Escondido Resources President Bill Deupree made an insightful presentation at the recent DUG Eagle Ford conference in San Antonio that factually highlighted the transforming power of horizontal drilling. His presentation juxtaposed the formation of Escondido Resources I, a conventional drilling partnership vs. Escondido Resources II, an unconventional drilling partnership. Escondido I was formed in 2004 with $ 75 million from EnCap Investments L.P. as the equity partner targeting the Olmos and Escondido sands in Webb, LaSalle, and Dimmit counties. Escondido I drilled all vertical wells with multi-staged fracs co-mingling the Escondido and Olmos formations. By 2008 they had acquired 31 wells, drilled 163 wells with a 95% success ratio, established peak production of 25 MMcfe/d and sold out for $250 million for a 3:1 ROI. Escondido II was formed immediately afterwards with $200 million targeting the Olmos, Escondido and Eagle Ford formations in the same counties. The key differentiator being that Escondido II would drill horizontal wells in each of the target formations. To date 44 wellls have been drilled, 19 vertical, 25 horizontal, with a 95% success ratio and 60 MMcfe/d in production. Additionally in 2010 Escondido II sold their LaSalle county Eagle Ford rights for $115 miliion. Note the events in the slide below.
By applying new technology to old, established fields and drilling a mix of shallow Escondido and Olmos wells along with deeper Eagle Ford wells Escondido II has attained outstanding success. So much so that Deupree states that any three wells from the Escondido II portfolio would produce the same reserves and production as all the wells from Escondido I! See the vertical vs. horizontal comparison below.
So the next time some pundit claims horizontal drilling and fracking is some kind of ponzi scheme or an uneconomical endeavor it would be well to remember that there a few smart Aggies in Midland with some deep pocketed partners who would beg to differ and they have the facts to prove it.
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