American Oil and Gas Reporter - PBIOS 2016 Official Program Guide - 106

Permian Basin Reports
Growing Their Footprints
Midland-based Concho Resources Inc.
is the Permian Basin's most active operator
with 17 rigs running and just more than
1 million gross acres stretched across
the Midland Basin, the southern and
northern Delaware Basin, and the New
Mexico Shelf. Concho's position got a
little bigger in mid-August when it announced an agreement to acquire 40,000
net acres with net daily production of
10,000 barrels of oil equivalent (67 percent
oil) from Reliance Energy in Andrews,
Martin and Ector counties, Tx., in the
core of the Midland Basin for $1.625
billion.
"It is contiguous acreage, just north
of our existing footprint," remarks Megan
Hays, director of investor relations for
Concho. "The acquisition reinforces our
commitment to the Midland Basin."
It adds more than 530 long-lateral
drilling locations to Concho's inventory,
Hays notes, adding that two-thirds of
those are two-mile laterals and the remaining are 1.5-mile laterals. Concho
estimates proved reserves attributable to
the acquisition at 43 million boe.
Concho's acquisition is but one of a

number of deals that foreshadow a rampup of activity. Denver-based PDC Energy
announced in August its agreement to
acquire two privately-held companies
managed by Kimmeridge Energy Management Co. for $1.5 billion. Their assets
include 57,000 net acres in the Delaware
Basin in Reeves and Culberson counties,
Tx., with net production of 7,000 boe/d
(42 percent oil) from 21 horizontal wells.
PDC Energy estimates there are more
than 700 gross horizontal drilling locations
targeting Wolfcamp A, B and C zones.
In another August announcement,
Austin, Tx.-based Parsley Energy acquired
11,672 gross acres near its Midland Basin
leasehold in Glasscock County, Tx., for
$400 million. The acreage features 240
gross horizontal drilling locations in the
Lower Spraberry and Wolfcamp A and
B benches, as well as additional horizontal
drilling locations in the Middle Spraberry,
Wolfcamp C and Cline, according to the
company.
Additionally, Pioneer Natural Resources Company acquired 28,000 net
acres in the Midland Basin from Devon
Energy for $435 million. Pioneer says
most of the acreage is in the core of the

Concho Resources Inc., which has more than 1 million gross acres throughout the Permian Basin, reports its Delaware Basin horizontal wells produced 88,500 barrels of oil
equivalent in second quarter 2016, up 8 percent over second quarter 2015. Twenty-four
horizontal wells in the northern Delaware Basin with at least 30 days of production averaged 30-day and 24-hour peak rates of 1,100 boe/d and 1,470 boe, while wells in the
southern Delaware Basin averaged 1,284 boe/d and 1,272 boe. The company adds that
four horizontal wells on the New Mexico Shelf had average 30-day and 24-hour peak
rates of 472 boe/d and 592 boe.

106 THE AMERICAN OIL & GAS REPORTER

Midland Basin, including 15,000 net
acres in the prolific Sale Ranch area in
Martin County and northern Midland
County, Tx.
Other companies paying as much as
$29,000 an acre or more in July and August to gain footholds in the Permian include Diamondback Energy, Energen
Corp. and WPX Energy in the Delaware
Basin, and Guidon Energy and SM Energy
Co. in the Midland Basin. Private equity
giant, The Blackstone Group, committed
$1.5 billion to back two experienced
West Texas/New Mexico players, and
newly formed Jetta Permian LP reports
it has $1 billion in financing to target
Permian assets as well.
Variety Of Targets
Operating across the Permian Basin,
Concho Resources is pursuing numerous
horizons. "For example, there has been a
lot of effort with the Wolfcamp in the
Midland Basin," Hays confirms. "But as
you move uphole, operators are developing
the Spraberry. We believe the thickness
of the hydrocarbon column in the Spraberry provides multiple targets, including
the Middle Spraberry and two stacked
benches in the Lower Spraberry as well."
Concho has been able to remain active
because of its hedge position, according
to Hays. She says the company reached
a high of 40 rigs and went down to a low
of eight after the downturn. It was running
17 rigs in September.
"We have been able to adjust quickly,"
she states. "We are spending within cash
flow."
Hays notes that the efficiencies Concho
has been able to achieve have helped
make it possible to continue drilling as
well. "One key to our efficiency is lateral
length," she relates. "We are drilling twomile laterals where our acreage allows
it, especially in the Midland Basin. Our
contiguous acreage in the southern
Delaware Basin also sets up well for
two-mile laterals.
"Another factor in improved efficiency
has been pad development," Hays goes
on. "Nearly 60 percent of our 2016 wells
will be on multiwell pads, compared with
10-15 percent in 2015."
Concho also is testing tighter well
spacing, drilling eight wells per section
in the same zone.
Hays calls completion designs and
proppant volumes a "giant experiment,"

American Oil and Gas Reporter - PBIOS 2016 Official Program Guide

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