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Schwarzschwan. Cygne noir. Cisne negro.

Translation??

Black swan.

When Nassim Nicholas Taleb popularized the term Black Swan after the 2008 market crash, just about every CEO and business strategist pretzelled their brains trying to anticipate—and thus get ahead—of the next Black Swan event.

A Black Swan event is something totally unexpected, nearly impossible to predict, has unknown implications and which can have major ramifications for a widely disparate set of interest groups.

Most folks usually think of them as events that bring destruction, chaos, uncertainty, and maybe even ruin.

But sometimes, a Black Swan event can announce the arrival of something really great!

In that spirit, we’re going to label Apache’s recent discovery/announcement of their opportunities along the Alpine High in Reeves County, TX as a Black Swan event.

It was not predictable because the industry had written off Apache’s area of leasehold interest as:

1. Too complex to effectively exploit
2. Limited to dry gas production
3. Too clay rich , and therefore presumably too ductile to support resource play type hydraulic fracturing operations.

Apparently “conventional wisdom” ain’t so wise.

But we’ve seen this before in geology and in the oil and gas business.

The most dramatic examples?

• The adoption of plate tectonics as a hypothesis that explained basin formation, clastic deposition, and trap formation models.

• George Mitchell’s breakthrough perseverance in proving that shale could be all the things that classic exploration petroleum geology looked for—source, reservoir, trap and seal—and that it covered hundreds of square miles—- Mother Nature’s gift that keeps on giving.

So when a company is true to its vision and perseveres through to massive success, it’s a groundbreaking achievement.

Making the comparison

Given that Apache compares the stratigraphy and environment of deposition of the Alpine High area to the SCOOP STACK plays in OK, we thought that we would compare some of the Play Assessment mapping that we’ve done in the SCOOPT/STACK plays to the limited data for the Alpine high area..

Alpine High: Spotting the Shadows of Black Swans

From: Apache’s presentation to Barclays
We confirm Apache’s claim that the Woodford section in the Alpine High area is approximately twice the thickness of the Woodford in the SCOOP/STACK. Our isopaching indicates an average thickness of Woodford in SCOOP-STACK of around 200+feet, whereas the Alpine High thickness is 350+ft.

Alpine High: Spotting the Shadows of Black Swans
DI Play Assessments – MidContinent

Alpine High: Spotting the Shadows of Black Swans

Moreover, cross sections comparing the SCOOP play with the Alpine high show that the Woodford section in both plays is relatively uniform in thickness(no worries about abrupt thinning or thickening) and lithology, which means that development drilling planning in the Alpine High area can quickly converge to a best practices benchmark.

Alpine High: Spotting the Shadows of Black Swans

Alpine High: Spotting the Shadows of Black Swans
DI Play Assessments- Mid-Continent/Delaware Basin

If we compare STACK leasing activity…
Alpine High: Spotting the Shadows of Black Swans

…with Alpine High activity…
Alpine High: Spotting the Shadows of Black Swans
Production Workspace

…it appears that leased acreage title in the Alpine High area is not as highly partitioned into fractional interests as it is in the STACK area, which argues again for Apache’s ability to efficiently execute their development drilling strategy.

And judging from a quick look at lease expiration dates in the area, drill-to-hold concerns won’t be an issue until early 2018, again providing a benign development drilling strategy timeline for Apache.

Alpine High: Spotting the Shadows of Black Swans
Production Workspace

Of course, the money shot is being able to get a firm handle on production rates
and EURS in the Alpine High fairway.

There’s not enough released production data to honestly estimate EURs for the play.

But if we continue running with the SCOOP/STACK analogy we can get some significant insights.

One thing we that we can say with utter confidence about upstream E&P…the industry always try to do better.

And we do. The vintage curve display below shows that operators made meaningful, significant improvements in their production year over year from 2011-2015 in SCOOP/STACK

Alpine High: Spotting the Shadows of Black Swans
Production Workspace – Type Curves

Using our Decline Curve Analysis algorithm against the SCOOPT/STACK type curve, we get a P50 value of approximately 2.75 BCF/well, plus liquids(Woodford).

Alpine High: Spotting the Shadows of Black Swans
Production Workspace-Probabilistic Decline Curve Analysis

Given that Apache claims slightly better mean porosity-10%–in the Barnett/Woodford section for the Alpine High area versus SCOOP play mean porosity -7%–there’s obviously more gas/oil storage pore volume in the Alpine High area. And with Apache estimating less mean clay content—15% for the Alpine High area, versus 25%+ for the SCOOP area, we would expect that their Stimulated Rock Volume(SRV) per well in the Alpine High could be appreciably larger than SCOOP.

So where will the industry find the next generation of black swans??

Alpine High: Spotting the Shadows of Black Swans

Start with Hurricane Energy’s offshore West Shetlands test of fractured basement with natural flow rates of 6600 BOPD. {max flow rate of 11,000 BOPD 38 API oil.
(source Penn Energy )

Alpine High: Spotting the Shadows of Black Swans
DI International

One thing is sure…. we’ll always be looking to find what no one else has seen before.

Post contributors: Thanks to Madeline Beitz for mapping of the Woodford, and to Tyler Krolczyk for leasing and well performance analysis.

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Mark Nibbelink

Mark Nibbelink

Enverus Co-Founder, Director of University Outreach. Before co-founding Enverus (formerly Drillinginfo) in 1999, Mark had a long career as a prospect geologist at Gulf Oil before beginning work as an independent geologist. Mark is responsible for quality control and data integrity. He received his Bachelor of Arts in geology and his master’s in geology and geophysics from Dartmouth College.