WPX Energy Inc. is loosening the reins in the Williston Basin with an eye on resuming completions and raising the rig count to three from one before year's end.
The decision to increase Williston activity "follows significant process improvements, structural changes to lower costs, successful discussions with key vendors, a technical analysis of WPX's well performance that led to higher estimated ultimate recoveries (EURs) and favorable results from larger stimulations," the Tulsa-based independent said.
"The combination of cost reductions and higher EURs gives us the opportunity to generate returns in excess of 30% in today's commodity price environment," said CEO Rick Muncrief. "This helps set us up for 20% oil volume growth in 2016. We're realizing the value we have on this acreage to a fuller extent through technical excellence, improving the way we develop the asset, and looking at the operations through a new lens."
The announcement comes just three days after WPX paid $26 million to buy 14,300 net acres in the San Juan Basin's Gallup formation (see Shale Daily, June 22). In February, WPX said it would drop 10 of its 16 rigs across the U.S. onshore in its key North Dakota, New Mexico and Colorado operations (see Shale Daily, Feb. 13). At that time, Moncrief said the Williston, where five drilling rigs had been working, would have only one rig "for the balance of the year."
However, the producer is "rapidly" ringing costs out of the Williston operations, with estimated drilling and completion (D&C) costs "approaching $8 million per well with 6 million pound completions." That's 30% lower than the 2014 average. In addition, the company is recognizing a blended type curve of about 750,000 boe for wells in the Middle Bakken and Three Forks formations, 25% above previous estimates of 600,000 boe.
The company estimates $9 million/well D&C costs to perform the larger 10 million pound stimulations.
All of the improvements have to do with incremental completion changes that WPX performed in late 2014. The Williston leasehold is 85,000 net acres strong, with proved reserves at the end of 2014 estimated at 119 million boe.
Currently, WPX has an inventory of 14 wells in Williston awaiting completion, and plans are to resume work in August beginning with a four-well pad. It also plans over the next few months to test 10 million pound fracture stimulations "with more stages, more entry points and a higher pump rate...using 100% sand" on the Williston wells. Up to now, the wells had been stimulated using a combination of sand and ceramic proppants.
Completion modifications also include moving toward a "higher intensity" slickwater design that has the potential to increase initial production rates and EURs even more.
"Increasing the stimulation size is about pursuing additional upside for our EURs," Muncrief said. "The collaboration we're seeing from service providers makes this the perfect time to proceed." Oilfield service costs across the board have fallen dramatically since the beginning of the year as competition in tight markets has accelerated.
A second rig is to be added in August, with a third raised in November.
Funding for additional Williston activity primarily is to be derived "by redeploying cost savings the company is incurring and reallocating capital from its Piceance Basin operations to its Williston development," management said.
"WPX plans to move to a one-rig program in the Piceance during the second half of the year and evaluate the extent of Piceance-related completions based on commodity prices." Early this year WPX announced it would delay natural gas well completions in Colorado until economics improved (see Shale Daily, Jan. 26).
Total planned capital investments for this year "remain in line" with previous guidance, to stay within its projected operating cash flow.