Parsley Energy’s New Core
First let’s take a look at Parsley. Historically the company has been focused on activity in the heart of the Midland Basin, in particular the Wolfcamp formations. According to their May 2016 investor presentation, their 1Q16 production was 29.1 MBoe/d with a 65% oil mix, and their Midland Wolfcamp A/B wells are generating very favorable results vs. their peers in the area through both increased production and lower completion costs per stimulated foot.
So given their Wolfcamp expertise, and strong Midland Basin results, the strategic movement into the Delaware Basin does make sense – it’s just a few counties over, and initial results in their acreage appear to be promising. Here is their new acreage position:
Image Source: Company May 2016 Presentation
They have certainly been executing very well in the market – in fact CEO Bryan Sheffield is a newly minted billionaire!
The Texas Portion of the Delaware Basin
Let’s examine these Wolfcamp Full Sections of the Delaware basin (from Drillinginfo’s Delaware Basin Play Assessment). On the upper left we see that the thickness of Parsley’s area of interest just north of the Sheffield Channel shows a little more variability than to the northwest along the route of the Pecos River. Neutron Porosity, on the lower right, shows a lot of potential for that corner of the county.
Next, if we look at well events and permits for the past 365 days in Reeves County, we can see there is more activity in the northern part of the county vs. the south. Considering the Parsley cash outlay of around ~$10,000/acre is quite a bit less than the mid-boom top of ~$37,000/acre or even the current $15,000 being reported now for core Permian acreage, it looks like they have caught a good deal.
Reeves County DUCs
Next, we’ll take a look at Drilled and Uncompleted Wells (DUCs) in Reeves County. In my previous post about Anadarko, I pointed out that their current strategy towards the Delaware Basin is to defer completion until a later time – they plan to run 4 rigs and 1 frac crew for the next year or so unless market conditions improve enough to tap into those wells (they refer to their DUC inventory as iDUCs – Intentionally Deferred Uncompleted Wells). On this image on the left we see DUC locations and on the right we see the accumulation of DUCs over time.
Again we see a heavier concentration along the Pecos River and border with Ward and Loving counties, although DUCs do extend about halfway down through the county. And those more recent DUCs sure do have the proppant suppliers and other oil field service companies salivating, I bet.
Reeves County Completion Trends
Because part of the advantage to deferring completions is to increase the actual production of the wells based on current and future performance, let’s take a look completion practices for the past couple of years.
On the left we see that though operators spent a couple of quarters hitting a median of 6.5 million pounds of proppant, more recently they have dropped back to the previous average of around 6 million pounds per well. On the right we see, after a fairly long period of stagnation, lateral lengths are starting to show some increase.
The Permian Basin as a whole has been the linchpin of US Oil & Gas operations for decades, and new activity in the oily Texas counties of the Delaware Basin is definitely something you want to keep your eye on.
What do you think? Leave a comment below.
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