Permian shale optimism linked to new term: the cubic mile
Randy Foutch, founder and CEO of Laredo Petroleum Inc. is one of many Permian-focused exploration and production executives that has touted a new term for the oil- and gas-producing shale region of West Texas: the Permian cubic-mile. The cubic-mile phrase is related to the amount of oil- and gas-saturated stack pay zone area that is present in the Permian. For every mile within the make-believe boundary of the Permian that exists on the surface, there is at least a mile deep of stacked, fossil-energy-saturated pay below. According to several producers that are operating in the Permian Basin, the stacked pay area available for development is larger in depth than if the Bakken, Eagle Ford and SCOOP/STACK were stacked on top of each other.
Mike Wichterich, an oil industry executive that has successfully built and sold multiple Permian or oil and gas ventures, said that when he looks at the Delaware Basin, which is part of the greater Permian, he sees roughly 4,000 feet of pay due to several oil or gas producing zones stacked on top of each other.
Despite the impressive nature of the Permian cubic mile, Foutch believes there are other selling points on the Permian. A year ago, he said recently at an oil industry event in Fort Worth, Texas, hosted by Hart Energy, shale producers were told by OPEC that U.S. producers needed to lower costs, borrow cash or liquidate. “One of the things they [OPEC] didn’t say was, ‘or, you get very good at what you do’,” he said.
The U.S. shale industry did get better at what it does, he said. Today, 395 rigs could be put to work and drill the same footage as 641 rigs could have achieved in 2014, he said. On the well completion side, new approaches to fracking have also helped keep production stable when OPEC expected it to dip. “I expect that each completion we perform today is better than the one before,” he says.
The continuous improvement is linked to operator’s willingness and reliance on acquiring and utilizing data and oilfield learnings more than ever. Gary Willingham, executive vice president for Noble Energy, said his production company is getting knowledge sooner and optimizing what it learns from the data earlier, and it all makes a big difference. According to Willingham, the operator has an inventory in excess of 7,000 wells to drill and complete assuming current commodity prices. "We are always working to improve. We are always trying to improve,” he said.
Foutch’s team is struggling to determine when it should move on its new-found understanding and well production successes that it believes it has proven out in the Permian. Through data gathering efforts the company calls earth modeling, Laredo believes that its estimated ultimate recoveries in the Permian, may need to increase to 3 million barrels, above the current 1.3 million that company uses in presentations.
For Noble, developing the Permian is exciting, but there is still much to learn. This year the company is drilling several multi-well pads with as many as seven wells from a single site. After a successful appraisal program in 2016 of its Permian acreage position, Noble is moving into an active development program with 6 drilling rigs by end of year.
Clay Gaspar, senior vice president and COO of WPX Energy, a Tulsa-based E&P that is active in the Delaware and the Williston Basins, said his company is willing to admit that it is never done with its approach to developing either its Permian assets or its Williston asseets. “We never cross the finish line in this business. We need to remember that we have never figured things out,” he said. As an example, Gaspar points to WPX’s current service and materials contracts. Although 70 percent of the operator’s services and materials have been contracted out for 2017, Gaspar and his team are still looking at innovative services and technologies that may give them an edge.
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