American Oil and Gas Reporter - June 2023 - 54

SpecialReport: Permian Basin Playmakers
crews over the past year. Hollis says it is
dropping to two rigs but is keeping two
frac crews to allow it to complete some
of its drilled but uncompleted inventory.
The two rigs and two frac crews for the
rest of this year will allow the company
to continue completing at a four-rig cadence,
according Hollis.
" We plan to pick up two additional
rigs in 2024, assuming commodity prices
warrant, " he reports.
Hollis notes that also will allow the
HighPeak Energy's acreage position in the northern Midland Basin produces mostly oil
that is heavier than crude produced in the central Midland and Delaware basins, giving
it an economic advantage. The company's 37,000 net boe/d (~50,000 boe/d gross) of production
in the first quarter was 85% oil and 94% liquids.
of 37,000 net boe/d (~50,000 boe/d gross)
was 85% oil and 94% liquids. So our
economics are dramatically different than
our peers because of our high oil weighting.
We had a 55% higher margin than
our average peer in the first quarter. "
That has allowed HighPeak to enjoy
remarkable growth, going from about
3,100 boe/d to nearly 40,000 boe/d since
it went public in August 2020.
HighPeak's oil is heavier, too, at 3538
degree API gravity compared with
40-42 degrees gravity in the central Midland
Basin and 43-44 degree in the
Delaware Basin, according to Hollis.
" That is an advantage because refiners
like to blend it with what they are getting
from the Delaware Basin, " he explains.
HighPeak's acreage is in two large
contiguous blocks, allowing the company
to build infrastructure in production corridors
to handle water as well as oil and
gas along with large tank batteries. Because
of that, Hollis says HighPeak can be
more efficient.
Much of HighPeak's acreage is within
a few miles of the Delek Refinery in Big
Spring, Tx. He notes that Delek markets
" the vast majority " of HighPeak's oil
production, thus reducing marketing and
transportation costs.
Another advantage is a sand mine located
between HighPeak's two blocks.
" We used to have a 125-150 mile
round trip to get our sand, " Hollis continues.
" Today, we use 100% local wet
sand. Now, we are trucking only 10-12
54 THE AMERICAN OIL & GAS REPORTER
miles per round trip to get sand. Which
can save us about $300,000 a well. "
Using local, less expensive sand also
means HighPeak can use more sand in
its fracs. " We average 2,200 pounds per
foot and 40-45 barrels of fluid per foot, "
Hollis adds, noting the company is recycling
roughly 85% of its produced water.
HighPeak also has built a substation
in northern Howard County, which means
it can use electricity to operate some of
its drilling rigs. That provides another
substantial savings.
As part of that substation and overhead
electric distribution lines project to power
its electric drilling rigs and field operations,
Hollis says HighPeak is building an 80acre,
10-megawatt solar farm to help support
its electrification efforts. The Flat
Top solar farm just south of the Borden
County line in northern Howard County
is expected to be connected to the grid in
the first quarter of 2024.
HighPeak primarily is targeting the
Lower Spraberry and Wolfcamp A formations
at about 6,500 feet in depth,
which is shallower than the same formations
in the central Midland Basin. That
is yet another advantage because it reduces
drilling and lifting costs.
Hollis says the 37,000 boe/d in the
first quarter came from about 185 producing
wells. The company has drilled
250 wells, however, meaning another 60
or so wells are somewhere in the process
of being completed. HighPeak has operated
as many as six rigs and four frac
company to have free cash flow by the
third quarter of this year while still maintaining
significant growth. HighPeak is
drilling four or five wells per pad with
average lateral lengths of 12,000 feet.
Horseshoe Laterals
Companies in the Permian continue
find creative ways to increase production
and lower costs. One of the more innovative
developments is Matador Resources' pilot
project using a " horseshoe " design in Loving
County.
Glenn Stetson, executive vice president,
says Matador has drilled a two-mile lateral
on a section only large enough for a traditional
one-mile lateral. The U-shaped lateral
drills out part of the wellbore, makes a
180-degree turn and then drills back toward
the rig to double the lateral length.
" Our operations team has always
worked closely with our geophysical and
land teams to find new and innovative
ways to reduce costs and increase production
and returns from our existing
acreage, " Joseph W. Foran, chairman and
chief executive officer of Matador, says
in his first-quarter shareholders' letter.
" We are now testing our first batch of
horseshoe wells in our Wolf asset area in
West Texas, which we expect to allow us
to drill two-mile lateral wells in onemile
land-locked sections.
" By successfully drilling U-shaped laterals,
we should be able to increase our
inventory of two-mile locations across our
Delaware Basin assets and continue to
expand capital efficiencies by accessing
longer laterals in sections previously limited
to one-mile wells. We estimate approximately
$10 million in cost savings will be
realized by drilling two U-shaped twomile
wells compared to four one-mile
lateral wells in this section, " Foran stated.
Matador also announced that it had

American Oil and Gas Reporter - June 2023

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