Pioneer Natural Resources Co. ranged widely in its search for hydrocarbons over the past two decades, expanding into deepwater and international operations in Africa, South America and elsewhere. Now, however, it’s making the most of its oily roots in Texas. There, it has 40 rigs at work in the Permian Basin’s Spraberry vertical liquids play and four in the liquids-rich horizontal Wolfcamp shale play; two drilling the Barnett combo liquids-gas play; and 12 going after liquids and gas in the Eagle Ford shale. Tom Spalding, vice president for horizontal Permian operations, brought attendees up to date on Pioneer’s action at Hart Energy’s 3rd annual DUO Conference & Exhibition in Denver. Another expert, Approach Resources Inc., also discussed results in the region.

Today, Pioneer, based in Irving, Texas, is focused on three of the most active U.S. fields as the third-most active driller in the U.S. so far in 2012. It leads drilling in the Spraberry Trend, with more than 7,000 producing wells, 900,000 acres (more than 50% of the total) and a vertically integrated strategy.

“In 1981, Pioneer held 429,000 acres (in the area), and today we have 1.7 million and growing,” noted Spalding. As of year-end 2011, it was producing 72,000 barrels of oil equivalent (BOE) per day from the Spraberry. After declining oil production from about 1975 through 2002 or so, the Permian’s yield is on the rise, with a strong upward trend in the past several years.

As the majors moved out of the basin in the 1980s, the indies moved in. “Independents are leading the charge today in going deeper, with activity building in the horizontal Wolfcamp shale in the southern part of the basin,” said Spalding. Pioneer has 23,000 vertical locations in the central and northern parts of Spraberry Field; and 3,000 horizontal Wolfcamp opportunities, based on 400,000 acres, primarily in the southern portion of the field.

Included in the independent force working the horizontal Wolfcamp are El Paso Corp., BHP Billiton, EOG Resources Inc., Devon Energy, Laredo, Apache, ConocoPhillips, and Approach Resources.

Spalding noted the stepped-up drilling and technology innovations driving the Wolfcamp play, comparing averages in fourth-quarter 2010 with those of fourth-quarter 2011: rigs up from five to 19 (and 29 currently); lateral lengths expanded from 4,700 to 7,400 feet; wells drilled per quarter hiked from nine to 40; and 24-hour peak initial production rates (IPs) up from 300 BOE per day to 1,200 (based on EOG, Approach and Pioneer results).

The Wolfcamp target for the horizontals today centers on the B interval, but Spalding noted Pioneer may eventually use individual laterals in the A and B to maximize recovery. The C1 and D intervals may be prospective in some areas.

The ramp-up is under way. In the first quarter of 2012 Pioneer drilled three wells. (Its first two wells drilled in the horizontal Wolfcamp continue to flow naturally at rates of over 215 BOE per day (after six months) and 350 BOE daily (after four months), respectively. “Cumulative production for both wells is more than seven times the production of a Spraberry vertical well, at 80% oil,” said Spalding.

The company will drill nine horizontals targeting Wolfcamp in the second quarter, increasing to seven rigs during the second half of this year and 10 rigs in 2013. Development well costs are about $6 million to $7 million versus $8- to $9 million for a science well. Estimated ultimate recoveries (EURs) are 350,000 to 500,000 BOE.

As for transport options out of the basin, Spalding said that major expansions are expected to come online in mid- to late 2012 and 2013. Gas processing and natural gas liquids take-away are likewise the focus of expansions and new-build activity.

Approach’s Path

Bringing additional perspective to the red-hot Permian Basin activity was Dr. Qingming Yang, executive vice president of business development and geosciences, Approach Resources, based in Fort Worth. With an enterprise value of $1.2 billion, Approach has 77 million BOE of proven reserves, nearly all of them in the Permian. It has 145,000 net acres, 165,700 gross, in the basin with 2,900 drilling and recompletion opportunities. Its projects include Pangea and Pangea West in Crockett County, targeting the Wolffork (Clearfork, Wolfcamp) oil-shale resource play.

The company is gearing up. In 2011, its production soared 50% year-over-year, and it looks for a 28% rise in production in 2012.

Approach’s strategy involves both horizontal Wolfcamp and vertical Wolffork drilling and recompletions. It also targets vertical Canyon/Wolffork potential. All told, Approach has more than 500 million BOE of gross resource potential, said Yang.

At present, Approach is transitioning Wolfcamp B activity to development mode; testing horizontal stacked laterals targeting Wolfcamp A and C; testing tighter well spacing; and preparing the field for full-scale development.

“The Wolfcamp is a world-class source rock with desirable shale properties,” said Yang. It has hydrocarbon-generating potential, the right thermal maturity window, storage space, and fracability and conductivity. “There are over 2,500 feet of gross pay in the Clearfork and Wolfcamp,” he said.

Since advances in completion methods, horizontal Wolfcamp IP rates in the B zone have been averaging 926 BOE per day. Average 30-day rates from the same zone are 548 barrels equivalent daily. The economics are strong, Yang noted, based on average EURs of 450,000 BOE; targeted well costs of $5.5 million; finding and development costs of $12.22 per BOE, and 500 potential locations. At $80-barrel oil, the IRR is nearly 25% for an average EUR of 450,000. At $90 oil, it is 30%.

In short, “The Wolfcamp has the potential to become one of the largest oil-shale resource plays ever found in the onshore U.S.,” Yang said.

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