Rosehill CEO talks southern Delaware Basin well results

By Luke Geiver | November 15, 2018

Rosehill Resources reported strong third quarter results for 2018 and highlighted how much running room the Delaware Basin of the greater Permian Basin still has despite the frantic pace of development that has been taking place there for the past five years.

Formed in 2017 through investments by a Special Purpose Acquisition Company, Rosehill has grown its production base to more than 20,000 barrels of oil equivalent per day through work in the Northern Delaware and Southern Delaware Basin.

In discussing its Q3 results with investors, the company and the investors on the call were enthused by the well results from the Southern Delaware. Although Rosehill has proven out most of its Northern Delaware acreage, its work in the Southern Delaware Basin is still in its infancy.

“We are encouraged by the production results associated with initial wells drilled and are looking forward to applying our learnings to the future development of the asset,” said interim CEO Gary Hanna. Rosehill has used Schlumberger seismic data, well logs and coring analysis to determine that its promising acreage in the Southern Delaware is proving out. The data shows high oil content, extensive natural fracturing and strong formation conductivity, according to the company. The wells drilled and brought online to date have had a low gas-to-oil ratio and will benefit from future optimization and artificial lift that is brought on sooner in the production cycle.

Although the wells flowed back naturally at initial production rates for the first 24 hours of a range between 700 to 1,200 barrels of oil equivalent per day, Hanna and his team believe they now know that after a two-week flowback period the best option for optimized production is to add artificial lift after two weeks. Hanna said the team learned a lot about the characteristics of the rock by letting the wells flow back naturally, but in the future artificial lift in the form of electronic submersible pumps or gas lifts will be needed to generate the type of cashflow Rosehill wants to get out of its Southern Delaware acreage. Artificial lift, Hanna said, will add another 20 to 40 percent of production to each well.

The team is currently deciphering 2019 plans based on its learnings from the Southern Delaware acreage, Hanna also said. The company does intend to continue running two drilling rigs instead of adding a third rig in 2019 mostly because the rig crews they have been contracting are drilling wells more efficiently and faster. In 2018, the drilling rig teams used were able to drill the wells from spud to total depth in roughly 12 days instead of the 19 days it used to take in recent years.

In addition to work in the Southern Delaware, Rosehill also drilled two saltwater disposal wells and continued to develop its takeaway infrastructure. The company will monitor SWD and infrastructure options in the future, noting that there continue to be more options for ownership or management of the company’s infrastructure needs.

Hanna, the acting CEO, also said the company is still in a search for a new CEO following the departure of Alan Townsend earlier this year.

In the Northern Delaware acreage, the spacing used to date would indicate four to six wells per section with wells targeting the Wolfcamp A, Wolfcamp XY and third Bone Spring formations. At the current well design, Rosehill would have 20-rig years of drilling inventory. The company has established production from four different formations and seven landing zones. They are currently testing the 8th landing zone the second bone spring. Most production comes in at 75 percent oil. The company is well hedged through the next three years, the team also said.