Wolfcamp Delaware getting more attention from producers, analysts

Clayton Williams plans to run one rig full-time in Wolfcamp Delaware

Move over Eagle Ford and Bakken, the Wolfcamp Delaware play is starting to attract attention, according to a new report from IHS.

The Wolfcamp Delaware is an emerging hydrocarbon play located in the western portion of the Permian basin that straddles the Texas-New Mexico border. IHS analyst Reed Olmstead says it has the “economic potential to sustain select operators” through this period of distressed oil prices.

“The Wolfcamp Delaware has promise, but right now, it is considered an adolescent in terms of its maturity,” said Olmstead, manager of the North American Supply Analytics Service at IHS Energy and principal analyst of the IHS Energy Wolfcamp Delaware Review.

However, like most adolescents, it is a story of promise, potential and testing limits.

Unlike the Eagle Ford and Bakken, the Wolfcamp Delaware still has some growing to do to be considered mature, even though it has some of the best normalized production of any U.S. onshore play, with average peak production rates of approximately 120 barrels of oil equivalent (boe) per day (per 1,000 feet of lateral well drilled), which is nearly double that of the Wolfcamp Midland basin average of approximately 63 boe per day per 1,000 feet of lateral well drilled, according to the IHS report.

In the Central Gas and Southern Liquids sub-plays, two early sweet-spots developing in the play, IHS said normalized productivity has increased by more than 40 per cent since the first quarter of 2013.

The Southern Liquids sub-play has had more activity, with nearly twice the producing horizontal wells of the Central Gas sub-play (127 wells and 60 wells, respectively).

“The sweet spots are still being defined because these normalized production rates have not shown signs of flattening, which means the limits of the play have not yet been fully delineated and operators are still learning how to best produce from this reservoir,” Olmstead.

As of May 2015, the IHS review said, there were more than 3,200 wells producing in the Wolfcamp Delaware, with nearly 75 per cent of those drilled as horizontals.

Of these 3,200 producing wells in the Wolfcamp Delaware, more than 475 began production after January 2014.

“Additionally, a very high number of operators—150—have produced from the play to date,” Olmstead said, “as compared to fewer than 90 operators in the Eagle Ford shale.

“Despite that high number, you have just two operators who are dominant in the play—Concho Resources and Cimarex Energy, who are delineating and testing the limits of the various sweet spots and production streams of the play.”

Concho Resources has been active in the Southern Liquids sub-play, while Cimarex has been focused on the Central Gas sub-play. Economics for both operators in their respective sub-plays, said the IHS review, are sufficient for drilling through the pricing downturn, but future delineation and possible expansion might be halted until oil prices recover and/or costs fall even further.

As a result, Olmstead says IHS Energy expects a good bit of movement as more operators enter the play and some, who lack quality assets, the financial stamina to wait for better break-even prices, or those who don’t consider the play core to their strategy, will exit.

Despite being major operators in the play Cimarex, Concho, Occidental Petroleum, and Clayton Williams still have relatively low well counts in the sub-plays that are expected to drive future production. While their well economics are representative of average historical returns, operators may be able to significantly improve their economics as the play is further delineated and developed.

As American Energy News reported last week, Clayton Williams plans to run one rig full-time in the Wolfcamp Delaware, primarily horizontal wells on its 66,000 net acres in southern Reeves County.