Posted on 03/15/2012 12:20:21 PM PDT by thackney
U.S. oil production is enjoying a renaissance, thanks to new technology that has made oil recovery possible in tight shale rock.
The busy Bakken formation in North Dakota and Montana is the largest and best-known oil shale play.
The Eagle Ford in South Texas and the Barnett "combo play" (gas and oil) in North Texas are also fairly famous unconventional plays.
But the Wolfcamp Shale?
"Over the next two or three years, everybody is going to be making a beeline to the Wolfcamp," said Scott Sheffield, chief executive of Pioneer Natural Resources.
Spanning numerous counties across West Texas, the Wolfcamp formation is located below the long-plied Spraberry field, which helped make Midland, Texas, oil-central starting in the early 1950 s.
Its location in the Midland Basin is within the larger Permian Basin.
Sheffield and other oil experts say the Wolfcamp is probably the thickest of any onshore U.S. oil shale play, with up to 1,000 feet of potential payout across hundreds of thousands of acres.
Biggest And Thickest "It will be the biggest, and it is already the thickest," Sheffield said. "So it's got the most pay zones of any oil shale play in the U.S. I call it the third or fourth coming of the boom in West Texas."
If Wolfcamp does turn out to be the next big oil shale play, Pioneer is on the ground floor. With 900,000 acres under lease in the Spraberry, it has the largest land position.
Pioneer believes that more than 400,000 of those acres are ripe for horizontal drilling.
Its game plan: drill 10,000 feet down through the Spraberry to the Wolfcamp and then out 7,000 feet horizontally.
For now, it's targeting 200,000 acres in the southern portion of the Spraberry field.
Pioneer's two completed wells in the Wolfcamp have already exceeded expectations, each producing 800 to 1,000 barrels of oil a day, and they're still early in production.
EOG Resources started drilling in the Wolfcamp earlier and is now seeing higher output from its 35 or so wells.
But Sheffield says Pioneer will be a bigger operator in the Wolfcamp in the sense that it has 400,000 prospect-worthy acres to EOG's 100,000.
"We are going to drill 80 wells in 2012 and 2013," he said.
EOG's wells in the Wolfcamp are producing 2,000 barrels a day, says Dan Morrison, analyst with Global Hunter Securities.
"Even if Pioneer's don't get to 2,000 barrels a day, at 800 barrels a day the play is incredibly economic," Morrison said.
Only if production were under 400 barrels a day would it not be "awe-inspiring," he added.
Though the first wells in the Wolfcamp cost more than $8 million each, that'll drop to $6 million to $7 million as development expands, management has said. Costs are higher than vertical wells, but the returns are likely to be higher.
Pioneer's first Wolfcamp well, for example, produced seven times more barrels of oil equivalent than a normal Spraberry vertical well over a similar 90-day period.
The economics are especially good with oil prices above $90 a barrel. WTI Crude has been above $100 since last month.
Pioneer believes Wolfcamp will start having a bigger impact in 2013.
Most of Pioneer's current production comes from its three core liquids-rich growth assets in Texas: the Spraberry field, with vertical wells; the Eagle Ford and the Barnett Shale Combo, which has a higher concentration of natural gas than the others.
Pioneer's Spraberry and Wolfcamp production is 90% oily, or liquids-rich, and only 10% gas. Oil-weighted production is viewed more favorably because of high oil prices and low natural gas prices.
Pioneer's fourth-quarter production rose 9% over the prior year to 140,000 barrels of oil equivalent per day. Adjusted income for the quarter was $147 million, or $1.19 per share, up from 51 cents last year.
Analysts estimate 2012 earnings will rise 38% over last year to $5.44 a share and go up another 42% in 2013, says a Thomson Reuters poll.
Pioneer's $2.5 billion capital budget this year is still weighted heavily to vertical oil drilling in the Spraberry ($1.5 billion) with the Wolfcamp trailing at a budgeted $275 million.
Indian Partner Pioneer's joint venture partner in the Eagle Ford, India's Reliance Industries, is footing about 75% of Pioneer's share of drilling costs in exchange for a 45% interest in Pioneer's core acreage there.
But Reliance's carried interest in the Eagle Ford will largely end next year, analysts say.
Analysts at Barclays Capital have expressed concern that a potential cash shortfall could temper Pioneer's growth plans in 2013 and beyond.
Pioneer will indeed be "very, very close" to using all its estimated $2.8 billion in 2013 cash flow, Chief Financial Officer Richard Dealy said in a conference call in February.
Management has said in the past that it might consider a joint-venture partner in the Wolfcamp in the future to defray costs.
Dealy said in the call that the firm's free cash flow would turn more positive in 2014 and 2015.
Pioneer also has smaller producing assets in Alaska's North Slope and the mid-U.S. and Rockies. It plans to sell its last international asset, in South Africa, by the summer. Production there is next to nothing.
"It's all about Texas," Sheffield said.
What a crap shoot. And it's always been that way. Drake's investors wanted him to shut down, and the letter came the day after he hit oil.
/johnny
I would certainly love to find out that a similar effort and result was coming for a certain property I own in central Kansas.
Just think about how much untapped potential there is in Mexico, which will probably never be exploited in out lifetimes because of their inability to get their act together. The Rule of Law can do some amazing things.
Obamugabe’s thugs in the EPA will find a way to stop this...............
Years ago, I did a super secret project on the wolfcamp, the company was pleased with the results. I am not surprised to heard this.
They already have a way. Don’t you remember the little 3” lizard that the EPA claimed was endangered and threatened to shut down drilling last year. Look for them (EPA) to pull this out of their butts again to stop the drilling. We certainly wouldn’t want to hurt a little lizard for some ol’ oil, now would we?
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Pioneer’s two completed wells in the Wolfcamp have already exceeded expectations, each producing 800 to 1,000 barrels of oil a day, and they’re still early in production.
Question....based on the above do they think it could increase or decrease and what would cause either to happen?
Do horizontal wells that are fractured have the same pressure issues that vertical wells do? Does the fracturing process create it’s own pressure?
Sorry for all the questions I’m really interested.
Pioneer’s two completed wells in the Wolfcamp have already exceeded expectations, each producing 800 to 1,000 barrels of oil a day, and they’re still early in production.
Question....based on the above do they think it could increase or decrease and what would cause either to happen?
Do horizontal wells that are fractured have the same pressure issues that vertical wells do? Does the fracturing process create it’s own pressure?
Sorry for all the questions I’m really interested.
Question Thack...
How do “we” get oil from shale?... or oil sands.?
I can see pumping oil from pools of oil underground BUT
cannot fathom how to get oil from SHALE.. or sand..
especially Shale.. know any good “primers”.. OR
can you explain it simply and graphically?..
Like trying to save a lizard?
What to increase or decrease, the individual well output? No way for me to tell that, they are the ones reading the data.
Do horizontal wells that are fractured have the same pressure issues that vertical wells do?
Fields have the pressure source. Each field or formation will have its own pressure. A well that stops vertically or is horizontal is going to see the same pressure.
Does the fracturing process create it’s own pressure?
No, the fracturing process temporarily "overcomes" the field pressure. At that time it puts more pressure back into the rock until it starts small local cracks form. The fluid flow into those cracks, spreading out through other cracks. Within the fluid is sand.
As the hydraulic fracturing pressure is equalized then reduced, the cracks stop spreading and the fluid starts to flow back. The cracks begin to close as the fluid flows backs. The sand gets trapped in the closing crack leaving them open.
Halliburton puts together a nice description with a simple video to explain the process.
http://www.halliburton.com/public/projects/pubsdata/hydraulic_fracturing/fracturing_101.html
I like the play.......
Keep in mind that "pool" is porous rock, not an underground lake.
A simple visualization would be a glass filled with sand, then you pour water into it. The drill a hole through the sand, insert a straw and try to suck the water out. You will never get all the water you poured in.
Tight sands, shale, etc are all the basic concept, but the formation have lower porosity (size of micro-holes) holding the oil. Also they have lower permeability (connection of those holes). By hydraulic fracturing, they put lots of cracks in the formation and sand to hold the cracks slightly open. This allows better flow out.
This is descriptive of what is going on with the Bakken, Eagle Ford, Marcellus and other popular shale currently under drilling and production.
We have far more petroleum trapped in oil shale. The previous was describing how to get oil/gas already separated from the shale or tight sands. This stuff, like what is in the Green River formation has to have the petroleum cooked out of it. That process is called retorting. It isn't really oil; what comes out of that is called Kerogen. It can be made into a synthetic oil that is actually pretty high grade stuff. The industry has done a crappy job distinguishing between the two. Bakken and Eagle Ford are still drilling and pumping. It just takes the horizontal wells and hydraulic fracturing to get enough flow per well to be economical.
thanks...
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