American Oil and Gas Reporter - August 2018 - 40

a chief executive at one company recently
told him of plans to drill two-mile laterals,
but the extended reaches are not without
risks of pipes or tools becoming stuck or
wells clogging with paraffin during production, he cautions.
"Still, the technology is amazing,"
Castle avers. "We are using a lot of sand
and resin-coated sand to keep fractures
propped open. The mud is changing constantly and drill bits are changing. We
are trying to get faster all the time. Jim
Henry, who discovered the Wolfberry
play, said at one point that he did not
know if the industry could get any more
of the oil in place out of a well, but we
definitely are seeing operators not only
get more out in terms of recovery rates,
but also get it out faster."

have lived in Dallas, Houston, Oklahoma
City, Denver and New York. The Castles
could have chosen to manage his investment company from almost anywhere,
but chose to stay in Midland, he says.
During the current surge in activity,
the cities of Odessa and Midland continue
to grow, with Odessa's population climbing
to 140,000 residents (from 100,000 in
2010) and Midland's to 160,000 (from
111,000 in 2010), Castle says, and the
average housing price has increased steadily
to a range of $325,000-$350,000.
"Those are growth spurts and we are
all for progress, but the growth has to be
managed," says Castle, who has served
on a number of civic boards and committees in the area. "That is the key."

Big Bucks

The same goes for the oil field, he
suggests. The meteoric production growth
that has seen oil and natural gas volumes
double in the basin in recent years is
leading to some growing pains that must
be managed. And that growth is expected
to continue well into the future as the industry shifts its focus to infill drilling to
fully develop acreage positions with multiple drilling locations and multiple stacked
pay targets.
Planning is crucial to fully implementing infill programs throughout the
basin, Castle says. While operators continue to test the limits of their acreage,
the emphasis is increasingly on infill
drilling to develop known reserves from
larger pad sites, Castle says.
"You can drill eight-12 wells off a
giant pad site that may be as big as 15
acres, whereas single-well used to be an
acre in some cases," he details.
On the markets side, more Permian
crude is making its way to the Gulf Coast
(and from there, to overseas markets
through crude oil and refined products
exports) as pipelines and processing continues to expand, but a planned refinery
at Fort Stockton will give basin operators
another outlet for their crude to be converted to gasoline for export to Mexico

The push to bolster returns has pushed
up total well costs from $3 million for
vertical wells a decade ago to more than
$15 million for some horizontal wells
today, he observes.
"You are talking about big bucks, and
you are talking about expensive equipment," Castle says. "And you have to
pay hands well. Drivers, whether they
are hauling crude, water or proppant, can
make up to $150,000 a year and service
companies still cannot find enough drivers.
There are very few vacant houses and
apartments in the area, so a lot of guys
are living in man camps and commuting
back home on the weekends to Dallas,
Houston and other places."
Contrary to the claims of some critics,
independents and their employees in the
basin care deeply about the environment
and water quality, Castle interjects.
"We have been fracturing since the
1940s and 1950s and we know how to
protect water sources," he says. "Water
is a valuable commodity. Without water,
none of us could exist. Midland would
be a ghost town if it didn't have good,
clean water."
Throughout his career, Castle says he
and his wife, Kay, and their children
40 THE AMERICAN OIL & GAS REPORTER

Planning Is Crucial

and for production of asphalt needed on
the Permian's busy roads and highways,
Castle says.
The export market will continue to
brighten, he assesses, with production in
many parts of the world in decline, supply-side geopolitical risks, and ever-growing demand. Additional export capacity
will help Permian operators sell more
natural gas associated with oil production,
Castle says.
"The gas is very rich in propane,
ethane and butane, but the problem is
that if you drill an oil well, you might
not be able to get a gas hook up for the
associated rich gas production," he says.
"The Texas Railroad Commission will
let you flare it for 30 days and you can
apply for 30 more days, but after that
you might have to shut the well in."
To take advantage of higher liquids
prices amid gas take-away constraints,
some operators are installing small extraction units in fields with high well
counts to separate out ethane, butane and
pentanes, Castle says.
"But then they have to figure out how
to get those products to market, either by
truck or pipe," he says. "At least on
propane, it can be cryogenically frozen,
which creates a storage issue, but they
are doing it rather than flaring it."
All the innovations taking place across
the basin help create new job opportunities
for young people throughout the West
Texas region and far beyond, Castle
relates. "The job market in this part of
the country has never been better," he
observes.
PBIOS contributes directly to worker
development through scholarship funds
given to Midland College, Odessa College,
the University of Texas of the Permian
Basin and Texas Tech University, he
points out.
"We want to tell people that careers in
the oil and gas industry are as good as, if
not better than, those in the banking industry, the information technology industry,
the entertainment industry, real estate or
anything else," Castle concludes.
r

American Oil and Gas Reporter - August 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - August 2018