The Wolfberry play, which has developed along the west flank of West Texas' Midland Basin,
combines production from
Spraberry and Wolfcamp.

Four years ago, some plump oil wells began to pop up along the western flank of Texas’ Midland Basin, where it begins its climb onto the Central Basin Platform. These wells were nominally Spraberry producers, but their performance was atypical.

Lower Permian Spraberry wells are widely known throughout the industry for rock-bottom production rates that can be sustained for decades. The average well in the Spraberry trend, which sprawls across the core of the Midland Basin, makes less than 10 barrels of oil per day, along with lots of water.

But one of these new “Spraberry” producers could make 100 or even 200 barrels of oil per day. This was not the everyday Spraberry, for sure. Most of the crude was actually pumped from Wolfcamp rocks, a thick, tight interval below traditional Spraberry targets.

Groundwork

Although the Wolfberry play seemed to suddenly burst forth, in truth it had been gaining momentum for more than 10 years. In 1996 and 1997, Arco Permian mounted a 300-well program in Midland County, on the west side of the considerable Spraberry trend. The company took its wells to 10,000 feet, which tacked on an additional 200 to 300 feet of hole below the Spraberry and scratched the upper part of the Wolfcamp section.

Some of Arco’s Spraberry-plus wells hit a sweet spot in the Wolfcamp. At the time, Arco was fracturing carbonate wells on the Central Basin Platform, and it tried similar stimulations on the intriguing Wolfcamp intervals. Results were surprisingly good. But BP soon acquired Arco, and its people scattered. The success of the program went largely unnoticed.

Of course, the Wolfcamp was a long-established reservoir in this part of West Texas. During Permian time, great fans of carbonate detritus were shed off the Central Basin Platform into the Midland Basin. Piles of Wolfcamp sediments, including huge slump blocks, tumbled into low areas all along the platform edge. This resedimented rubble mixed in with deposits from reef-building organisms that flourished in the warm Permian seas.

The first Wolfcamp fields were found in the 1950s, as wells aiming for deeper targets occasionally intersected slump blocks or reef facies with excellent reservoir properties. Deliberate exploration with 2-D seismic located additional fields, but the heyday of the Wolfcamp was in the 1990s. As 3-D seismic swept across the Permian Basin, million-barrel Wolfcamp prospects practically jumped off the data. The entire trend along the platform edge was closely explored, and features down to 15 acres were eagerly drilled. Arco Permian was one of the producers that invested heavily in the Wolfcamp.

What was left after the intense geophysical scrutiny was the country rock. It was a mess of up to 2,000 feet of carbonate and shale sediments of all sorts of sizes and shapes that were suffused with oil.

Henry steps up

Midland independent Henry Petroleum, a private firm that had worked the Midland Basin for decades, owned interests in Pegasus Field in Midland and Upton counties. In 2002, CMS Energy launched a drilling program on the east side of Pegasus, in the same area as the old Arco project.

CMS was locked into a continuous drilling commitment on its acreage, but it unexpectedly met some financial constraints. Henry decided to investigate the area.

Henry’s A&D manager at the time, Gary Pitts, liked the potential opportunity. In late 2002, Henry took a farm-out from CMS on 14 160-acre tracts and satisfied the drilling commitments. Henry’s exploration manager Dave Feavel decided to take the wells all the way through the Wolfcamp section, as Devonian wells drilled by CMS had encountered some striking shows in lower Wolfcamp.

Dennis Phelps, an ex-Arco engineer, worked for Henry on a contract basis. He had been involved in the 300-well Arco program. Phelps was called on to complete Henry’s new wells with Arco-style stimulations. He used multiple slickwater fracs across the entire Wolfcamp interval.

“We made some pretty good wells on the farm-out from CMS,” says Jim Henry, chief executive. “From there we decided that maybe the Wolfcamp would be better in other parts.”

Henry mapped the trend and began to acquire acreage in earnest. It negotiated a 10-section farm-out from BP in the Boultinghouse area, south and east of the original Arco project. It farmed out another multi-section project in Upton County from EOG Resources. This block offset 14 sections held by Pure Resources. Henry and Pure pooled their holdings and formed the WC joint venture, with Chickadee as its central project.

Before long, Henry had a sizeable lease position and six rigs at work on Wolfberry wells. “We had a whole team of people who worked on this play and made a quantum leap that took the Wolfcamp to another level,” says Henry.

All of this activity generated surprisingly little curiosity. People paid scant attention to Henry’s projects. The company operated a couple hundred Spraberry wells and was recognized as a Spraberry driller. And, the state classification for the Spraberry included the Wolfcamp interval. Too, Henry’s initial potentials looked like typical Spraberry results: not much oil and gobs of water. Only an astute observer who tracked production histories would see how strongly the wells improved as frac fluids flowed back.

Awareness spreads

At present, Henry has 10 rigs at work on Wolfberry wells, and it plans to keep at least eight busy into the foreseeable future. It has drilled some 500 Wolfberry wells to date, and has enough acreage for five to 10 more years of steady activity.

Economics of Wolfberry wells are very dependent on current prices. A good well will make 100 barrels per day, but initial rates vary from several hundred to 20 barrels a day. Declines are rapid, about 50% during the first year. Then rates taper after a few years to five to 10 barrels per day, and wells maintain that pace for many years.

Nonetheless, the play is far from easy. It’s extremely critical to keep a tight rein on costs. Henry has a reputation as one of the trend’s lowest-cost operators, and constantly strives to keep that distinction. Still, a Wolfberry well that required $800,000 to drill and complete at the inception of the play now costs around $1.5 million.

Nearly a third of that goes to completion. The favored technique treats the entire Wolfcamp interval with a series of slickwater stimulations. Henry has certain aspects of its completions that it keeps to itself, although it shares quite a bit of information with other operators.

Although the company has amassed an enviable acreage position, many of its leases are laden with difficult clauses. Henry works hard on its landowner relations. “We’ve been in Midland for more than 40 years, and we plan to be here a lot longer. Good landowner relations are high priority for us,” says Henry. “It’s a very complicated play and it keeps us up working late.”

Competition has exploded as well. Two years ago, only two companies competed for acreage; now numerous firms are active across the play.

Expanding opportunity

A few of Henry’s competitors are offshoots of it and its work. One of the new entities in the play is Midland-based private company ExL Petroleum LP, formed in mid-2005 by three members of Henry’s Wolfberry team: Dave Feavel, former exploration manager for Henry; Doug Robison, former senior land negotiator and general counsel; and Mike LaMonica, former operations manager.

“We started by buying into a joint venture on lands controlled by Vecta Exploration, then by building ExL prospects in the trend and working to expand the play,” says Feavel.

Dallas-based Vecta Exploration focused on exploration using multicomponent seismic. Vecta held acreage in Bloxom, a substantial block at the south end of the Wolfberry play. The two companies formed Ambrose Energy, a joint venture that has financing from Trust Company of the West. Subsequently, Ambrose acquired majority interests in Bloxom and a number of other leases in the play; ExL operates the Ambrose properties.

Today, Ambrose has 50,000 acres of leases, and ExL has grown to a staff of 20 and has drilled 45 wells.

The completions ExL performs on its Wolfberry wells are similar though not identical to Henry’s approach. “We do six to eight stages of slickwater stimulations during a two-day period,” he says. “The technology is not new but must be properly implemented.” Eight to 10 stimulations are needed to open 1,500 feet of Wolfcamp section.

“Well to well, we can almost never correlate porosity zones,” he says. “There is porosity scattered all throughout the section, but individual zones don’t generally have much extent. We stimulate the entire section so that we can access lots of these 2,000- to 15,000-barrel oil-filled lenses.”

ExL’s corporate strategy is to identify, acquire, develop and monetize properties. In that vein, it recently put its first batch of Wolfberry assets on the market. “We’re selling 15% of our acreage position, and about 50% of our production,” says Feavel.

The package includes 32 producing wells and 178 proved undeveloped locations on 8,400 gross acres in Upton, Midland and Ector counties. Net production was 1,900 barrels of oil equivalent (BOE) per day. Proved reserves (according to Albrecht & Associates Inc.) stood at 16.5 million barrels of oil and 22.2 billion cubic feet of gas. Albrecht handled the deal.

“Interest in the properties was very good,” says Feavel. “We had a data room open for five weeks and it was occupied almost every day.” Closing was set for December 2007.

Meanwhile, the company continues to develop the rest of its assets. It sees a long future in the Wolfberry. It has four rigs running on properties that are not part of the sale package.

“Across the play, well quality is improving as stimulation techniques continue to evolve. And there are many infill wells that can be drilled, and proven areas that remain undrilled.

There’s a whole lot of work to do.”

Enter St. Mary

Denver-based St. Mary Land & Exploration surprised some in the industry when it purchased its Sweetie Peck asset in the Spraberry trend at the close of 2006. But the company’s senior management was actually buying into the Wolfberry, and indeed had first-hand experience with the rapidly growing play.

Tony Best, chief executive and president, and Jay Ottoson, executive vice president and chief operating officer, worked together on the Wolfberry at Arco Permian and later at Pure Resources, both based in Midland.

“Our growth strategy is to look for acquisitions that are a good fit for us, and to grow our drilling inventory to three to five years,” says Best.

Best had enjoyed a fruitful relationship with Henry Petroleum that dated back to the late 1980s. After he assumed the top position at St. Mary in mid-2006, Best became aware that Henry was selling the Sweetie Peck asset. The Wolfberry play matched St. Mary’s goals.

“We were quite familiar with the Wolfberry, and we jumped at the opportunity to look at it. We negotiated a very solid acquisition that significantly increased our presence in the Permian Basin.” The $247.6-million purchase was the largest in the company’s history. Based on the buy, St. Mary opened a regional office in Midland in February 2007.

“To date, we are very pleased. The Wolfberry program ramped up more quickly than we expected and we have a great talent base in our office.”

St. Mary recently scaled back to three rigs at Sweetie Peck, down from five earlier in 2007. The service market is stretched thin in the Permian Basin, and skilled labor is dear. The company wasn’t getting the efficiencies it wanted from the two rigs it let go.

Sweetie Peck’s 13,000 net acres offer St. Mary up to five years of drilling inventory, assuming infill drilling proves successful. It figures its estimated ultimate recoveries at 165,000 BOE per well. Per-well costs are targeted at $1.6 million, and it runs up to 10 fracs on each. “We like to have multi-year programs that we drill at a controlled pace so we can focus on costs. We don’t want our performance to fluctuate on price,” says Best.

Additionally, St. Mary owns a 65% interest in Halff East, a Henry-operated Wolfberry project southeast of Sweetie Peck. Results have been so attractive the partners decided to double their 2007 well count from 15 to 30. Two rigs are at work on that project, which also holds multi-year inventories of locations.

“In 2007, our total Wolfberry program was to drill or participate in 69 wells, and we raised that to 80.”

St. Mary is very happy with its Wolfcamp results so far, and it would like to expand its footprint in the play. “This is not your father’s Spraberry,” says Best. “It’s an entirely new play, with new wells and new facilities. And quite different economics.” M

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