American Oil and Gas Reporter - PBIOS 2014 Official Program Guide - 146

Permian Basin Reports
FIGURE 5
San Andres Investment Parameters and Results
CBP Vertical Well Profile
EUR: 80,000-85,000 boe; 30-Day IP: 65 boe/d
Cost: $750,000-$850,000
Spacing: 5-10 acres
IIR: 60% ($80 oil/$5 gas)
Source: Multiple Operators, Howard Weil
CBP Horizontal Waterflood
Redevelopment Profile
EUR: 160,000 boe; 30-Day IP: 400 boe/d
Cost: $4.0 million
IIR: 20% ($80 oil/$5 gas)
Source: Apache Corporation, Howard Weil
CBP Horizontal Well Profile
EUR: 250,000-350,000 boe; 30-Day IP: 450
boe/d
Cost: $4.0 million-$5.5 million
IIR: 60% ($80 oil/$5 gas)

One well of note is a completion by
Forge Energy LLC. Its Fisher 9-2H had
initial 24-hour production of 899 barrels
of oil and 154 Mcf gas out of what the
old timers would have considered tombstone rock.
To put the economic opportunity of
these horizontal hybrids in perspective,
it is useful to compare them with the
profiles of both vertical wells and horizontal waterflood redevelopment wells
in the San Andres.
The upper-left box in Figure 5 shows
the profile of a vertical well, put together
by Howard Weil as a composite of multiple
operators. Vertical wells typically cost
$750,000-$850,000 and have EURs of
80 million-85 million boe for an internal
rate of return of 60 percent. Initial production averages 65 boe/d. The rate of
return is good, but the volume is not
there.
Horizontal waterflood redevelopment
wells cost more than four times vertical
wells, averaging $4.0 million (centerright box in Figure 5). EURs are larger
than for vertical wells, but only by two
times for an average 150 MMboe, yielding
an IRR of only 20 percent. Initial production is an impressive 400 boe/d.
Within the waterfloods, the formation
has been pressured up so there are better
IPs, but they water out earlier. This profile
is based on Apache wells, although other
operators have reported similar results.
The hybrid profile shown in the low-

er-left box of Figure 5 has similar costs
to the waterflood redevelopment well,
coming in at $4.0 million-$5.5 million,
but with an EUR of 250 MMboe-350
MMboe. Because production is so high,
the IRR is competitive with vertical wells
at 60 percent. Initial production is a
record 450 boe/d.
All internal rate of return calculations
for these San Andres comparisons are
based on $80 oil and $5 gas.
Conclusions
The type curve for these Wichita-Albany/Fullerton and San Andres hybrids
also presents a pleasant surprise. It actually
is less steep than for conventional wells.
While overall production is not as high
as in the Eagle Ford or Bakken shales,
infrastructure costs are much lower because
everything is in place. Wells can be drilled
faster because there is not as much advance
planning required for facilities and getting
product to market.
It is quite a change in thinking to use
unconventional technologies to go after
areas that were deemed sub- or noncommercial. Operators who have done this
have realized returns as good as they
would have from vertical wells drilled
into good, conventional reservoir rock.
Hybrid plays are not restricted to the
Central Basin Platform, or even the Permian Basin. Permian Basin operators
have shown how attractive targeting these
plays can be, and similar activity is under

146 THE AMERICAN OIL & GAS REPORTER

way in Wyoming's Sussex and Frontier
sandstone formations where 600-900 barrel-a-day IPs are being reported. The
Gallup Sandstone in New Mexico and
the Codell Sandstone formation in Colorado also are potential targets.
Companies that have leaseholds and
access to infrastructure can add hybrid
plays to their portfolios as a high-return
option for formations previously considered marginal, at best. While they may
not be sufficient to be the sole focus,
these plays could represent as much as
500 MMboe in the Permian Basin alone.
That is sufficient reason to rethink plays
classified as subcommercial.
❒
BILLY W. HARRIS is a partner and
vice president of engineering for Elk
River Resources in Midland, were he
began his career with Conoco in 1978.
Harris was employed 23 years by
Wagner & Brown Ltd. as senior petroleum engineer, where much of his
work was focused on tight gas and oil
plays, before he helped form Elk River
in October 2013. He has worked internationally and domestically in various capacities in drilling, completion
and production operations; reservoir
engineering; property valuation; and
as an expert witness in civil litigation.
Harris was a director on the Society
of Petroleum Engineers International
Board from 2008 to 2011, where he
served on the Board Committee on
Finance & Administration and chaired
the Board Committee on Education
and Professional Activities. He is currently in his fourth year as chairman
of the SPE Liquids-Rich Basins Conference. Harris also is an adjunct professor at New Mexico Institute of Technology. He holds a B.Sc. in petroleum
engineering from the Colorado School
of Mines.

Big-Spender Plays
Capital spending in the booming
Wolfcamp and Cline shale horizontal
plays alone is expected to top $12
billion in 2014, according to a forecast by Wood Mackenzie.

American Oil and Gas Reporter - PBIOS 2014 Official Program Guide

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