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Potentially 'More Productive Than Eagle Ford'

Wolfcamp play in Permian’s Delaware Basin

Can it be that a dwindling U.S. drilling rig count has become the new normal?

Ask a dozen “experts” what the future holds for the industry, and you’ll likely get a dozen different answers.

But there is an indisputable constant: The world continues to run on fossil fuels, crude oil in particular. And, there are pinpoints of light penetrating some of the on again/off again gloom hovering over the domestic E&P scene.

Look, for instance, at the Permian Basin, the old onshore workhorse of the industry, comprising several sub-basins.

The number of rigs exploring in the Permian actually increased by seven during the week of July 6 to a total of 239, according to the weekly rotary rig count released July 17 by Baker Hughes.

It’s encouraging also that this region holds an emerging hydrocarbon play with the economic potential to carry select operators through these trying times of low and uncertain oil prices, according to a new analysis by IHS Energy.

It’s the Permian-age Wolfcamp formation play in the Delaware Basin on the western side of the Permian Basin.

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Can it be that a dwindling U.S. drilling rig count has become the new normal?

Ask a dozen “experts” what the future holds for the industry, and you’ll likely get a dozen different answers.

But there is an indisputable constant: The world continues to run on fossil fuels, crude oil in particular. And, there are pinpoints of light penetrating some of the on again/off again gloom hovering over the domestic E&P scene.

Look, for instance, at the Permian Basin, the old onshore workhorse of the industry, comprising several sub-basins.

The number of rigs exploring in the Permian actually increased by seven during the week of July 6 to a total of 239, according to the weekly rotary rig count released July 17 by Baker Hughes.

It’s encouraging also that this region holds an emerging hydrocarbon play with the economic potential to carry select operators through these trying times of low and uncertain oil prices, according to a new analysis by IHS Energy.

It’s the Permian-age Wolfcamp formation play in the Delaware Basin on the western side of the Permian Basin.

The Wolfcamp is a well-known producer in the Permian, particularly in the Midland Basin.

In the Delaware, the play is more expensive to develop because of depth and pressure, according to Jerry Eumont, managing director of the financial services group at IHS.

Composed essentially of interbedded shale and limestone, the Wolfcamp formation kicks out impressive volumes of hydrocarbons.

In fact, the IHS study notes that the play has some of the best-normalized production of any U.S. onshore play.

“I’ve seen productivity in the Delaware Wolfcamp get up to 100-120 boe per thousand feet (of lateral wells drilled),” Eumont said. “In the Midland Basin, it’s still around 60-70 boe per thousand.”

Effective May 2015, there were more than 3,200 wells producing in the Delaware Wolfcamp, with about 75 percent of these drilled horizontally.

Of that total, more than 475 came on production since January 2014.

Still Growing

The play is considered to have great promise, as it’s currently viewed as a kind of adolescent in terms of its maturity, according to Reed Olmstead, manager of IHS’ North American Supply Analytics Service.

“The sweet spots are still being defined, because these normalized production rates have not shown signs of flattening,” Olmstead said. “This means the limits of the play have not yet been fully delineated, and operators are still learning how to best produce from this reservoir.”

Eumont elaborated.

“In the (Delaware) Wolfcamp, the production continues to improve,” he noted. “In the Eagle Ford (play), you know what you will get, and the Bakken is consistent for the most part.

“The Wolfcamp production in 2010 averaged 48 boe per thousand feet,” he said. “In 2012 it was about 78, and in late 2014 it was 116. We’re seeing continuous improvement, and that’s why we’re saying it’s not yet mature.

“It looks like it could grow up to be, economically, possibly more than the Eagle Ford as to productivity,” Eumont emphasized.

Olmstead commented that about 150 operators have produced from the Delaware Wolfcamp to date, compared to 90 in the Eagle Ford.

The Central Gas and Southern Liquids sub-plays are two sweet spots currently developing in the play.

Eumont said Cimarex is leading the charge in the Central Gas action in Culberson County, while the Southern Liquids activity in Reeves County is spearheaded by Concho Resources.

Normalized productivity from the sub-plays has increased by more than 40 percent since first quarter 2013, according to Olmstead.

The IHS analysis noted that the economics for both operators in their respective sub-plays are sufficient for drilling through the pricing downturn. But future delineation and possible expansion might be halted until oil prices recover and/or costs fall even further.

Still, many operators appear to be optimistic and eager for a piece of the action.

“In the last two months or so I’ve talked to 30 or 40 different operators, and at least half of them want to play the Wolfcamp Delaware,” Eumont said.

“Not only that, one of the largest oil companies in the world said they think they can make this play work at $55 (oil),” he added.

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