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Permian Basin shale reserves boost operator growth

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Oilfield Technology,

The massive potential identified in a US unconventional resource play, known as the Wolfcamp Shale, suits the production growth plans of several major operators, and these firms are mobilizing quickly to exploit this vast resource, according to a new report from GlobalData.

The company’s latest report forecasts capital expenditure for 2014 in the Wolfcamp Shale, a liquids-rich play, to almost US$ 2 billion. The main operators in the play – Pioneer Natural Resources (Pioneer), Devon Energy (Devon), EOG Resources (EOG) and Approach Resources (Approach) – account for US$ 1.45 billion of this expenditure, while smaller firms are forecast to contribute an additional 30%.

The significant investment is well worth it for those with acreage in the liquids-rich zones, including Pioneer and Approach, with rates of return ranging from 29 - 49%. Conversely, those operators in the primarily gas-rich zones are seeing substantially lower rates of return, such as Cimarex, at 19%.

While Oxy holds a substantial acreage position throughout the Permian, its 2014 development plan in the Wolfcamp is rather limited compared to other operators. However, with Oxy currently reigning as the top producer in Texas, its plans for the Wolfcamp may be on the horizon as its competitors continue to tweak their development strategies.

Taryn Slimm, GlobalData’s Lead Analyst covering US Onshore, says: “Pioneer took significant strides in 2013 to secure its position as the top player in the area, with a budget of more than US$ 1.2 billion with US$ 200 million specifically allocated towards infrastructure development. The additional facilities will allow Pioneer to continue growth in the Wolfcamp and provide the necessary infrastructure for its projected 2014 developments, including an additional 120 wells.”

Pioneer will see a strong boost in production in early 2014 as multiple horizontal drills come online and the impacts of pad drilling are realized. GlobalData estimates that Pioneer will nearly double its daily liquids - crude oil and Natural Gas Liquids (NGLs) - production in 2014, from approximately 9587 bpd in 2013 to 18 870 bpd.

EOG, Devon and Approach also reported a rise in production in 2013, with an increase of 33%, 32% and 24% year-over-year growth, respectively. GlobalData’s forecast for these companies’ Wolfcamp production in 2014 is 5354 bpd (crude oil), 20 423 bpd (crude oil and NGLs) and 35 489 bpd (crude oil and NGLs), respectively, while Pioneer can expect to achieve 18 870 bpd (crude oil and NGLs). Approach has benefitted substantially from its transition to a predominantly horizontal development program in 2011, and will continue to optimize its development strategy in 2014.

Additionally, both Pioneer and EOG’s production levels are forecast to peak in 2017, while those for Devon and Approach will reach their highest in 2016.

Slimm concludes: “The recent Wolfcamp Shale boom can be attributed largely to exceptional well economics. Many companies have transitioned to horizontal development strategies, and several companies producing from the play are already seeing returns on investments from anywhere between 21% and 32%, with Approach netting returns almost as high as 50%.”

The full report can be accessed here.

Adapted from a press release by David Bizley

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