Delaware Basin Input From New Mexico Oil Expert
Daniel Fine wears many hats and all of them involve oil and gas analysis. Fine, currently the associate director of the New Mexico Center for Energy Policy, has served the New Mexico office of the Governor as an official oil and gas analyst. He also authors a column for the Farmington Daily Times on energy related topics ranging from Trump to frack spreads. As part of our work for a full-length feature story dissecting and describing the current state of several North American shale plays, we asked Fine about what he sees in his backyard and across the border in West Texas. The following Q&A is a sample of perspective from Fine, much of which will be included in the upcoming feature article.
How would you describe the Delaware Basin?
The basin has been discovered and proven out. It is booming even with $50 oil. It is in the boom stage the Bakken was in in 2013. Everybody is excited and optimistic there. The outlook is good. Even at $40 oil, the rate of return there would still be 10 percent. This is a factor of geology, technology and innovation.
Remind us, why are companies so attracted to the Delaware Basin?
They are attracted by the idea of drilling deep and looking at four to five intervals into which they can book reserves. The geology is stacked there. And, you are getting some wells that deliver 2,000 plus barrels per day in the first 60 days and then stay above 1,200 boepd after that.
What will it take for the activity in the Delaware of New Mexico and parts of Texas to continue trending up?
There has already been an extraordinary influx of investment. The BLM had an auction three months ago in Roswell. Acres at the auction were going for $45,000/acre. Activity levels this summer will depend on OPEC and non-OPEC agreements. If they do not extend it (production quotas that act as production cuts) going into summer then we could be back to pre-negotiations that took place in 2016.
Stay tuned for more of Fine’s commentary, including what he believes will happen in the Permian should OPEC end its production cuts and how Trump could greatly alter production levels in North America.