Shales Update

By Jaci Satterlund | December 18, 2017

Permian
In the Permian’s Delaware Basin, Rosehill Resources has added 4,500 undeveloped acres for $77.6 million. The acres offer more than 320 drilling locations that could target the Wolfcamp A and B benches along with the Bone Spring. Although the acres are undeveloped, they are held by production from four vertical wells that put the acreage in lease terms until 2020. On a per drilling location basis, the acres cost roughly $500,000 per drilling location.

Anadarko Petroleum Corp. will spend more than $900 million next year in the Delaware. The goal is to develop what the company calls its onshore mega project. The project includes establishing local workforce, trading for 35,000 net acres and delineating the core Wolfcamp A. To date, Anadarko has checked those items off its mega project to-do list. Next up, according to the E&P, is adding 120 mbopd of additional oil-treating capacity, 600 Mmcf/d of gas processing capacity to existing infrastructure already there, and,  adding 700 mbl/d of water disposal capacity.

For the past 18 months, Earthstone Energy has been navigating a company merger and a transition to West Texas. Through a deal valued at $27 million, Earthstone has shifted its focus to the Midland Basin where it now has a 27,000 net acre, 7,000 boepd-position following the sale of non-operated assets in the Williston Basin. The company left its Williston Basin position due, in part, to lease-operating expenses and access to water disposal in Texas. LOE’s in the Bakken were in the $10 to $12 range for the company, but are only in the $3/b range in Texas.

Permian pure-play Diamondback Energy has grown production by more than 175 percent during the previous 11 quarters. The company is currently running nine drilling rigs and four frack crews. In Q3, Diamondback said it has increased the average length for its laterals, moving from 7,716 in Q2 to more than 9,600 feet in Q3. To end the year, Diamondback will bring 35 to 40 wells online.

 

Eagle Ford
Cabot Oil and Gas Corp. reported a net income of $17.6 million in Q3, compared to a $10.3 million loss during the same quarter one year ago. The turnaround has come, in part, from its operations in the Eagle Ford. In Q3, the company brought nine new wells online. Each of the wells utilized a horizontal lateral that reached more than 10,000 feet and was packed with close to 2,000 pounds of proppant per foot. The company is currently running a single rig and a 24-hour frack crew.

 

Scoop/Stack
The Energy Information Administration has added the Anadarko Basin—home to the emerging shale plays of the SCOOP and STACK—to its monthly Drilling Productivity Report. Information used prior to EIA’s inclusion of the Anadarko Basin showed that the region was producing 450,000 barrels of oil per day and 5.7 billion cubic feet per day of natural gas.
 
Devon Energy believes that publicly available data shows that the Oklahoma City operator has achieved the highest 90-day production rates for new wells of any U.S. onshore operator. In the STACK, the company recently said it has brought on more than 14 wells that achieved 30-day initial production rates of 2,300 boepd or higher (55 percent oil). Also in Q3, Devon said its STACK assets were its best performers as production advanced 26 percent compared to 2016 exit rates.

 

Niobrara
SandRidge Energy has made a move to bolster its DJ Basin position. Through an agreement with Bonanza Creek Energy valued at $746 million, SandRidge could create a DJ Basin position with 67,000 contiguous net acres. At current strip prices, many of the assets included in the Bonanza Creek deal could provide 40 percent initial rates of return at oil in the mid-$50 range. Fir Tree Partners, a manager that holds roughly 8 percent of SandRidge, believes the assets in the deal aren’t worth the asking price.
 
Anadarko Petroleum Corp. will run five drilling rigs and three frack crews in the DJ to start the year. In total, Anadarko will invest more than $900 million next year in the Colorado play.
 
SRC Energy Inc., a Denver-based firm, has picked up 30,000 acres in Weld County, Colorado, from Noble Energy. The deal—valued at $608 million—includes 4,100 barrels of oil equivalent per day and leaves Noble Energy with 335,000 net acres in the DJ Basin. According to Gary Willingham, executive vice president of operations, Noble did not intend to develop the acres sold to SRC Energy for a number of years. The producing assets included in the deal have a production mix of 20 percent oil, 30 percent natural gas liquids and 50 percent natural gas.  

 

Bakken
Hess Corp., a top-Bakken oil producer, has sold more than $2.6 billion worth of assets in Equatorial Guinea and Norway. Proceeds from the combined sales will be used to help Hess pay down roughly $500 million in debt next year and to help the exploration and production company continue to maintain and expand its operations in North Dakota and the Gulf of Mexico. While Hess will continue to focus mainly on the Bakken and the Gulf of Mexico, it will still have operations in the Utica, along with assets in Guyana, Suriname, Ghana, Malaysia and Libya.

 

Marcellus/Utica
Select Sands is turning to the water to move proppant from its Arkansas-based sand mine to the Appalachia shale plays. Through a deal with an end-user in the Northeastern U.S., Select Sands will move 10,000 tons of frack sand via barge. The proppant-supply business has been improving for the Vancouver, British Columbia-based company. From Q2 to Q3 this year, revenue for proppant increased by 148 percent.

 

Haynesville
The Haynesville shale gas play is growing once again. With operators drilling laterals past 7,000 feet, frack crews placing more proppant per lateral foot and utilizing more frack stages, producers are now increasing initial production rates, according to the U.S. Energy Information Administration. This year, the play reached 6.9 billion cubic feet per day of natural gas production, up from the 6 billion cbpd achieved last year.