Permian Oil and Gas

Range Resources Releases Third Quarter of 2012 Permian Basin Update

Range Resources (NYSE:RRC) updated its development program in the Permian Basin where the company is developing the Wolfberry and Cline Shale plays.

Wolfberry

Range Resources reported a Wolfberry well with an initial production rate of 505 barrels of oil equivalent (BOE) per day.  The production was composed of 243 barrels of oil, 126 barrels of natural gas liquids and 814,000 cubic feet of natural gas per day.  The well cost $2.5 million to drill and complete.

Range Resources said that the company’s first two Wolfberry wells have an estimated ultimate recovery (EUR) of 216,000 BOE each. 

Cline Shale

Range Resources has completed its third horizontal well into the Cline Shale in the Permian Basin, which is approximately 12 miles from the company’s first well drilled into the Cline Shale.   

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.

Chesapeake Energy Sells Permian Basin Oil and Gas Properties

Chesapeake Energy (CHK) agreed to sell the company’s oil and gas properties in the Permian Basin to three separate buyers. The company expects to receive proceeds of $6.9 billion for these properties, its midstream assets and non-core leasehold in other areas. Chesapeake Energy will use part of the proceeds to pay down $4 billion in term loans in the fourth quarter of 2012. 

Chesapeake Energy will receive $3.3 billion for its Permian Basin properties which have current production of 21,000 barrels of crude oil and natural gas liquids per day, along with 90 million cubic feet of natural gas per day. The three buyers are Royal Dutch Shell (RDS.A, RDS.B), Chevron Corporation (NYSE:CVX) and EnerVest, Ltd. 

Royal Dutch Shell and Chevron Corporation are buying acreage in the Delaware Basin while EnerVest, Ltd. will get properties in the Midland Basin.  Chesapeake Energy will still have 470,000 net acres of undeveloped acreage in the Midland Basin after the sale is completed.