By September 13, 2016 Read More →

Alpine hype: will Apache’s new Permian Basin discovery deliver? – Wood Mackenzie

Apache estimates of 2,000 to 3,000 net Permian Basin locations, a 20+ year drilling inventory assuming an average of 6 rigs per year

Permian Basin

Source: Wood Mackenzie. Click to enlarge

The announcement of a major resource discovery by Apache Corp. has Permian Basin watchers atwitter, according to Wood Mackenzie.

The new Alpine High play could boost the Permian Basin profile exponentially — if Apache’s estimates bear out.

In a new research report and Crude for Thought podcast, Wood Mackenzie US Lower 48 experts look deeper into the data surrounding the acreage, and how much work the asset requires to meet expectations.

Apache Corp. made a bold announcement this week that its new Permian Basin play, Alpine High, holds 75 trillion cubic feet of natural gas and 3 billion barrels of oil in its depths.

Quietly building out and assessing more than 300,000 net acres in the southern Delaware Basin over the past year, Apache’s leasing costs of US$1,300 per acre for drilling rights is a pittance compared to recent M&A deal valuations that have averaged US$20,000 to US$30,000 per acre, giving it a significant entry-cost advantage over other area players, says Wood Mackenzie.

What lies beneath

The Alpine High position is concentrated in a previously dismissed area in southern Reeves County, which holds wet gas potential from the Barnett and Woodford formations.

The hydrocarbon mix there, however, is a significant variable in ascribing value to the play. Historically, the Barnett-Woodford resource base has been considered uneconomic due to dry gas weighting, complex geology and limited access to infrastructure.

Apache is deviating from convention in its approach, attempting to prove that the work is not yet done there — and while more delineation and testing are necessary, early tests show strong signs of hydrocarbon flows and liquids potential, according to Wood Mackenzie.

By the numbers

With 19 wells drilled to date and nine producing at infrastructure-constrained rates, Apache has a lot of work to do to further understand the position.

Although most testing in the area has so far focused north of Apache’s position, its announcement suggests a multi-phase play similar to the SCOOP and STACK plays in Oklahoma.

The company has self-reported estimates of 2,000 to 3,000 net locations, a 20+ year drilling inventory assuming an average of six rigs per year, and is touting 4,000 to 5,000 feet of stacked pay across the acreage.

Game-changer or gamble?

Apache has a lot of midstream work to do to make its investment work, but its history of building out infrastructure to support its Midland Basin assets could serve it well in the Delaware.

While it’s too soon to call whether Alpine High will be a watershed for Delaware Basin development, it has garnered a lot of attention as the new star of Apache’s Permian portfolio.

We expect to see vertical development in the near term, as the company moves to hold acreage by production, and potential marketing of Apache’s less contiguous Permian properties to high-grade their position.

Permian Basin

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