the Fusselman.
“If the Fusselman is there, we use a little acid, we produce it, the Fusselman flows, and then we will come back later and frac the other Wolfwood zones and commingle,” Christmann said of its Deadwood operation. “The wells where the Fusselman is not there, we go ahead and frac them Day 1 and drill out all the plugs and commingle them. We are running 14 rigs there [in the Deadwood Field] now.”
Apache also has 377,000 net acres exposed to the Wolfcamp Shale, according to Christmann. Its first Wolfcamp horizontal well, the Scott Sugg #1H had a peak initial production of 1,255 barrels equivalent per day with a 30-day average of 726 boe/d. The Bennie #2H had similar IP rates of 1,260 barrels and an 11-day IP average of 800 boe/d.
He noted that Apache has 451,000 gross acres exposed to the Cline Shale with current production at 500 boe/d. It has moved two horizontal rigs into the Cline play and plans to drill 10 wells in 2012.
Denver-based Cimarex Energy has 440,000 net acres in the Permian Basin, but Mark Burford, the vice president of capital markets and planning, said the company’s drilling focus is on its 250,000 acres in the Delaware Basin. It has 14 rigs—all horizontal—operating in the Delaware Basin. He pointed out that five are targeting the 3rd Bone Spring on the Texas side of the Delaware Basin and five more are drilling the 2nd Bone Spring in Eddy and Lea counties in New Mexico. The other four are targeting the Wolfcamp Shale, primarily in southern Eddy County, N.M., and northern Culberson County in Texas.
According to the company’s second quarter financial report, its 31 gross (16 net) 2nd Bone Spring wells in New Mexico averaged over 600 boe/d with 87 percent oil. The 3rd Bone Spring drilling in Texas totaled 19 gross (12 net) wells in the first half of 2012 with a 30-day average gross production rates per well of 850 boe/d (79 percent oil).
“We are in the early stages of our Wolfcamp evaluation,” Burford added. The Cimarex second-quarter report noted the company had drilled and completed six gross horizontal Wolfcamp wells, bringing the total wells in the play to 24. First 30-day production rates averaged 6.5 million cubic feet equivalent per day, which has 43 percent gas, 25 percent oil, and 32 percent natural gas liquids.”
The Cline Shale is a shining example of how the EUR numbers can change rapidly, however. Two years ago, no one had even heard of the potential of the Cline Shale play. Stark said it is too early for IHS to have any EUR numbers to attribute to the Cline Shale. But Devon Energy Corporation has big plans. Devon announced on Aug. 1 that it had signed an agreement with Sumitomo Corporation, which will invest $1.4 billion in exchange for 30 percent of Devon’s interest in approximately 650,000 net acres in the Cline Shale and the Midland-Wolfcamp Shale.
Devon has assembled 556,000 net acres prospective to the Cline Shale on the eastern flank of the Midland Basin that will comprise the joint venture with Sumitomo, according to Dave Hager, vice president of exploration and production. Devon’s Cline acreage extends as far east as Nolan and Fisher counties. The company’s first horizontal well in the Cline Shale play, the Stroman Ranch C-5H in Sterling County, had a 30-day IP rate of 300 boe/d.
The joint venture between Devon and Sumitomo also includes the Wolfcamp Shale in the southern Midland Basin, where Devon has 94,000 net acres. Hager says Devon brought three Wolfcamp horizontal wells online in the second quarter, including the Coronado #2H, which had an average 30-day IP rate of 575 barrels of oil equivalent per day, and the University #52-10 that averaged 650 barrels of oil equivalent per day, including 575 barrels of oil.
“The Cline Shale is symptomatic of what is happening around the country.” Stark said. “There are at least a half-dozen plays where operators are in the initial stage of testing.”
His “Big Three” in tight oil plays in the country may soon be the “Big Four—or Five or Six or Seven.”
Stark and the folks at IHS will have to keep their pencils sharp and their calculators plugged in because the estimated ultimate recovery numbers in the Permian Basin—from the Bone Spring in the Delaware Basin to the Wolfberry play in the Midland Basin, the Wolfcamp Shale in the southern Midland Basin, and the emerging Cline Shale on the eastern shelf of the Permian Basin—are changing rapidly.