QEP sets focus on Permian only, plans asset sale

By Luke Geiver | March 06, 2018

By late April, Denver-based QEP Resources could become a Permian Basin pure play operator. QEP’s board of directors has approved plans to list the company’s Williston Basin, Uinta Basin and Haynesville shale assets for sale. In 2017, QEP purchased roughly 15,000 acres in the Permian Basin for more than $700 million. If a sale of QEP’s non-Permian assets is completed in April, the company will hold roughly 50,000 net acres with 27.8 mboed worth of production in Texas. The production mix is 75 percent oil, 11 percent gas and 14 percent NGL. QEP is currently running six drilling rigs in the Midland Basin portion of the greater Permian Basin.

According to Chuck Stanley, CEO for QEP, the pure-play move will help create a more focused energy development company that is heavily-linked to oil generation. Since QEP branched off from a larger company in 2010, the goal has always been to become a more oil-rich entity, Stanley said. Proceeds from a sale—asset values have not yet been announced—will be used to pay down debt and fund operations in the Permian. By 2019, QEP hopes to become cash flow neutral from its production and operations in the Permian. QEP’s board has also approved the possibility of a share repurchase program of up to $1.2 billion, depending on market conditions.

In the Williston Basin, QEP will list its two main assets separately, including the South Antelope field assets and others on the Fort Berthold Indian Reservation. For the past year, QEP has been performing refrack tests on generation one wells. Results from the refracks have been favorable, the company said, with some estimated ultimate recovery numbers for gen 1 wells nearly doubling post refrack. In total, QEP owns more than 110,000 net Williston Basin acres. There are almost 400 producing wells in the QEP Williston Basin portfolio and the company is currently running a single drilling rig with no plans to add another this year. Production on QEP’s wells in North Dakota equates to 70 percent oil, 14 percent gas and 16 percent NGLs. Assets in the Uinta and Haynesville are dominated by gas production. Last year, the company also performed refrack tests on wells in its Haynesville acreage. Midstream assets present in the Haynesville could become part of a sale for the assets there.

The use of tank-style fracture strategies has QEP enthusiastic about its Permian focus. The approach is used to target multiple stacked horizons from a single surface location. Wells in separate formations are completed from a single pad in a top-down order. Pressure walls and buffer zones—most likely made up from the thickness of horizons in the basin—are placed between well bores that are being completed, producing or are in the process of drilling. The use of pressure walls and buffer zones, according to Stanley, minimized interference between completed and drilling wells. The approach also helps to eliminate surface costs as rig and frack crews spend less time in transit and more time on a single pad. Downhole, tank-style development also helps to maintain a super-charged reservoir pressure during completion while reducing the shut-in times for offset producing wells.

Although the cost to drill and complete a Permian well versus a Williston Basin well are nearly identical, there are more pay zones in the Permian. According to QEP, the company can drill at least six zones from a single pad. In the Williston Basin, most producers are currently targeting between two and four zones.