Apache Corp announced in early September, a major oil discovery in Texas, the latest sign the strongest shale companies don’t appear to be slowing down, even with continuing weakness in oil and gas prices. The company said it had assembled contiguous parcels of more than 300,000 acres for $1,300 an acre in the field it calls “Alpine High,” most of which is in Reeves County, Texas.
The price is a bargain compared to deals done for as much as $30,000 an acre in other parts of Texas. Improved technologies and efficiencies will allow Apache to exploit the area, an overlooked part of the otherwise expansive Permian Basin, the top U.S. oilfield with multiple layers of oil-bearing rock.
Apache estimated that its acreage holds about 75 trillion cubic feet of mostly wet gas and 3 billion barrels of oil in the Barnett and Woodford regions of the field. It also said there is significant oil potential in the shallower Pennsylvanian, Bone Springs and Wolfcamp formations.
Key highlights of the discovery:
• Apache has secured 307,000 contiguous net acres (352,000 gross acres) at an attractive average cost of approximately $1,300 per acre.
• Alpine High has 4,000 to 5,000 feet of stacked pay in up to five distinct formations including the Bone Springs, Wolfcamp, Pennsylvanian, Barnett and Woodford.
• 2,000 to more than 3,000 future drilling locations have been identified in the Woodford and Barnett formations alone. These formations are in the wet gas window and are expected to deliver a combination of rich gas and oil. Initial estimates for the Woodford and Barnett zones indicate a pretax, net present value (NPV) range of $4 million to $20 million per well, at benchmark oil and natural gas prices of $50 per barrel and $3 per million cubic feet (Mcf), respectively. Expected well costs in development mode for a 4,100 foot lateral are estimated to be approximately $4 million per well in normally pressured settings and $6 million per well in over-pressured settings.
John J. Christmann IV, Apache’s chief executive officer and president, noted that “We are incredibly excited about the Alpine High play and its large inventory of repeatable, high-value drilling opportunities. We have thousands of low-risk locations in the Woodford and Barnett formations alone, and we are looking forward to further delineating what we believe will be a significant number of oil-prone locations in the Pennsylvanian, Wolfcamp and Bone Springs.”