The Permian may be the most intricate basin in the United States with respect to geology. Shale thickness is much greater than in the Bakken and Eagle Ford. This allows for vertical drilling techniques. It requires lower spec drilling rigs and reduces overall costs. The Delaware Basin has multiple stacked pay zones, most are horizontal, and different from those in the Midland. Recoveries have been lower than other liquids plays, but this is changing as companies continue to increase lateral lengths and the number of stages. This increases costs, but is improving recoveries. We are beginning to see larger oil cuts in these areas, as the Permian is not just a combo play. This will increase economics as the price NGLs have decreased.
This geology changes quickly from one basin to the next. This changes target zones, and how it is drilled and completed. The picture above shows the different basins in the Permian. The Permian offers one of the most diverse areas as it is a stacked play offering very good results at different depths. The picture below is a good representation of where each shale play is located. The Delaware Basin is prospective the Bone Spring, Wolfbone and Wolfcamp. The Midland Basin is also prospective the Wolfcamp, but includes the vertical Wolfberry and horizontal Cline shale. Although not shown on the map, the Northwest Shelf of the Central Basin Platform (just north of the Delaware Basin) is prospective the Yeso.
The Midland Basin breaks down into several horizontal and vertical targets. The Wolfberry is located in the Midland Basin. It consists of the Spraberry and Wolfcamp formations. The Wolfberry is very thick, making it a good vertical target. This is usually done with 8 to 12 frac stages. Above the Spraberry shale is the Leonard, also known as the Avalon in the Delaware Basin. The Wolfcamp is part of the Wolfberry formation, but can also be considered as its own horizontal target. The Wolfcamp is 42% oil, 30% NGL, and 28% gas and is a combo play. It covers an estimated one million acres and is found at depths of 7,000 to 10,500 feet. The Cline shale is below the Wolfcamp and is another horizontal target. Estimates have it producing EURs of 340 MBoe using a ten stage 3000 foot lateral. This has an average cost of $4.3 million. 15 stage 4,000 foot laterals increase EURs to 420 MBoe (60% oil), but increase well costs to $7.7 million. There are six vertical targets below the Cline, all of which may be economic.
|Lower Cline Shale||Horizontal|
The Delaware Basin does not have the vertical targets of Midland. It shares the Wolfcamp with the Midland Basin, but also has the Avalon shale. The Bone Spring consists of three layers, all separate pay zones. Each has a thickness of 150 to 350 feet. It covers 4,390 square miles. EOG Resources (NYSE:EOG) estimates a resource cut of 41% oil, 31% NGL, and 28% gas. It is found at depths of 6,000 to 9,800 feet. The Wolfcamp is located below the Bone Spring, and is referred to as the Wolfbone when combined.
|1st Bone Spring||Horizontal|
|2nd Bone Spring||Horizontal|
|3rd Bone Spring||Horizontal|
- Apache: 3.5 million acres
- Occidental (NYSE:OXY): 3 million acres
- Conoco Phillips (NYSE:COP): 1.1 million acres
- Chevron (NYSE:CVX): 1.02 million acres
- Devon (NYSE:DVN): 1 million acres
- Pioneer Natural Resources (NYSE:PXD): 900,000 acres
Some of Apache's recent Midland Basin well results and EURs are listed below:
|Well||Source Rock||EUR (MBoe)|
|Weber 47 #8||Wolfberry||172|
|Keathley 46 #12||Fusselman||262|
|ED Books 1B #11||Wolfcamp/Strawn||147|
|SAU 45 #4C||Spraberry/Dean||221|
Apache's vertical Midland Basin wells include the formations in the above table. Apache drilling and completion costs are approximately $2 million. EURs range from 125 to 202 MBoe. Resource garnered is 82% liquids. Vertical Spraberry well economics produce EURs of 127 MBoe. Drilling and completion costs are $1.4 million. These wells are 68% liquids. Apache's Cline shale results are listed below.
|Barracuda 45 #2H||528||3800||11|
|Mac 6-Carter 43||380||6705||12|
|Marlin 47 2H||420||4255||12|
Drilling and completion costs of 7.6 million are expected in the Cline. EURs of 423 MBoe are expected with 87% liquids production. Below is a list of Apache's Upper Wolfcamp results.
|Scott Sugg #1H||682||7322||23|
|Bennie 4342 M-9H||850||9094||33|
Wolfcamp shale EURs are 598 MBoe and produce 91% liquids. Apache's results have significantly outperformed. Increased lateral length and stages are producing significantly better recoveries.
In summary, Apache is a Permian leader. It has produced the widest range of results from several different pay zones. It is ahead of the competition, and has provided a good baseline of results to compare with in the industry. Its Wolfcamp wells have improved and I would guess the Cline will do the same. In part 2, I will cover Apache's Central Basin Platform and the areas it is working. I will also compare how its competition is doing as this play begins to improve production due to better drilling and completion techniques.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This is not a buy recommendation. The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, are not guaranteed for accuracy or completeness, do not reflect actual investment results, do not take in consideration commissions, margin interest and other costs, and are not guarantees of future results. All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. For more articles like this check out my website at shaleexperts.com. Michael Filloon is a Director at Fracwater Solutions L.L.C. We engage in industrial water solutions for oil and gas companies in North Dakota. This includes constructing water depots, pipelines, and disposal wells. We also provide contracting services for al types of construction at well sites. Other services include soil remediation. Please contact me via email if you are interested in working with us. For other, more of my articles check out shaleexperts.com.