With a recently signed joint venture agreement targeting the Wolfcamp Shale in hand, Pioneer Natural Resources Co. this year plans to step up horizontal drilling there. In the Eagle Ford, longer laterals and more white sand proppant instead of ceramic are on the agenda.
“Our extensive Midland Basin geologic analysis has identified multiple prospective horizontal targets throughout Pioneer’s extensive 900,000-acre Wolfcamp/Spraberry leasehold position with an aggregate estimated resource potential of more than 4.6 billion boe,” CEO Scott Sheffield said. “During 2012, we focused on appraising and developing the southern 200,000 acres of the play. This culminated in the signing of the joint interest agreement with Sinochem [Petroleum USA LLC (see NGI, Feb. 4)] that will allow horizontal development of the Wolfcamp Shale in this area to be accelerated.
“We were also able to begin drilling horizontal wells on our northern acreage to appraise the potential of the horizontal Wolfcamp Shale in this area. Early results are extremely encouraging, and we are initiating a $1 billion dollar appraisal program for 2013 and 2014 to confirm the estimated 3 billion boe of resource potential we believe exists in our northern acreage, which should add substantial net asset value to the company.” Pioneer said it is beginning a $1 billion capital program to take place over the next two years to confirm this.
Last month, Pioneer placed its first horizontal Wolfcamp Shale well with a 10,000-foot lateral on production. It had an initial peak 24-hour production rate of 1,203 boe/d and an average peak 20-day flow rate of 1,022 boe/d. Oil content was about 80%. “The performance of this well is substantially above the 650,000 boe EUR [estimated ultimate recovery] type curve that reflects the performance of the two horizontal Wolfcamp Shale B interval wells that were drilled in the Giddings area of Upton County by Pioneer in 2011,” the company said.
Pioneer expects to run seven rigs in the southern joint interest area of the play during 2013, with an increase of three rigs per year expected in 2014 and 2015. The 2013 drilling program will continue to focus on delineating acreage and testing the Wolfcamp A, Upper B, Lower B and D intervals, while the program in 2014 and beyond will primarily focus on development drilling and accelerating production growth. Completion techniques will continue to be optimized and downspacing opportunities will be evaluated. In particular, slickwater fracks will be tested, which could save $1 million per well when compared to gel-conveyed fracks, Pioneer said.
The company also is ramping up activity in the Eagle Ford Shale where it expects to drill about 130 wells this year at a cost of $7-8 million each. Liquids and increased well efficiencies are the targets. The number of wells drilled from pads, as opposed to single-well locations, is expected to increase from 45% in 2012 to 80% in 2013 as most of the company’s Eagle Ford acreage is now held by production. Pad drilling is said to save $600,000-700,000 per well and will result in Pioneer being able to drill 130 wells with 10 rigs in 2013 compared to drilling essentially the same number of wells in 2012 with 12 rigs.
Pioneer has been increasing its use of white sand as a proppant in shallower areas of the Eagle Ford. It’s cheaper than using ceramic proppant. “The company is now expanding the use of white sand proppant to deeper areas of the field to further define its performance limits. Pioneer tested 97 wells with white sand in 2011 and 2012 with a savings of about $700,000 per well.
Average Eagle Ford lateral lengths are slated to increase, too, from 5,700 feet last year to 6,200 feet this year, which will add about $500,000 in drilling and completion costs to each well but greatly improve EURs, Sheffield said.
In the liquids-rich Barnett Shale Combo play, Pioneer is operating one rig but plans to double that number during the second quarter to hold acreage in the highest-return areas of its 82,000 net acreage position. Here, Pioneer currently holds about 20% of its acreage by production, or 16,000 net acres, and expects to hold an additional 45,000 net acres by production over the next three years with a two-rig program.
This year, the northern Wolfcamp/Spraberry will get about $1.23 billion in capital spending for horizontal and vertical drilling as well as more infrastructure and automation. The southern Wolfcamp joint interest area will see $425 million in spending. The Eagle Ford is slated to get $575 million and the Barnett Shale Combo, $185 million. Alaska activities will see $190 million.
Wells Fargo Securities has an “outperform” rating on Pioneer with a valuation range of $131-135/share. The firm’s analysts are enthusiastic about the company’s growth plans. “As the Spraberry and Eagle Ford Ramps take hold, we see growth accelerating…while horizontal Wolfcamp potential provides a catalyst for shares,” they said in a note Wednesday. “Our ‘outperform’ rating…primarily reflects our positive view on optionality represented by Pioneer’s Permian asset and its strong returns in the Eagle Ford.”
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