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This is the third of a three part series on EURs in the Permian. In parts 1 and 2, I covered different areas and how it is producing. These differences can be attributed to well design, but the biggest variable is geology. It has multiple pay zones, which change significantly from the Central Basin Platform to the Delaware and Midland basins.


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Energen (NYSE:EGN) has 275000 net acres in the Permian Basin. Energen is working in the Central Basin Platform, Delaware and Midland basins. In the above picture, the blue and yellow markers indicate where Energen has acreage. This map also indicates where specific formations are targets. A good portion of its Midland Basin acreage is prospective the Wolfberry, Wolfcamp and Cline shales. In the Delaware Basin, it is focused on the Bone Spring and Wolfcamp. It does have one location, where it is testing the Wolfbone.

Wolfberry wells are vertical and have a lower cost of $2.3 million doing a 6 to 8 stage frac. EURs are lower at 155 MBoe, with 76% of initial production coming from oil. Longer-term models have 61% oil and 84% liquids. In the Delaware Basin, the third Bone Spring models to 475 MBoe. The cost to complete is $6.9 million using a 4400 foot 10 or 11 stage lateral. Total production is 66% oil or 84% liquids.

Linn Energy (NASDAQ:LINE) has 100,000 acres in the Permian. It is concentrating on the Wolfberry. This models to an EUR of 125 MBoe. It estimates 79% liquids production.

Antares (OTCPK:AZZEF) has 32065 acres in the Permian. It is drilling the Wolfberry at costs of $1.9 million using 8 to 12 stages. It models the Wolfberry at 205 MBoe with 111 MBoe coming from oil in Howard County. In Dawson County, EURs decrease to a range of 125 to 175 MBoe.

Callon (NYSE:CPE) has 32750 acres in the Permian. It is in the Midland Basin and prospective the Wolfberry, Wolfcamp and Cline shales. It has modeled the Wolfcamp B. Well design is a 7000 foot 24 to 27 stage frac. EURs are 450 MBoe with 86% of initial production coming from oil.

Abraxas (NASDAQ:AXAS) has 41131 acres in the Permian. This acreage is a conventional play in Nolan County. Drilling and completion costs are $1.8 million with EURs of 145 MBoe.

The tables below, organize data by producer. I have broken the numbers by formation. This should give an idea of how wells are producing, and how profitable it is going forward.

Spraberry

Operator EUR MBoe Well Cost MM % Liquids
Apache (NYSE:APA) 127 $1.4 68% Liquids
Pioneer (NYSE:PXD) 140

The Spraberry is developed vertically in the northern Midland Basin. Areas prospective the Wolfcamp are drilled and completed as Wolfberry wells and have better results. The Wolfberry provides better IP rates, EURs with a higher percentage of liquids. Both of these plays are attractive given lower costs, and a short payback time.

Wolfberry

Operator EUR Moe Well Cost MM % Liquids
APA 125-202 $2.0 82% Liquids
Range Resources (NYSE:RRC) 216 $2.6 72% Liquids
Clayton Williams (NYSE:CWEI) 135 $2.3
Laredo Petroleum (NYSE:LPI) 145 $2.2 65% Oil
AZZEF.PK 205 $1.9 54% Oil


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In the picture above, Laredo shows a significant number of vertical pay zones. This is possible due to very thick source rock. More important are the horizontal targets shown. The Cline and three Wolfcamp shales could all be developed from the same pad location. This could be compared to Bakken in North Dakota, as it is also prospective at least four zones. Continental (NYSE:CLR) is planning 14 well pads, which could be down spaced. Below I have listed the configuration of a Bakken well pad.

  1. Middle Bakken: 4 wells
  2. Upper Three Forks: 3 wells
  3. 2nd Bench of the Three Forks: 4 wells
  4. 3rd Bench of the Three Forks: 3 wells

We will see more locations in the Bakken. It is just a matter of time, before well design improves and we find the best method to develop all of this source rock. The Midland Basin may have a much larger number of wells given its shale thickness.


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The picture above shows a much greater thickness throughout the Wolfcamp and Cline shales when compared to other successful unconventional plays in the United States. The Bakken/Three Forks has a thickness of approximately 500 feet at its thickest. The Wolfcamp/Cline is over 3 times that. This does not mean 42 wells could be drilled from each pad, but does indicate the possibility of significantly more wells per location.

Cline

Operator EUR MBoe Well Cost MM % Liquids
APA 423 $7.6 87% Liquids
RRC 340 $4.3 62% Oil/83% Liquids
LPI 550-690 $9.5 73% Oil


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The upper Wolfcamp has provided very good results. The Cline may be as good. In the picture above, Laredo provides how much improvement is seen by using longer laterals and more stages. It is expected larger amounts of water and proppant would be used as well. Newer wells use 9000 foot laterals and 32-37 stages. It will be interesting how it affects overall production.

Wolfcamp

Operator EUR MBoe Well Cost MM % Liquids
APA 598 $7.7 91% Liquids
CPE 450 86% Oil, IP
Concho (NYSE:CXO) 700 $9
Approach Resources (NASDAQ:AREX) 450 $5.5 82% Oil IP
LPI Upper Wolfcamp 715-800 $8.5 77% Oil
LPI Middle Wolfcamp 600-700 $8.5 63% Oil
LPI Lower Wolfcamp 605-730 $9.5 63% Oil

The Bone Spring is located in the Delaware Basin. It is more shallow than the Wolfcamp, and has three separate intervals. The Bone Spring has a total average thickness of 1556 feet.

Third Bone Spring

Operator EUR MBoe Well Cost MM % Liquids
EGN 475 $6.9 66% Oil/84% Liquids
CXO 500 $7
APA 313 $6.6 74% Liquids

When the Bone Spring and Wolfcamp formations are combined, it becomes a vertical pay zone known as the Wolfbone. It has over 2400 feet of thickness. Vertical depth of 12900 feet using 10+ stages. The Wolfbone has higher well costs than the Wolfberry, but also has higher EURs.

Additional Pay Zones

Formation Operator EUR MBoe Well Cost MM
Wolffork AREX 110 $1.2
Canyon Wolffork AREX 193 $1.5
Fusselman APA 180-262
Wolfbone CWEI 200-250 $4.0
Wolfbone APA 280 $3.6
Strawn APA 147
Strawn AXAS 145 $1.8

The Central Basin Platform has produced vertically decades. Redevelopment is being pursued using horizontal techniques. Although much has been developed, there is still a large amount of resource in place. This includes the San Andres, Clearfork, Grayburg and Wichita Albany. Apache has had some very good results in the latter, with IP rates of 1000+ Boe/d. At least two wells have EURs of 600 MBoe or better.

In summary, excitement in the Permian has decreased as natural gas and NGL prices have pulled back. It is important to remember many of the formations are shallow vertical plays significantly lowering well costs. The Wolfberry, Wolffork, and Wolfbone are all economic at today's prices. The Wolfcamp, Cline and Bone Spring have seen better results as well designs have improved. I think we will get a better feel for the area once full pad development has begun. I think the Permian could possibly be one of the best basin's with respect to well spacing. This should drive costs down significantly, improving the economics of the area.

Source: Bakken Update: Estimated Ultimate Recoveries In The Permian Part 3