As E&P analysts at Global Hunter Securities were digesting second-quarter reports, one of the drilling results that stood out in the Permian Basin was from Pioneer Natural Resources. During the period, the E&P company made two vertical completions in the Pennsylvanian Atoka interval--below the Wolfcamp--at average IP rates of 150 BOE/d.

"Pioneer, and others, are targeting the Atoka as yet another zone to add to their vertically commingled wells in the Spraberry Trend --Atokaberry?" notes analyst Dan Morrison in a Sept. 2 report. "At those rates, we began to ponder the horizontal potential of the zone."

After taking a peek at the production histories in the Midland Basin, GHS saw that several vertical Atoka wells had been drilled and produced over time in an area of Midland, Martin, and eastern Andrews counties.

"As we focused in on this area, we discovered a well in western Martin County permitted in February by a private operator as a horizontal completion in either the Strawn or Atoka intervals. We could not obtain any information as to which zone the well was actually completed in, or how productive the well may--or may not--be. But we did notice the same company filed four additional permits in July for similar horizontal wells, suggesting they are seeing some encouraging results."

Morrison says the subsequent permits included Strawn and Atoka as potential targets, along with Mississippian and a deeper wildcat interval. GHS favors Atoka as "the most likely suspect."

"There are far fewer Strawn producers in the same area and just a handful of Mississippian wells. A new, deeper zone is always a possibility too. But Pioneer's recent vertical success also adds to our confidence in the horizontal potential of the Atoka. Thinking of the 150 BOE/d vertical completion as a single stage, the potential rates available from 5 to 10 multiple stages in horizontal completion starts to get one's attention."

With antennas up, GHS reviewed its coverage universe to spot other E&Ps with potential exposure to the play. As part of this process, the analysts mapped companies’ active production in the area as an indication of potential acreage exposure.

"The currently producing properties may or may not include rights to the Atoka, so this is just a screen indicating potential exposure. Not surprisingly, Pioneer looms large with their large position in Midland and Martin counties. Chesapeake also appears well positioned as does Concho and potentially Clayton Williams and Berry. Just outside the limits of historical vertical Atoka production to the south is Callon's Sallie Ann property in Ector County and W&T Offshore, now onshore in northern Martin County."

The Permian Basin's promise is affirmed by recent activity in the area from players of all sizes. Chesapeake Operating Inc. recently completed Delaware Basin horizontals in the Phantom Field portion of Ward County, Texas. The #1H Monroe 1-10 flowed 1,010 bbl. of 47-degree crude, 1.42 million cu. ft. of gas and 1,022 bbl. of water daily from Bone Spring at 11,643-14,865 ft. after fracture-stimulation.

Meanwhile, a horizontal Bone Spring producer by Yates Petroleum Corp. in Berry North Field recently flowed 195 bbl. of oil, 236,000 cu. ft. of gas and 174 bbl. of water per day from acid- and fracture-treated perforations at 9,842-13,130 ft. The well was drilled to 13,327 ft., with a lateral that was drilled to a vertical depth of 8,856 ft.

Many active players in the Permian give a lot of credit to new technologies developed in recent years that make it much easier to get at oil resources underground. Just a few years ago the Permian was thought to be headed for a decline in production. But these same technologies have led to a large increase in the output of oil in Permian. In 2002, the basin produced about 17% of total U.S. oil, and some analysts expect this could climb to close to 25%.

"We've focused on the area where the Atoka has been successfully produced vertically," Morrison says. "But an important aspect of horizontal completion technology is its ability to potentially commercialize areas that are non-commercial under vertical development. The Atoka could have horizontal potential over a much larger area. So add Atoka to Wolfcamp, Avalon, Bone Spring, Abo and others as new horizontal plays to watch in the Permian."

Contact the author, Bertie Taylor, at btaylor@hartenergy.com.

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