American Oil and Gas Reporter - March 2018 - 54

SpecialReport: Permian Powerhouse
both risk and reward. If you have a problem
in a longer lateral, it can be costly."
Higher Intensity Stimulation
Another key to Encana's increased recovery rates is what it calls "higher intensity fracturing operations." Balmer indicates the company is using tighter
cluster spacing for each stage. By keeping
the group of holes close together, while
making use of proprietary analytics to
determine the optimal choices for variables
such as volumes and types of proppant
and fluid, Encana is able to expand the
proportion of stimulated reservoir. He
adds that the company's standard is to
use 250-foot frac stages.
"If the oil or gas is not given pathways,
the rock's low permeability makes it hard
to move," he points out. "We are trying
to optimize profitability: to produce the
best well at the lowest cost."
Balmer says Encana uses a "thin" frac
fluid rather than a gel system.
"If you put sand in water, it sinks to
the bottom," he maintains. "But we don't
want to use a gel system that can plug
the rock, so we have developed a product
that is mostly water. We want it to act
like water while carrying the sand."
After they come on line, the company
uses a combination of lift systems during
the life of its wells, Balmer mentions. "On
new wells, especially with longer laterals,

you want to get the water off as soon as
possible," he explains. "We use electric
submersible pumps. ESPs can move as
much as 5,000 barrels of fluid a day."
After the water is gone, he says, Encana
switches to gas lift and then eventually
to pump jacks.
Permian Expansion
According to Zane Arrott, chief operating officer of RSP Permian Inc., the
basin's resurgence has been driven by
the appropriate technologies coming into
their own in the right place. "We are embarking on a new journey for our industry,"
he reflects. "It is becoming more of a
manufacturing process, where logistics
and efficiency are more important."
RSP Permian's story mirrors that of
the Permian Basin and includes acquisitions,
the evolution to horizontal drilling, the
rapid expansion into the Delaware Basin
and the development of new technology.
The tale begins with Rising Star Petroleum, a private company that had done
several groupings with Natural Gas Partners, and had some nonoperating interests
in the Permian. When the operator and
other interest owners in the properties
decided several years ago the time was
right to sell out, Rising Star's management
called the leadership at Pecos, another
Permian-focused NGP portfolio company.
"Six of us got together and formed RSP

Many of RSP Permian's operations begin with natural ﬂow, transition to gas lift, then go
to electric submersible pumps and then standard rod pumps. Since the company went
public in 2014, it says it has focused much of its activity on the area around Midland.

54 THE AMERICAN OIL & GAS REPORTER

Permian," Arrott recounts. "RSP stands
for Rising Star and Pecos. That is what
happens when you get a bunch of engineers
together. Had we known we were going
to go public, we would have thought up
a better name."
According to Arrott, RSP Permian
made a $370 million acquisition in the
Midland Basin in 2010, intending to drill
100-200 vertical wells. He says the late
Ted Collins Jr. and his business partner,
Mike Wallace, owned interests in the
properties, and did not want to sell out
with the other owners. They eventually
merged their interest into what became
RSP Permian and became major stockholders and board members.
"There would be no RSP Permian
without Ted Collins," Arrott reflects. "He
and Wallace called Mike Grimm, one of
the co-founders and current RSP chairman,
in the fall of 2010 and said they had a
deal they thought Rising Star Petroleum
should consider. What followed was the
rise from a small private equity company
co-founded by two management teams .
. . from an initial investment of around
$370 million-the majority of which was
funded by NGP-to today's almost $6 billion market cap public company."
Everything changed in 2012, when
the company drilled its first horizontal
well. "It went really well, and we realized
we had a lot to do here, which exceeded
our private equity capital," he describes.
And so RSP Permian went public in
2014. Since then, much of its drilling activity has been close to the city of Midland
and Arrott says travelers flying in and
out of Midland International Air and
Space Port probably can expect to spot
one of RSP Permian's rigs. He adds that
the company is "joined at the hip" with
Diamondback Energy Inc. in many of its
projects in Midland County, Tx.
In 2016, RSP Permian made a large
Delaware Basin acquisition, obtaining
Silver Hill Energy Partners for $2.4 billion,
Arrott says, with the last piece of the
deal closing in March 2017. RSP Permian
now has 92,000 net acres, split almost
evenly between the Midland and Delaware
basins. Its Midland Basin acreage includes
leaseholds in Texas' Midland, Ector and
Glasscock counties, as well as property
near the Martin/Andrews/Midland county
American Oil and Gas Reporter - March 2018

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