American Oil and Gas Reporter - June 2016 - 46

SpecialReport: Permian Basin Update

Anadarko Petroleum Corp. has identiﬁed more than 6,000 drilling locations on its 255,000
net acres in the Permian's Delaware Basin. According to Chad McAllaster, vice president
of Delaware Basin operations, the company has shifted its initial focus from the Avalon
Shale and Bone Spring formations to the Wolfcamp because of its higher liquids content.

"We are excited about our position," he
emphasizes, adding that Anadarko has
identified more than 6,000 drilling locations. "(The Delaware) has the thickest section of Permian-aged rock in the country.
That rock contains a tremendous amount
of oil and natural gas with good productivity, which is realized through horizontal development. The Delaware Basin
has tremendous stacked pays that yield
good results."
When Anadarko started its Delaware
Basin horizontal drilling program in 2010,
McAllaster says it was focused on the
Avalon Shale and Bone Spring formations.
But the target has shifted to the Wolfcamp,
he says, because of the company's overall focus on oil. He says the Wolfcamp
wells produce 70 percent oil on the eastern side of Anadarko's acreage and 50 percent crude oil farther west.
"Natural gas liquids are 15-30 percent,
so the vast majority is liquids," McAllaster
points out. "It is a tremendous oil play with
a ton of stacked pays. It stands to be a key
component for our company's onshore operations for years to come."
Anadarko has doubled its net resources
estimate for the Delaware Basin to more
than 2 billion barrels of oil equivalent.
McAllaster says Anadarko has about 325
producing horizontal wells in the play, as
well as a number of vertical gas producers. The company averaged six operated
rigs, spudded 23 wells, and turned on 26
operated wells during the first quarter.
Net sales volumes for the quarter, according to company reports, averaged
38,000 boe/d, an increase of 46 percent
from first quarter 2015. Total liquid vol46 THE AMERICAN OIL & GAS REPORTER

umes averaged 26,000 bbl/d, which is an
increase of 44 percent year over year and
4 percent from fourth quarter 2015.
McAllaster notes that total per-well
costs were reduced by $1 million, or 14
percent, from the prior quarter, and completion costs-per-foot are down 47 percent
over the prior year.
"We have partnered with our service
providers in improving time efficiency of
drilling and completing the wells," he says.
"We are seeing the cost structure go
down, too."
Although Anadarko has a few drilled
but uncompleted (DUC) wells, he says it
is completing the majority of the wells it
drills. McAllaster reports the company also
is increasing the lateral lengths of its
Delaware Basin horizontals.
"We typically have drilled one-mile laterals," he says. "Now we are pushing to
7,500 feet and have drilled 10,000-foot laterals. In fact, we drilled one 11,000-foot
lateral. It doesn't change our completion
strategy, but it is a more efficient use of
capital. We are drilling longer laterals
everywhere we can."
Return Game
McAllaster calls Anadarko's development of its Delaware Basin acreage "a return game."
"We have the flexibility to ramp up or
ramp down," he states. "Our focus is on
returns. If we can generate competitive returns on investment, we will stay moderately active."
McAllaster says that is accomplished
by cutting costs and improving production
efficiency. He points out that EURs of

Anadarko's Delaware Basin wells vary
from 600,000 to 1 million boe, with initial production running anywhere from
1,000 to 6,000 boe/d.
With its midstream partner, Western Gas
Partners LP, Anadarko has a strong footprint in the region, according to McAllaster,
with gathering systems, water lines, and access to several processing plants.
Anadarko also has begun limited pad
drilling in the Delaware Basin, something
McAllaster says has not been all that common in the company's Wolfcamp program
to date. "We have started a fair bit of pad
drilling," he confirms. "With a resource this
big, there has to be delineation, which usually is done with single wells. But as we
start development, there will be more pad
drilling. It is still early (in the Delaware
Basin), but there is so much potential."
John Christiansen, vice president of
corporate communications for Anadarko,
compares the future development of the
Delaware Basin to the Wattenberg Field in
the DJ Basin in Colorado, where the
company is the largest producer.
"How we developed the DJ Basin in order to align infrastructure, take-away capacity, water handling and pad drilling with
production growth is how we anticipate developing the Delaware Basin," he says.
Northwest Shelf
Riley Exploration Group (REG), an
Oklahoma-based exploration, development and production company funded by
the private equity group Yorktown Partners,
is focused on the San Andres formation in
Yoakum County, Tx., on the Northwest
Shelf of the Midland Basin.
Riley's acreage position consists of
30,172 gross and 10,072 net acres in
Yoakum County, according to company
President Corey Riley. He says REG has
production from eight operated and 20
nonoperated wells producing from the San
Andres formation.
"REG has drilled 12 operated wells:
eight producing horizontals, two horizontal DUCs, and two disposal wells," Riley
points out. "Through applying horizontal
drilling and fracturing techniques to the
San Andres, our finding and development
costs are less than $10 per boe on 1.5-mile
laterals. We believe there are additional opportunities to enhance returns to make this
a premier company asset."
REG's horizontal wells had average initial production in excess of 500 bbl/d oil,
according to Riley, with one-to-one gasto-oil ratios.

American Oil and Gas Reporter - June 2016

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