(Editor’s note: This article was written on Jan. 23 and published in Oil and Gas Investor magazine on Feb. 1.)
New-play news has resumed after a few years in the “for a better commodity day” folder.
There’s EOG Resources Inc.’s work in the northern Midland Basin in Dawson County, Texas, west of the prolific, highly oil-weighted Howard County where HighPeak Energy, with its additional leasehold in Borden County, is exploring a sale.
J.P. Morgan securities analyst Arun Jayaram reported EOG picked up two permits in Dawson, offsetting a two-well Trinity Lease pad.
“Enverus data indicate all four of these wells to be in the middle Spraberry Formation, though that has not been confirmed by public data,” Jayaram wrote.
EOG is leasing and drilling in the county as CGS Operating LLC. “Initial developments in the Leatherwood and Crockett units showed [uneconomic] results.”
Meanwhile, the Santorini and Bluebonnet leases are looking better, but whether they’re economic is “yet to be determined,” he added.
There’s also Marathon Oil Corp.’s development of the Woodford and Meramec in the Delaware Basin. A first three-well combo pad in Ward County in 2021 is being followed by a four-well pad, reported Enverus analyst Erin Faulkner.
“Long-term production data show the 2021 pad … to be highly productive,” she wrote, adding that it’s even better than an average Oklahoma SCOOP or STACK Woodford well.
One well (King George SA 3 7803H) made 666,075 boe (about two-thirds oil) its first year from a 7,828-ft lateral.
Back in the Midland Basin, Pioneer Natural Resources Co. is testing the gassy, deep Barnett and Woodford this year.
And Apache Corp. has resumed drilling its gas and gas-liquids Alpine High play in southern Reeves County – its first pad since 2019.
The renewed interest in Permian gas is derived in part from the expected construction start later this year of another new LNG terminal—NextDecade’s long-awaited plant at Brownsville, Texas.
It’s also derived from continued solid gas demand from Mexico, which is importing some 7 Bcf/d from north of the border and experiencing a manufacturing boom from factory reshoring there from China.
Sempra Energy expects to source gas for its Baja California, Mexico, LNG export facility from the Permian and Rockies via the El Paso Pipeline.
Over in the Eagle Ford, EOG’s immense “Dorado” Austin Chalk play in Webb County might be a 20-Tcf field of ultimately recoverable reserves, chairman and CEO Ezra Yacob told Goldman Sachs conference attendees in January. EOG has about 50 wells online now and estimates more than 1,000 locations.
“If you think about that 20-Tcf number … that would be a Bcf a day produced for 50 years,” Yacob said.
EOG is building a 36-inch pipe to connect 720 MMcf/d to Cheniere Energy Inc.’s Corpus Christi LNG plant in a contract that has EOG getting the international gas price for 420 MMcf/d.
Meanwhile, Gene Shepherd, who has an oft-proven knack for picking new acreage and turning it into a build-and-flip success, has chosen the Red Bull play in the Coyanosa area of the Reeves-Pecos counties’ border in southern Delaware.
Shepherd and energy trader Vitol’s new VTX Energy Partners LLC is buying the property from Delaware Basin Resources (Patriot Resources).
The late oilman T. Boone Pickens said in 2016 about Red Bull, “Of all the wells I drilled, this actually turned out to be the biggest prospect that I’ve ever been involved in.”
Taking the Permian on the road—well, across the Atlantic—oil and gas analyst Subash Chandra at Benchmark Co. LLC reported, “Algerian shales, finally.” He cited a Wall Street Journal report that Chevron Corp. is looking to commence shale exploration in the desert.
Of all the places on Earth where shale development might not meet with surface constraints, Algeria is one. There are very few neighbors, the country’s political regime is energy friendly, and there’s plenty of takeaway infrastructure.
It’s also closer to market: Russia’s former customer, Europe.
“Chevron’s technology transfer from the Permian makes this a prize worth pursuing,” Chandra wrote.
The source-rock is loaded with Btu and “gamma-ray readings, thickness and thermal maturity rival U.S. shale basins.”
More inspection is needed of clay content. “Whether it is substantially a ‘hybrid’ play—high-deliverability conventional rock charged by adjacent shales—needs study,” he added.
Should development begin, one of the challenges will be accessing water.
Join us at the sixth annual DUG Haynesville conference March 28-29 at the Shreveport Convention Center. Speakers include Chesapeake Energy, Southwestern Energy, Aethon Energy, Rockcliff Energy, TG Natural Resources, Sabine Oil & Gas, Diversified Energy, Sempra Infrastructure and Williams Cos. More details at HartEnergy.com/events.