Permian Oil and Gas

Diamondback Energy - Newly Public Permian Basin Operator

Diamondback Energy (Nasdaq:FANG) completed its initial public offering and raised net proceeds of $204.5 million.  The company is working on the Wolfberry play (Wolfcamp, Cline, Clearfork, Spraberry, Strawn and Atoka formations) in the Permian Basin. 

Diamondback Energy’s Permian Basin assets include:

• Proved reserves of 39.46 million barrels of oil equivalent (BOE)
• PDP reserves – 21.7% of proved reserves
• PUD reserves – 78.3% of proved reserves based on 329 gross well locations and assuming 40 acre spacing
• Proved reserves - 66% crude oil, 20% natural gas liquids and 14% natural gas
• Vertical drilling locations – 916 potential based on 40 acre spacing and 1,122 potential based on 20 acre spacing
• PUD estimated ultimate recoveries (EUR) - 135 million BOE, with 93 million barrels of oil, 102 million cubic feet of natural gas and 25,000 barrels of natural gas liquids
• Q2 2012 production – 3,637 BOE per day – (2,579 barrel of oil, 2.757 million cubic feet per day of natural gas and 599 barrels of natural gas liquids per day.

2012 Drilling Program

Diamondback Energy’s 2012 drilling program in the Permian Basin includes 48 gross, or 42 net vertical wells and two net horizontal wells into the Wolfberry play.  The company estimates capital expenditures at $150 million to $160 million during the year.

Apache - Midland Basin Cline Shale Drilling Economics

Apache Corporation (APA) recently updated for investors and shareholders the economics of drilling and completing horizontal oil and gas wells into the Cline Shale in the Midland Basin area of the Permian Basin.

Apache estimates that horizontal Cline Shale wells will cost an average of $7.6 million to drill and complete and have an estimated ultimate recovery (EUR) of 423,000 barrels of oil equivalent (BOE).

Apache estimates that 87% of the production from these wells will be crude oil or other liquid hydrocarbons and yield an average return of 28%.  The company estimates that it has 2,321 drilling locations in the Cline Shale in the Midland Basin.

Apache has drilled four wells into the Cline Shale through June 2012 and is currently operating two rigs here.  The company plans to drill a total of ten wells in 2012.

Apache - Permian Basin Summary

Apache Corporation (APA) is active in the Permian Basin and has 1.6 million net acres under lease.  The company reported that production from this basin was 101,000 barrels of oil equivalent (BOE) per day in April 2012, with approximately 70% of this production composed of crude oil and other liquids.

Apache estimates that oil and gas production from its properties in the Permian Basin will grow at a compound annual rate of 13% from 2011 to 2016.  The company will operate an average of 32 rigs in 2012 and drill 760 wells at a cost of approximately $1.9 billion.

Apache is targeting multiple formations in the Permian Basin including the Wolfcamp Shale, Cline Shale, Spraberry, Yeso, Clearfork, San Andres, Grayburg, Avalon Shale and Bone Spring.