Cimarex Energy Co., exclusively focused on the Permian Basin and the Midcontinent, said a pair of test wells targeting the Upper and Lower Wolfcamp formations in New Mexico and Texas showed enough promising results to increase full-year production guidance.
On Wednesday, the Denver-based company said its 1Q2017 production averaged 1.06 Bcfe/d, a 9.2% increase from the year-ago quarter (973.1 MMcfe/d). Broken down by play, production in the Permian averaged 576.8 MMcfe/d in 1Q2017, a 20.8% increase from 1Q2016 (477.3 MMcfe/d). Midcontinent production averaged 484.2 MMcfe/d in 1Q2017, a 1.7% decline from 1Q2016’s 492.8 MMcfe/d.
The Pintail 23-26H well in Eddy County, NM, achieved a 30-day peak initial production (IP) rate of 1,557 boe/d, 64% oil. The well, which targets the Upper Wolfcamp, was drilled with a 10,000-foot lateral.
"This well result, along with some recent competitor well results in the area, is helping us gain confidence that we have a highly economic target in the Upper Wolfcamp interval," exploration chief John Lambuth said Wednesday in an earnings call to discuss 1Q2017.
Lambuth said five infill wells with 10,000-foot laterals targeting the Lower Wolfcamp in neighboring Culberson County, TX, part of the company's Tim Tam infill development project, achieved an average 30-day peak IP rate of 13.9 MMcfe/d, with oil weighting from 26-36%.
"This result confirms that we can very economically develop the Lower Wolfcamp interval at a minimum of six wells per section," Lambuth said. "In fact, due to the exceptional performance of these wells, we are formulating plans to test even tighter spacing in the Lower Wolfcamp later this year."
Cimarex raised its full-year production guidance to 1.09-1.13 Bcfe/d, a midpoint increase of 15% over 2016 volumes. Production during the second quarter is expected to average 1.08-1.13 Bcfe/d. Capital expenditures for exploration and development (E&D) in 2017 remain unchanged at $1.1-1.2 billion. Cimarex spent $306 million on E&D in 1Q2017.
Cimarex is currently operating 14 drilling rigs -- eight in the Permian and six in the Midcontinent. The company completed 70 gross (26 net) wells during the first quarter.
Broken down by play, 45 gross (10 net) wells were completed in the Midcontinent, while the remaining 25 gross (16 net) were in the Permian. Cimarex said there were 82 gross (26 net) wells awaiting completion at the end of the quarter -- 68 gross (15 net) in the Midcontinent and 14 gross (11 net) in the Permian.
During the question-and-answer portion of the conference call, Lambuth said plans to possibly go up to 18 rigs by the end of the year were "quite frankly a little bit in flux."
"It's a matter of timing between us and our partner in the Midcontinent region with our next major development project," Lambuth said. "We're still working with them, trying to decide the overall scope and size of the project. We'll dictate whether the rigs show up late this year or early next year. We're still working on that right now."
In June 2013, Cimarex signed an eight-year, $60 million joint development agreement (JDA) with Chevron USA Inc., a subsidiary of Chevron Corp., to develop their combined Permian Delaware sub-basin acreage in Culberson County. The JDA's position totals more than 100,000 net acres.
Cimarex reported net income of $131 million ($1.38/share) in 1Q2017, with net cash from operating activities totaling $249.5 million. By comparison, the company reported a net loss of $231.5 million (minus $2.49/share) in the year-ago quarter, with $85.4 million in net cash from operations.