20 Billion Barrels of Oil in the Wolfcamp Formation according to the USGS

https://www.usgs.gov/news/usgs-estimates-20-billion-barrels-oil-texas-wolfcamp-shale-formation

Good News Folks!

Cheers!

Ralpr

That's great news. Hope some of it reaches into Howard County!

Oh it does, Mr. Hodges! Check out the map!

Joy

Ralpr

I hope that this will revitalize drilling in Lubbock and Lynn County. However, it will be a long time before leasing is started in these counties again. These counties were leased at the very end of the Cline Shale excitement. Ralph what do this mean for the West Texas area when oil prices are in the $40.00 range?

Jack I do not know where you minerals are located in Howard at. But Surge in the area they acquired from Tall City and Plymouth have been issued over 60 permits since first of year and probably running 3 or 4 rigs in the area of 33-2N around Knott and SE of Vealmoor.

Our minerals are in sections 5 and 45... south of I-20.... east, south east of big spring. Waggoner has a little of the minerals and Hannathon has the rest. most of it is on Moss creek hunting club... owners of the surface.

jack

Ralpr, thanks for the article and the map. I was worried most of the "find" would be south and west of our minerals. I feel a little more encouraged by the article you sent. thanks again!

jh

Hi Mr. Rieger, The price of oil has to be significantly higher to make it worthwhile for energy producers, so they can ramp things up. $40 range will not improve things as fast as we would all like. These have to be ripe times for mergers and acquisitions of companies, so that might speed up things drilling-wise, due to deeper pockets and larger leased areas to hold by production?

Best of luck to All!

Ralph “Ralpr”

You're most welcome Mr. Hodges!

Ralph

It should get bigger because the USGS did not include the Wolfcamp in either the Central Basin Platform or the Delaware Basin. How about that?

Ralph

This USGS report and its 20 Billion BO number has created a very positive buzz among readers, but as I have done on this site multiple times in the past, I encourage readers to to look into the details to see just how accurate this report really is.

On a high level sense, the Wolfcamp D member being discussed here includes much of what used to be called the Cline Shale – especially in the eastern part of the study area.

And we know how that play has turned out.

The Northern Midland Basin is a puzzling inclusion to this resource report to those who are knowledgeable as to O&G issues in the Permian Basin. This area as outlined by the USGS has a much lower thermal maturity that the rest of the Midland Basin – and this fact is documented by multiple analyses and studies. Numerous operators have lost their shirt trying to chase the Wolfcamp in this area over the past several years.

And in diving into a more specific example, one can see how the USGS report is misleading in many degrees.

The Wolfcamp A is perhaps the most proven of all the benches in the Wolfcamp in the Midland Basin. The USGS report has a mean total of 4.1 MM prospective acres at this level with 86.3% being untested and prospective. This 3.54 MM acres would have 35,409 wells drilled in it using the 100 acre per well drainage area outlined in the mean numbers. These wells would have a probability of success of 95.3% - so one is looking at 33,745 successful wells.

These wells / laterals would cost about $6.5 MM apiece (drilled and completed) or a total of $230.2 Billion (for the full 35,409 wells). And this does not include pipelines, facilities, operating costs, work overs, conversion to artificial lift, marketing, transportation, etc.

The USGS is assuming mean per well reserves for the Wolfcamp A to be 167 MBO, 134 MMCF and 14 MB NGL per well. Using $50 oil, $2 gas and $12 NGL pricing and 75% NRI metrics, each successful well will generate $6.587 MM in cash flow on an undiscounted basis.

Considering that this O&G revenue will take 20 to 30 years to be generated, the time value of money is a HUGE issue that needs to be considering in any economic analysis. And if you do that in this example, this is an uneconomic play using these per well reserves.

On a total Wolfcamp A comparison, the successful wells (using the 95.3% P/s), generate $222.3 Billion in undiscounted cash flow.

This is $8 billion less than the $230.2 Billion needed to drill the wells included in this USGS example.

With all that being said, the Wolfcamp in the Midland Basin is a highly prospective unit. Multiple operators have proven this over the past several years with horizontal wells now having EUR’s up to 1 Million BOE. Recent deals in the basin have had per acre acquisition metrics in the $40,000 to $60,000 per net acre range.

And as others have noted, the Delaware Basin and to a lesser extent the Central Basin Platform will add additional Wolfcamp reserves to the Permian Basin picture.

But the numbers being cited by the USGS are very misleading as to the overall recoverable and economic potential of this section.

I would ask that readers keep these facts in perspective when reviewing this USGS report.

Thanks for your comments Rock Man! Truly appreciated!

Ralph

and hoping Cheers are for us in 32 Sec 27 S/2 as well.

So does this mean if I have 10 ac. it could sell at 40-60 an acre (howard county)

The $40-60,000 per acre is what operators are paying other operators for properties in that area.

These larger numbers are based on the large acreage position where the buying operator can walk in and start drilling on 300-600 acre drilling units over a large area (e.g. over 20,000 acres).

They are not paying mineral owners that number.

Leasing minerals is running in the $1000 to $2000 per acre range - but it is very area dependent. It also depends on what rights are included in the mineral lease (all depths vs limited depths).

Small blocks like yours also are subject to a discount in what is being paid just because of their size

Where is your acreage in Howard Co? Some areas are prime (and you probably would have been contacted by now) while other parts of the county are significantly less prospective

Rock Man; I know that Surge Energy has been doing a lot of drilling in Howard and now reaching out into Borden counties in the area acquired from Plymouth and Tall City in late 2015 by Moss Creek. They have been issued 76 permits in Howard and 5 in Borden since 1-01-2016. They supposedly running 5 rigs and have between 4-8 wells in some units. Praying they get to our area in Borden this year , we already have a test well in our acreage drilled by Tall City in 2014 and Surge has a permit on a new well 8 miles straight west of us.

Hoping Surge can crack the code on Borden Co horizontal drilling. The Tall City wells were at best very average -and uneconomic.

Koch Exploration (Denver) is flowing back its Wolfcamp Hz located about 5 miles north of the Howard Co line in Borden Co. Those results should be interesting

Our well Cassidy is averaging about 1800 to 2000 obls per month and now around 80,000 cubic feet of gas per day, not a barn burner but maybe they can crack the code as you say, They release our area in Feb 2016 and there is 18,000 acs. here so they could drill a lot of wells, I will not mind a bit, have a small portion on each one of those acs.