American Oil and Gas Reporter - June 2016 - 48

SpecialReport: Permian Basin Update
He says his company is looking at a
number of things to improve efficiency besides longer laterals, completion strategies,
and fracturing techniques. "We are focused
on infrastructure design and investment
(gathering, disposal and other), which will
enable us to achieve great efficiency,
lower capital expenditures, and reduce
lease operating expenses as we execute our
horizontal development plan," Riley states.
The company also is looking long-term
as it develops its acreage.
"With a clean balance sheet consisting
of no debt and a solid core acreage position, REG is in a strong position to implement our development strategy to place
well locations optimally for primary recovery and a possible carbon-dioxide flood,
while looking to expand our position if the
proper opportunity arises," Riley offers.
"Operationally, we are challenging our
company to be the lowest cost producer
possible. We believe the best way to protect our investment is not only to be efficient in deploying capital for drilling and
completion, but also to focus on producing wells at the lowest cost possible."
Targeting The Fusselman
Even though the Permian Basin's rig
count stood at only 134 at the end of April,
which is a decline of 104 active rigs over
the past year, according to Houston-based
Baker Hughes, it remains the most active
play in the nation.
Kent Brock, manager and president of
privately held Strand Energy LC in Houston, marvels that the basin has remained
as busy as it has.
"I am very surprised," he confirms.
"Public companies have a different motivation and access to equity markets to keep
getting more money. The challenge for private companies like us is cash flow. Private
companies spend out of their cash flow, and
there are lots of private operators in the Permian Basin who are not very active. So I
am surprised the Permian has held up this
well, but this will be a busy basin for years
to come when prices come back."
While horizontal drilling in unconventional plays dominates activity in the
Permian Basin these days, there still are
a number of companies drilling vertical
wells in conventional reservoirs.
For example, Strand Energy has drilled
five vertical wells in Sterling County, Tx.,
on the Midland Basin's Eastern Slope,
based on 3-D seismic surveys. Brock
says Strand is targeting the Fusselman, a
conventional reservoir at 8,800-9,100
48 THE AMERICAN OIL & GAS REPORTER

feet. The wells are not hydraulically fractured, which further keeps down the cost.
"We are targeting the Fusselman, but
if that doesn't work, our bailout is the Cline
and Canyon formations," he observes. "We
have drilled two wells this year with a 50
percent success rate. We have drilled a total of five Fusselman wells, and are batting 60 percent. The challenge is predicting porosity. It is difficult, even with 3-D
seismic."
Brock says Fusselman wells IP at
150-250 bbl/d and typically experience a
rapid decrease, although he notes that they
still produce more than 50 bbl/d after six
months. "Our target reserves on these wells
are 100,000 barrels of oil and 500 MMcf
of natural gas," he continues, noting
Strand will drill two more wells in Sterling County this year to maintain leases.
The company also is producing both
vertical and horizontal wells in Gaines
County on the Northwest Shelf. "We are
putting together drilling cost estimates to
see at what price we can drill the Lower
Clear Fork in Gaines County," he offers.
'Meat And Potatoes'
Charles "Cactus" Schroeder III, president of Abilene, Tx.-based Chisholm
Operating Inc., said he was "cautiously optimistic" as prices crept above $40 a barrel going into May. Although Chisholm
Operating is not as active as it was a few
years ago, Schroeder claims his company
still is involved on the Permian Basin's
Eastern Shelf, drilling vertical wells in
what he calls "meat and potatoes" conventional reservoirs.
"There is not a lot of wildcat drilling,"
he states. "Everyone is being more conservative. If we can sustain oil prices in the

$40-$50 range, we can determine the
economics. Then we can go back to
drilling, if we have a decent return on investment. Operators have better profit
margins drilling vertical around here."
Chisholm Operating drilled a well
earlier this year in Stonewall County,
Tx., targeting the Strawn Sand and Conglomerate formations.
"This is a long-term project to put in a
waterflood," Schroeder explains. "We
won't see maximum production for two or
three years, when hopefully prices are back
up. We just drilled our first well. We have
to drill out of cash flow, but we hope to
drill one or two more wells this year."
He predicts the Stonewall County
project eventually will include three or four
injectors and 8-10 producers. The Strawn
Sand is more primary production, while
the Conglomerate will be the focus of the
waterflood, according to Schroeder.
He says Chisholm Operating also drilled
a well in Nolan County, Tx., targeting the
Ellenburger and Strawn Reef zones.
"We are shooting seismic now to find
offsets," he continues. "We made a good
well. We will drill one more in Nolan County this year, and then see where it goes."
Schroeder says the Nolan County well
still was making 60 barrels a day after
more than eight months, although it was
pumping only at about 50 percent. "Oil is
more valuable in the ground right now," he
muses.
A couple years ago, operators were enthused about the potential of the Cline
Shale on the Permian's Eastern Shelf, but
"that deal is done," Schroeder suggests. He
says the oil is still in the ground, however, and eventually technology will figure
out how to get it out economically. ❒

FourPoint Set To Acquire 3,500 Chesapeake Wells
DENVER-FourPoint Energy LLC has
signed a definitive agreement to acquire
all of Chesapeake Energy Corp.'s remaining Western Anadarko Basin oil and
gas assets for $385 million.
The company says the assets to be acquired include interests in nearly 3,500
producing wells, primarily in the Granite
Wash, Missourian Wash, Upper and Lower Cleveland, and Tonkawa formations.
The production mix is 67 percent natural
gas and 33 percent oil and natural gas liquids.
The assets cover 473,000 net acres in
15 counties in western Oklahoma and the
Texas Panhandle, and are 98 percent held

by production, FourPoint says.
"This acquisition will increase our
position in the Western Anadarko Basin
significantly, and will give us greater operatorship and capital control," assesses
George Solich, FourPoint's president and
chief executive officer. "The properties create visibility into decades of development
growth, and closely overlap FourPoint's
current acreage footprint."
The company says prior to the customary post-closing adjustments, FourPoint's
footprint will exceed 884,000 net acres,
with net production estimated at 435 million cubic feet equivalent a day from more
than 7,600 gross wells.
❒

American Oil and Gas Reporter - June 2016

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