Energy Analytics

Conventional Opportunity in Unconventional Times

byMark Nibbelink

On Feb. 3, a Wall Street Journal opinion piece titled, “Oil Frackers Brace for End of the U.S. Shale Boom,” took a hard look at major shale players’ remaining inventory of quality drilling locations.

The gist of the piece was that major shale operators — no matter what basin they’re operating in — have a limited number of economic locations they can drill. As a result, they are slowing drilling to avoid depleting remaining reserves too quickly, or within the next five to 10 years.

What struck me about the piece was its limited perspective. Namely, it ignores the fact that oil and gas basins have more than one producing reservoir.

The map of Texas below shows all wells that were drilled with a first production date before Dec. 1, 1980, prior to the unconventional boom.

Map of Texas below shows all wells that were drilled with a first production date before Dec. 1, 1980, prior to the unconventional boom.
Source: Enverus

If we look next at the horizontal wells that have been drilled in Texas alone from 2000-present, one thing is clear — these unconventional wells have been drilled in fairways with plenty of conventional production.

Map of horizontal wells that have been drilled in Texas alone from 2000-present.
Source: Enverus

The above map shows 84,895 horizontals, and nearly all of them — except the eastern Austin Chalk/Woodbine wells in Polk, Tyler, Jasper and Newton Counties — have been drilled in areas of adequate to excellent conventional production.

Nearly 85,000 new well logs have been added to our store of knowledge about Texas’ subsurface. Given the astounding number of line miles of seismic that have been shot to tease out the fracturing, surface curvature and petrophysical characteristics of formations like the Eagle Ford or the Wolfcamp, it’s a sure bet that there are more tools than ever in our exploration arsenal to find attractive new conventional field or field extensions.

The rewards are there.

Consider my favorite example, Pioneer’s discovery of Sinor Nest field in Live Oak County.

The following map shows vertical wells with first production dates that precede the Eagle Ford boom. The northern part of the county was sparsely explored.

Map showing vertical wells with first production dates that precede the Eagle Ford boom.
Source: Enverus

That changed with the burgeoning Eagle Ford expansion.

Map showing vertical wells with Eagle Ford expansion.
Source: Enverus

And with it, Pioneer found a nice, thick stray Wilcox sand (open hole log examples below) discovery that became the Sinor Nest Field, the yellow box on the previous map.

Source: Enverus. This chart depicts the Sinor Nest open hole logs, with the red brackets representing the perforated interval.

With well total depths around 8,000 feet and a mix of vertical and low offset directional wells, Sinor Nest has produced more than 7 million barrels of oil and 11 Bcf of gas from 28 wells. Using oil and gas prices from Feb. 4, 2022, and assuming a royalty of 25%, these produced assets would generate more than $485 million of net revenue before ongoing lease operating expenses. Not bad at all for 28 vertical wells drilled to about 8,000 feet.

Source: Enverus

Nearly half the Wilcox wells have produced more than 350,000 BOE.

Source: Enverus

I remember working in the Austin Chalk in the mid ‘80s when I was put on notice about uphole opportunities when AOP Operating plugged back Humble’s Isis well (Austin Chalk) and re-perforated the Wilcox from 5,502 to 5,534 feet. This uphole re-completion in the Wilcox produced nearly six Bcf of gas but only 39,414 bbl of oil.

Four months later, HECI Exploration brought in the Russell Neel Unit well, which ultimately produced 507,621 bbl and 521,959 MCF of gas at depths of around 5,600 feet with stable and predictable decline rates, but with high water cuts.

Source: Enverus

The focus on unconventional production capabilities is understandable. Enormous amounts of money have been spent to exploit these resources, and production from them vaulted the U.S. into the top spot as the world’s most voluminous oil producer.

And the focus is, quite naturally, for major unconventional players to manage their reserves and their capex to hew to the valuation mandates around free cash flow that Wall Street and the banking community have prioritized.

But there is good potential for significant uphole, and maybe downhole, reserves to be discovered in almost all of these unconventional plays.

It’s impossible to know at this point whether a focus on uphole conventional targets could yield the same reserves as the bounty that unconventional wells have provided the industry and the country.

But if you compare Eagle Ford’s median BOE of 322,000 with Sinor Nest’s median BOE of 230,000, which was achieved at a fraction of the high cost of fractured horizontal wells, there can be a compelling value proposition around dedicating interpretation resources to identifying uphole conventional reservoirs.

We’re not hearing much about farmouts from these large operators, but it sure seems like a sensible way to capitalize on the enriched data set that all these horizontals have created.

A quick LandTrac search into Reeves County, Texas, for leases over the past 36 months (by instrument date) finds only about 14% of leases subject to depth or Pugh clauses, so farmouts of relatively large acreage positions that are still held by production by unconventionally drilled wells, should be a realistic option.

Private equity, are you listening?

Mark Nibbelink

Mark Nibbelink

Mark Nibbelink is co-founder and director of university outreach at Enverus. 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.

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

CCUS-GettyImages-1056200534
Energy Analytics Energy Transition
ByAndrew Gillick

In case you missed it, Enverus virtually hosted EVOLVE, our flagship conference, May 16-17. The event included two full days of presentations, panels and keynotes, distilling the most relevant data and thoughts on the industry today.  Below Andrew Gillick, managing director...

blog-refinancing
Energy Analytics Other
ByShane Reddell

In the current landscape of heightened environmental and social consciousness, upstream oil and gas companies face significant challenges in achieving favorable refinancing for their existing credit facilities. These challenges are compounded by the recent volatility in the debt markets and...

unprecedented-wildfire-season-singes-alberta-oil-production
Energy Analytics Intelligence Publications
ByMaurice Smith

Wildfires that have already scorched more than double the average annual fire destruction across Alberta forced the shut-in of more than 300,000 boe/d while threatening future shuttering of output from the so-far largely unaffected oil sands region. Record temperatures saw...

ccus-risky-business-post
Energy Analytics Energy Transition
ByHeather Leahey

CO2 containment risk has become one of the most popular topics among our clients evaluating CCUS projects. Operators need to understand and evaluate subsurface features that could trigger CO2 migration and containment losses as well as introduce additional safety, reputational...

ev-parent-image
Energy Analytics Energy Transition
ByRyan Luther

Anyone who thinks spending time at a public charging station is a blocker to buying an electric vehicle (EV) might want to consider the numbers behind EV and internal combustion engine (ICE) vehicle refueling times. The answer is that it...

Enverus Blog - 6 tax preparation tips for mineral and royalty managers
Energy Analytics
BySilas Martin

Recent years have been a roller coaster for mineral buyers, from record low commodity prices to highs for oil and natural gas in the last year. Going forward, challenges and opportunities will be plentiful. We expect oil prices between $80...

wind-power-energy-woman-trader-stock
Power and Renewables
ByKenneth Curtis

It’s that time of year when generator and transmission outages are at their peak in PJM. The first half of April has not disappointed volatility-wise as the WHUB/NIHUB spread has set new 30-day highs largely driven by congestion. Figure 1:...

Enverus Blog - April's energy outlook: Analyst insights you can't miss
Analyst Takes Energy Analytics
ByChris Griggs

May marks a new month, and it’s essential to assess the energy landscape of April. Our Enverus Intelligence® | Research (EIR) team has scrutinized critical trends and advancements, delivering to you insightful analyst takes that can shape your business decisions....

ofs-banner
Energy Analytics
ByCayley Krynowsky

Inventory is king in 2023. Operators and investors alike are more concerned than ever about remaining inventory – who has it, where is it, and will it be economic? To answer these questions, most turn to the tried-and-true, but also...

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Access Product Tour

Speak to an Expert

Book a Demo