To Tom Ward, the San Juan Basin resembles the earliest days of U.S. shale: vast, underexplored and brimming with potential.
And Ward speaks from experience. He previously co-founded Chesapeake Energy with Aubrey McClendon before going on to found public E&Ps SandRidge Energy and Tapstone Energy.
Ward now leads Mach Natural Resources LP, an upstream MLP historically focused on the Anadarko Basin of Oklahoma and southern Kansas.
But earlier this month, Mach announced $1.3 billion of deals to expand into two new basins: the Permian and San Juan.
In a $787 million deal, Mach acquired IKAV’s San Juan Basin portfolio, a natural gas-rich asset previously operated by supermajor BP Plc.
Mach also landed a $500 million acquisition of Sabinal Energy’s conventional oil assets in the Permian.
While Sabinal offers Mach low-decline production and healthy free cash flow for distributions, the San Juan gas assets acquired from IKAV provide immediate drilling inventory.
The IKAV San Juan asset spans 570,000 net acres. First-quarter production averaged 336 MMcf/d of gas and 4,000 bbl/d of NGL.
The IKAV deal also adds around 100 gross 10,000-ft locations in the San Juan’s dry gas Mancos Shale play.
“The ability to bring on gas in the Mancos is unlimited,” Mach CEO Tom Ward told Hart Energy in an exclusive interview.
“It’s like walking back in time early on in the shale plays because it’s never been explored because of low [gas] prices,” he said.
IKAV’s 3-mile Mancos wells
Once natural gas prices moved above $3.50/Mcf, private San Juan operators started to ramp up drilling, Ward said.
The San Juan is seeing a resurgence of activity. The basin is now home to six active rigs, the most since 2015, according to East Daley Analytics.
Private E&Ps Enduring Resources and LOGOS Resources II are running two rigs each in the San Juan. Hilcorp Energy and IKAV are each running a single rig.
Four of the rigs are active in the San Juan’s dry gas play to the north of the basin, while two rigs target the oily “Gallup” play to the south.
With an uptick in natural gas prices, investment dollars are pouring into the Mancos dry gas play.
Henry Hub gas prices are forecast to average $3.88/MMBtu over the next 12 months; the 24-month strip is about $4. That’s up from an average of $2.19/MMBtu seen in 2024, per U.S. Energy Information Administration (EIA) data.
Horizontal drilling results in the Mancos suggest the formation can deliver more than 5 Bcf per mile of lateral, Ward said.
“You can drill 3-mile laterals there and find close to 20 Bcf of gas is what we project,” Ward said. “All you have to work on is getting your prices down to have a high rate of return.”
The three wells IKAV is currently drilling are 3-mile Mancos wells, Ward said. Drilling on the current pad will wrap up soon, with well completions continuing into the fall.
Mach aims to bring in its own rig after the acquisition closes, potentially starting in spring 2026. Mach’s acquisition from IKAV is expected to close in the third quarter.
The push for longer laterals in the San Juan is a relatively recent trend, with only 10 Mancos wells exceeding 2 miles drilled, and all of them since 2022, according to Ryan Hill, principal analyst at Enverus Intelligence Research.
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Mancos potential
Some of the top San Juan gas producers are reporting average Mancos IP rates of around 12 MMcf/d, according to East Daley analysts.
“We definitely believe that there’s tremendous opportunity there in the dry gas Mancos, and now we own 570,000 acres of it with our own gathering [assets] and our own plants,” Ward said.
LOGOS Resources, the San Juan’s second-largest gas producer, sees average 30-day IP rates of approximately 17 MMcf/d, CEO Jay Paul McWilliams told Hart Energy. IPs for individual Mancos wells range from 9.4 MMcf/d to 25 MMcf/d.
LOGOS has completed 25 San Juan wells to date and plans to bring online another 15 this year.
Recent years haven’t been kind to the San Juan Basin, a legacy gas play where producers have drilled vertical wells for decades.
The San Juan took a backseat to more relevant shale plays, like the Haynesville, Appalachia and Permian. Major operators like ConocoPhillips, BP, Encana Oil & Gas (now Ovintiv) and WPX packed up and left the basin.
But the increasing activity has experts rethinking their San Juan outlooks. Increased Mancos D&C activity could grow San Juan gas production by between 500 MMcf/d and 1 Bcf/d by year-end 2030, according to updated East Daley estimates.
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Mach’s Permian entry
In addition to the San Juan, Mach is expanding into the prolific Permian Basin through a $500 million acquisition of Sabinal Energy.
Kayne Anderson-backed Sabinal holds 130,000 net acres in the Permian, including assets in the Delaware and Midland basins and on the Central Basin Platform.
Texas Railroad Commission (RRC) data shows Sabinal Energy Operating holding assets in Andrews, Ector, Gaines, Hockley, Howard, Mitchell, Terry and Yoakum counties, Texas. The company also has assets in the New Mexico Delaware Basin, according to Rextag data.
Sabinal produced 10,000 bbl/d of oil and 2 MMcf/d of gas from the Permian in the first quarter, mostly from conventional Clear Fork and San Andres wells.
While the IKAV San Juan asset immediately competes for drilling capital, Sabinal offers a low-decline, long-life oil asset throwing off significant free cash flow, Ward said.
Ward said Mach is effectively buying oil at a future strip price in the low $60s—which benefits the company if prices rise by the time production is realized. Ward has witnessed this play out many times in his career, including during the past few years of whiplash-inducing price swings.
“It’s very difficult in this business to produce oil at any meaningful replacement value with oil in the $60s. It just doesn’t stay there very long,” Ward said.
Instead of drilling new wells, Mach aims to lower lease operating expenses and other costs after taking control of the Sabinal assets. It’s a track record the company has made with previous deals.
“In every other deal we’ve ever bought, we’ve been able to lower between 25% to 33% lease operating expenses,” he said. “That’ll be our focus here, too.”
The Sabinal deal is expected to close in the third quarter.
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