If the round of second-quarter conference calls proved one thing, it was how prospective West Texas’ Permian Basin has become.
The basin is really two distinct halves, comprising the Midland Basin to the east side, and Delaware Basin to the west, which also creeps into southeast New Mexico. And underneath those two halves are vast number of discrete formations, stacked atop one another like pancakes. And an increasing number of those formations are proving to hold a lot of syrup.
Oil companies have pushed the basin’s envelope in recent months by expanding into new regions, as Wall Street watches with high-powered binoculars from the bleachers. One particular “hot spot” has been the Northern Midland, where Pioneer Natural Resources has the upper hand at the moment. There, the company’s Hutt well captured huzzahs in the first quarter and the momentum continued into the second quarter when the company debuted two look-alike wells.
Initial production rates from those first three wells averaged more than 1,600 b/d of oil equivalent, a high rate. Pioneer managers said ultimate well recoveries are trending currently at 800,000 to 1 million boe, which industry considers outstanding.
Moreover, Pioneer is pushing even further north, with wells planned 15 miles northwest of the 1,572 boe/d Mabee 1H well, on the border of Andrews and Martin Counties.
Recall that Pioneer earlier this year posed a thesis that two shale formations alone in the Midland Basin, the Wolfcamp and Jo Mill, may contain as much as 50 billion boe of recoverable resource across industry acreage. And that’s on 140-acre spacing; the company is testing tighter spacing, which could provide an upside.
The Hutt-Mabee wells reflect “positively” on the 50 billion boe claim, FBR Capital Markets Rehan Rashid said in a recent report. As a result, “we believe long-term recovery factors and the resource in-place estimate should trend higher,” Rashid said.
The Jo Mill Shale starts at about 7,000-7,500 foot depths; the Wolfcamp at 8,000-10,000 feet.
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Meanwhile, in the Delaware Basin, companies continue to distinguish their acreage through drillbit results. For example, the Northern Delaware is “continuously improving” for small but aggressive Permian player Concho Resources, Global Hunter Securities analyst Mike Kelly said in a recent report.
Concho, which “made its bones” in the Permian, said its production overall from the Delaware had grown more than 200% in the previous year, and oil production up nearly 300% during that period. The company, formed in 2004, said its output overall in that chunk of the basin had grown 200% versus a year ago.
But interestingly, the company believes its southern acreage could have the most oil in place, and to prove it plans to drill longer laterals there for the rest of 2013.
Also, shale sultan EOG Resources is playing the Delaware’s Leonard and Wolfcamp Shales. An EOG well in the Wolfcamp Shale tested at a robust 2,056 boe/d, while three Leonard Shale wells averaged a healthy 1,530 to 1,905 b/d of oil alone plus modest amounts of natural gas and gas liquids.
Second quarter conference calls were also were notable for another reason: EOG and Marathon Oil debuted new CEOs, while the companies’ former CEOs — who now are executive chairmen of their respective companies — continued to field questions from analysts but signaled they will guide the new management smoothly into their new roles.
EOG’s Mark Papa had been his company’s CEO ever since EOG was spun off in 1999 from now-defunct energy trading giant Enron as its upstream arm, formerly known as Enron Oil & Gas. Cazalot took the helm of Marathon in 2002 after the separation of USX’s steel and energy businesses, and presided over that company’s transformation into a major US shale operator with assets in the US’ Eagle Ford and Bakken Shales and other resource plays. New CEOs: Bill Thomas for EOG and Lee Tillman for Marathon Oil.
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