Apache notes new resource play with Alpine High

After 2 years of extensive geologic and geophysical work, Apache Corp. estimates its southern Delaware basin Alpine High play to contain 75 tcf of rich gas and 3 billion bbl of oil in 4,000-5,000 ft of stacked pay in up to five distinct formations including Bone Springs, Wolfcamp, Pennsylvanian, Barnett, and Woodford.

The Houston independent said it has secured 307,000 (352,000 gross) contiguous net acres in the wet gas and oil windows, primarily in Reeves County, Tex. The average cost was stated as $1,300/acre. The company also said it has identified 2,000-3,000 future drilling locations in the oil-bearing Woodford and Barnett formations alone. Both formations are in the wet gas window and are expected to deliver a combination of rich gas and oil. The pretax, net present value range for these zones is $4-20 million/well at the benchmark oil and natural gas prices of $50/bbl and $3/Mcf.

Apache has drilled 19 wells in the play and expects future well costs for a 4,100-ft lateral to be $4 million in normally pressured settings with over-pressured wells costing $6 million. A report published by Cowen & Co. cites the 24-hr IP for the Woodford Mont Blanc 1H well as high as 17,068 Mcfd. The Ortler 1H came in as the lowest well at 1,752 Mcfd, the report said. Four additional wells have reported production in the range of 6,484-7,122 Mcfd. Estimated ultimate recoveries are between 1.1-2.7 MMboe.

A key setback in this region is the lack of gas processing capacity. As a result, nine of Apache’s wells are producing in limited quantities, including six wells in the Woodford, one well in the Barnett, and one well each in the shallower Wolfcamp and Bone Springs oil formations. Cowen’s report cited this as a key setback in the region. Apache plans to install temporary infrastructure before yearend to add capacity.

The play contains a comparatively low clay content of 10-20%, Cowen said. The Alpine High well results show a declining water rate, which acts as positive catalyst for operating expenses, the consultancy added.

Benjamin Shattuck, analyst with Wood Mackenzie Ltd., recently said “average penetration rates in the Delaware basin are up 20-25% compared to 2 years ago.” Service prices are down roughly 40-45% and a well that would have cost $10-11 million in 2014 is closer to $6.5-7.5 million today (OGJ Online, Sep. 5, 2016). The Delaware basin holds promise in 2017 with spending in the Permian falling 37% compared with 2015. “Other US unconventional plays are down more than 50%,” Shattuck added.

Contact Tayvis Dunnahoe at tayvisd@ogjonline.com.

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