Permian Oil and Gas

Energen Adds To Permian Basin Acreage

Energen Corporation (EGN) reported that the company signed an agreement to purchase additional oil and gas leasehold in the Permian Basin.  The properties acquired have both developed and undeveloped acreage that is prospective for the Wolfberry play.

Energen Corporation will pay $65.8 million for 3,200 net acres in Midland County, Texas. The properties have 29 producing wells, 50 drilling locations and proved and probable reserves totaling 8.5 million barrels of oil equivalent (BOE). The company said that it would not start developing this acreage until 2013 at the earliest, and the cost of development is estimated at $115 million.

Energen Corporation conducts its exploration and production operations through Energen Resources, a subsidiary of the company. 

Energen Reports On Avalon Shale Operations

Energen (EGN) reported an update on its operations in the Avalon Shale during the fourth quarter of 2011.  The company has 110,000 net acres in the Permian Basin prospective for this play.

Energen said that a test well drilled to the Avalon Shale in Loving County, Texas, had an initial production rate of 200 barrels of oil and 750,000 cubic feet of wet natural gas per day. The oil production on this well is now down to 75 barrels per day. Energen has 340 drilling locations into the Avalon Shale based on 320 acre spacing.

Energen used smaller fracturing stages on Avalon Shale wells in an attempt to reduce water production and maximize production. The company believes that this well design actually inhibited production. Energen plans to shift capital from the Avalon Shale to the deeper Wolfcamp in 2012.

Energen Updates Third Bone Spring Sands

Energen (EGN) issued an operational update on the Third Bone Spring play in the Permian Basin.  The company has 68,000 net acres prospective for this formation.

Energen drilled and completed eighteen net wells into the Third Bone Spring sands in 2011, and completed two wells that were drilled in 2010. The company has five other stages in various stages of drilling and completion.

Energen reported that the average initial production rate of the seven wells brought on line in the fourth quarter of 2011 was approximately 485 barrels of oil and 1.08 million cubic feet per day of wet natural gas.

The average initial production rate of the 20 net wells brought on line in 2011 was approximately 400 barrels of oil and 1.04 million cubic feet per day of wet natural gas. The company’s model for Third Bone Spring sands wells called for an initial production rate of 260 barrels of oil and 735,000 cubic feet of wet natural gas per day.

Energen estimates that the company has 210 drilling locations based on 320 acre spacing.  The average cost to drill and complete a Third Bone Spring well is $7.5 million.

Energen also said that wells drilled on the western side of the Pecos River have been less productive than other wells on its acreage. The wells on the western side have greater amounts of water in the production stream and steeper decline rates than expected.