American Oil and Gas Reporter - June 2017 - 74

SpecialReport: Permian Basin Profile
Although he acknowledges that Torchlight initially may have to flare associated
gas, he predicts take-away capability will
not be a significant problem. He points
out that two Kinder Morgan gas lines
run through Torchlight's acreage, and
notes that a crude oil pipeline also crosses
the property. Moreover, Brda observes,
the Orogrande Basin is only 20 miles
from the Western Refinery near El Paso.

Hazel Project
While Torchlight works to breaks new
ground, its other undertakings include
tried-and-true ventures in the form of the
Hazel project, which Brda describes as
"a typical Midland Basin play." The company says that leasehold is in Texas,
stretching across Sterling and a sliver of
Tom Green counties and on into Irion
County in the southeastern part of the
Midland Basin.
"We have been able to confirm that it is
not on the eastern shelf," he offers. "It is on
the updip of the eastern edge of the Midland
Basin. There is not a lot of water associated
with it. We are targeting the Leonard, Dean
and Wolfcamp A and B zones."
Torchlight reports success testing the
Flying B Ranch No. 2 vertical well in the
Lower Wolfcamp A and Upper Wolfcamp
B sections. At the time of the report, the
well was still in the flowback process
and improving during clean-up of the
2,000 barrels of remaining frac load.
Brda says the well is testing at more
than 20 bbl/d of oil with associated gas
that has yet to be measured. He says the
test confirms the second horizontal bench
in the Hazel Projects. Results from the
first two Flying B Ranch wells have established the Lower Dean/Upper Wolfcamp A and the Lower Wolfcamp A/Upper Wolfcamp B formations.
"These are not economical as vertical
wells," he explains. "We drilled these
vertical wells to tell where we can drill
horizontally. There is not a lot of well
control in this area. This test validates
our theory that commercial production
of oil and gas from horizontal development
in multiple stacked pay zones across different areas of our lease is achievable.
As we approach the Leonard, we hope to
prove up the potential of a third bench in
our Hazel Project, which will add significant value to the acreage."
The next steps for the Flying B Ranch
No. 2 well are to test the Leonard interval
and fracture it to prove up a third horizontal
bench, Brda relates. Once the frac is
74 THE AMERICAN OIL & GAS REPORTER

completed and the Leonard zone tested,
he says Torchlight expects to place the
well back on pump and produce sales.
Meanwhile, the Flying B Ranch No.
3H well-the company's first horizontal
test in the project-was to be spud in
June. Brda says Torchlight will begin
with a vertical pilot to collect scientific
information and then immediately drill a
7,500-foot lateral.
He points out that Torchlight has put
pump jacks on its vertical tests, but says
he wants to transition to gas lift for the
horizontal phase.
Brda adds that the first two tests are
producing about 80 percent oil and 20
percent gas with "not a ton of NGLs."
He estimates the Hazel Project offers the
potential of 150-200 drilling locations.
A Bargain At Any Price
Although Permian Basin leasing prices
have skyrocketed, Brda suggests the rates
are not as outlandish as they seem at
first. "It is crazy," he admits, "but when
you have three or four benches and
spacing becomes tighter, you can drill
eight wells a section. That is 32-40 locations. Amortize that over that many wells,
and $20,000 an acre is not out of line."
Steep leasing prices have not slowed
a land rush by a number of companies,
especially in the Delaware Basin. In addition to the acquisitions by Noble Energy
and others, Resolute Energy Corporation,
which has two rigs operating in the
Delaware Basin, announced in its first
quarter earnings report that it had added
the Bronco acquisition, which will increase
its leasehold in the basin 30 percent.
Meanwhile, Denver-based Centennial

Resource Development announced in
May that it will acquire undeveloped
acreage and producing oil and gas properties in the core of the northern Delaware
Basin from another Denver company,
GMT Exploration, for about $350 million.
The acquisition is comprised of 11,860
net acres in Lea County, with average
net production of 2,100 boe/d (77 percent
oil) in the first quarter.
Centennial said it identified about 255
gross horizontal drilling locations and
estimated undeveloped resource potential
of more than 91 MMboe. Therefore, Centennial says it is raising its 2020 oil production target to 60,000 bbl/d, with the
acquisition expanding its Delaware Basin
position to 88,000 net acres from 76,000
net acres at year-end 2016.
"This acquisition marks our entry into
the northern Delaware Basin, further expanding our footprint into an area with
similar producing horizons as our existing
acreage," says Chairman and CEO Mark
Papa in a press release.
Other spring Permian Basin announcements include Marathon Oil Corporation's
March acquisitions in the northern Delaware
Basin in New Mexico, which include
21,000 net acres from Black Mountain
Oil & Gas. Marathon CEO Lee Tillman
reports the combined deals give the company more than 90,000 acres in the Permian
Basin, more than 70,000 of which are
concentrated in the northern Delaware.
Primary targets on the acquired acreage
are the Wolfcamp and Bone Spring formations, Tillman says, but the Black
Mountain acreage offers as many as 10
target benches within 5,000 feet of stacked
pay.
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MMEX Resources Plans Permian Basin Refinery
AUSTIN, TX.-MMEX Resources Corp.
has announced plans to build a $450 million,
50,000 barrel-a-day crude oil refinery in
the Permian Basin, subject to receiving
the required government permits, and completing debt and equity financing.
The 250-acre facility will be located
20 miles northeast of Fort Stockton, Tx.,
near the Sulfur Junction spur of the Texas
Pacifico Railroad, MMEX says, where it
can utilize railway connections to export
diesel, gasoline, jet fuels, liquefied petroleum gas and crude oil to western
Mexico and South America.
Commenting that existing facilities
and pipeline networks largely are unequipped to handle the exponential growth

in crude oil production the Permian Basin
has experienced, MMEX President and
Chief Executive Officer Jack W. Hanks
says, "By building a state-of-the-art refinery along the region's existing railway
infrastructure, we hope to bring a local
and export market for crude oil and
refined products that will add substantial
job and economic growth to West Texas."
MMEX says it plans to utilize stateof-the-art emissions technologies and
closed-in water and air-cooling systems,
which will require very little local water
resources. Construction is slated to begin
in early 2018, and the facility is projected
to begin operations in 2019.
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American Oil and Gas Reporter - June 2017

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