Abraxas CEO: What's good for the Bakken is good for the Permian

By Patrick C. Miller | July 25, 2017

Robert Watson, CEO of Abraxas Petroleum Corp., has news for those who believe the Delaware formation of the Permian Basin in Texas has a great advantage over the Bakken of North Dakota’s Willison Basin.

“Anybody that poo-poos the Bakken really doesn’t know what they’re talking about because the economics are just as good,” Watson said during his presentation at the Bakken Conference & Expo last week in Bismarck, North Dakota.

Abraxas—headquartered in San Antonio, Texas—was an early player in the Bakken, drilling its first wells there in 1979. The company sold its North Dakota assets in 1992 to focus on its Texas acreage, but returned in 2008. Abraxas now operates in the Bakken, the Delaware and the Eagle Ford with a nearly 50-50 split in capital expenditures between the Bakken and Delaware.

During his talk, Watson outlined the difference between the company’s operations in the Bakken and the Permian, but noted that the 35 percent rates of return on wells in both locations are identical on $46 per barrel WTI crude.

“Our Delaware—and everybody’s Delaware—are generating rates of return equal to what an accomplished operator can do in the Bakken,” he said. “If oil prices were to become the same, the Bakken would exceed the Delaware because the Bakken differentials are currently higher than the Delaware, and that’s built into this rate of return.”

Abraxas’ innovative fracking techniques were noted when the Society of Petroleum Engineers published a paper authored by Pete Bommer, the company’s vice president of engineering. The paper was reprinted this month by World Oil Magazine.

“We’re a small company, but we pride ourselves on our technical ability and our engineering talent,” Watson said.

Drilling costs in the Delaware are slightly higher—$6.3 million per well compared to $6 million in the Bakken. That’s because the harder rock of the Delaware requires more water, more proppant and more intense fracks, according to Watson. One advantage of the Delaware, he acknowledged, are its four horizons compared to the Bakken’s two.

Watson said the biggest change in fracking operations occurred several years ago when Abraxas began using polylactic acid diverters, which he attributed to the production increases from its Bakken wells. The technique worked so well in North Dakota, the company decided to try in in Texas.

“We incorporated diverters thinking it’s the thing to do. It worked for us in the Bakken, so why not do it here?” he asked. “Our Delaware well is outperforming our type curve. If I had to put my finger on one reason, it would be because of the use of diverters.”

At the mid-point of 2017, Abraxas’ average production was 8,200 barrels per day, but Watson expects it to reach 10,000 barrels per day by year’s end. He noted that during the recent years of low oil prices, Abraxas continued to increase production.

“Even though we were spending less and less money until this year, we were still growing production, which I think is testimony to the quality of our assets—especially here in the Bakken,” Watson said.