We are high on Approach Resources here at DI-ESP. They have 576 producing wells in TX, with the vast majority located in Crockett and Schleicher counties in the Southern Midland Basin. They have a lot of exposure to previously undrained wolfcamp, much of it behind pipe. Below are some quick hits.
3Q Conf Call Data Points and Discussion Notes:
– AREX performed 23 stage frac jobs in their 3Q2011 horizontal wells. Current wells are being fraced with 35 stages.
– Recompletions are averaging about 75% liquids
– EURs: HZs are 400-450 Mboe, VERTs are 100-110 Mboe
– Well Costs: HZs are $6.5MM with a $5.5MM target, VERTs are ~$1.2MM
– AREX is experimenting with propane fracs. They are more expensive but have positive early results. With Permian Basin frac water at a premium, especially down the line, this could be a viable alternative. AREX still waiting for more definitive results.
– As is the case with other unconventionals (see Eagle Ford), AREX is foregoing intermediate casing, savings of $250k-$300k / well.
– Interesting discussion regarding differential to WTI: typically is ~$5, now up to $7.90 and AREX expects the trend to continue through 2012. Tightness in takeaway market and competition is a key driver.
– AREX expects 2-4 recompletions per month going forward, operating 1 HZ and 2 Vert rigs, with possibility to add another. Of the 92 permits filed by Approach in TX this year, 8 have been reentries or recompletions based on Drillinginfo data.
Key Horizontal Wells In The Area
Since only 26 horizontal wells have been drilled in the area, you could consider all of them key. El Paso has drilled the most with 8, followed by AREX and EOG at 6 and 5.
The three wells highlighted have similar GORs at 2-3 Mcf/Bbl. Peak monthly oil volumes range from 210-333 Bbls/mo.
Key Positions Offset To AREX, El Paso
Interestingly, the El Paso assets are now owned by Kinder Morgan. Considering Kinder Morgan is an MLP, expect these El Paso assets to be on the market, along with their other unconventional assets, such as the Eagle Ford position. Drillinginfo data shows the vast majority of El Paso Crockett County leases average about 650-700 acres per, expire in September of 2013, and have 25% royalties.
I still have the Approach Resources Wolffork Investor Day slide deck from late 2010, if anyone wants it let me know.
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