Hot New Bone Spring Play Helps Keep Permian Basin Chugging Along
(Copyright © 2010 Energy Intelligence Group, Inc.)
Oil Daily Friday, September 17, 2010
The prolific Permian Basin of West Texas and southeast New Mexico has been left for dead many times since the first commercial oil well was drilled there in 1921. But the application of horizontal drilling and hydraulic fracturing technologies have once again breathed new life into the legacy play, opening a new frontier known as the Bone Spring Formation.
"Everything we're doing today is in fields and in projects that were unknown 10 years ago," Tim Leach, chief executive of Permian Basin-focused Concho Resources, told delegates at the Barclay's energy conference in New York this week.
"When you think about the Permian Basin, I think you need to start thinking about it in a new way…when you apply new technology, whether its horizontal drilling or hydraulic fracturing, there is a tremendous amount of resource that is going to be unlocked from the Permian Basin in the future," he said.
A 2007 report from the US Geological Survey pegged the Permian's conventional resources at 100 million barrels of original oil in place, of which 40 million bbl had been produced. Leach, however, "wouldn't be surprised" if the Permian's unconventional resources were to match the 60 million bbl of conventional oil still left in the ground.
Current production in the Permian stands near 900,000 b/d of oil and 4 Bcf/d of natural gas, says Leach. And of the roughly 300 rigs running in the region, about one-third are focused in the Spraberry Trend in the Midland sub-basin of West Texas.
However, new activity is pushing into the more westerly Delaware sub-basin, which runs from the southern tip of the New Mexico Shelf down into Pecos County, Texas. Of particular interest there are the Bone Spring and Avalon shale plays, which have popped up in operations updates from a few companies, but which have generally remained something of a mystery to outsiders.
Concho helped to shed some more light on the matter on Wednesday, as Leach provided a glimpse into this potentially attractive new nook of the Permian.
The Bone Spring, a Leonard Age formation, spans five million acres and runs the entire length of the Delaware Basin. Three layers of alternately sandy, dirty carbonates compose the Bone Spring, and the first layer houses the Avalon Shale, Leach said. Horizontal drilling is tapping all three of these zones.
The formation extends 6,000-13,000 feet beneath the surface, and gets deeper as you move south, Leach said.
The New Mexico portion of the Delaware Basin has operators targeting the first and second Bone Spring layers, while the third Bone Spring layer emerges around the Texas-New Mexico border, he said.
Farther south, the play is known as the "Wolfbone," with vertical wells penetrating down to the Wolfcamp formation, as has already been occurring in the Wolfberry play near Midland, he said. Multi-stage fracturing is used across these subplays.
In all, the industry has drilled 250 wells in the Bone Spring and 30 rigs are currently running in the play, Leach said. Privately-held Marbob, which Concho agreed to purchase in July (OD Jul.21,p2), was an early mover, accounting for more than 50 of those wells and currently running four rigs.
"[The Bone Spring] seems like one of the best plays as far as growth potential, [and the] number of companies who are active," Leach said.
Concho is excited about the 100,000 acres that it will inherit soon from the Marbob acquisition. Most of this acreage overlays the portion of the play where the Avalon Shale is present. In all, Marbob has identified over 1,000 gross drilling locations there and 100 million bbl of (largely unproved) reserves.
Beyond Concho, a slew of other exploration and production firms have alluded to holdings in this emerging play: Chesapeake Energy, EOG Resources, Anadarko Petroleum, Devon Energy, SandRidge Energy, Cimarex Energy, Vanguard Natural Resources and Clayton Williams.
Casey Sattler, Houston
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This play was mentioned in Doral's press release. This merger sounds like a great deal for both Doral and Pure Gas, where, once they have merged, they can do a quick little equity raise and then put themselves in a position to farm out their Bone Spring acreage. From the looks of things there would be many interested parties for such a farmout. |
