Energen pursuing Permian basin liquids plays

By OGJ editors

Energen Resources Corp., Birmingham, Ala., said it replaced its 2011 production and added 20% to its proved reserves for a yearend total of 343 million bbl of oil equivalent.

About 45 million boe of additions came from proving up probable and possible reserves mainly in the Permian basin, where 54% of the company’s proved reserves now reside. More than half of the company’s yearend proved reserves are liquids.

Energen made good progress in the vertical Wolfberry play in the Midland subbasin of the Permian basin and is seeing good results from its more recent Third Bone Spring wells that have been drilled on the east side of the Pecos River.

Avalon shale potential remains unclear, and Energen likely will redirect planned Avalon capital to the deeper Wolfcamp shale formation in 2012; the Wolfcamp is thought to have a higher mix of oil to gas, and its production will hold the shallower Avalon shale.

Energen drilled 153 net Wolfberry wells in 2011 and completed another 22 spudded in 2010. Of these 175 wells, 122 are producing and 53 are waiting on completion. Initial stabilized rates from the 39 wells brought on line in the fourth quarter averaged 65 b/d of oil and 150 Mcfd of wet gas. Energen’s risked model initial stabilized rate is 55 b/d and 110 Mcfd.

Energen has 32,000 net undeveloped acres in the Wolfberry play and some 800 potential drilling locations based on 40-acre spacing. The company’s estimated cost to drill and complete a Wolfberry well in 2012 is $2.3 million.

Meanwhile, Energen drilled and completed 18 net Third Bone Spring wells in 2011 and completed 2 wells spudded in 2010; another 5 are drilling, waiting on completion, or testing.

The seven wells brought on line in the fourth quarter had an initial stabilized rate of 485 b/d of oil and 1,085 Mcfd of wet gas. The initial stabilized rate of all 20 net wells brought on line in 2011 averaged 400 b/d and 1,035 Mcfd. The initial stabilized rate in Energen’s risked, weighted average Third Bone Spring model is 260 b/d and 735 Mcfd.

The majority of 12 wells drilled on the west side of the Pecos River have underperformed relative to wells drilled on the east side. In general, the western wells have encountered higher amounts of water, and efforts to optimize production from nine wells that have had steeper-than-expected declines have been hampered by limited infrastructure. With water disposal wells drilled late in 2011, Energen has lately been able to install pumps on three of the west-side wells and continues to work to improve production.

Energen has 68,000 net undeveloped acres prospective for the Third Bone Spring sands and 210 potential drilling locations based on 320-acre spacing. The company’s estimated cost to drill and complete a Third Bone Spring well in 2012 is $7.5 million.

Energen’s Avalon shale test well in Loving County had an initial stabilized rate of 200 b/d of oil and 750 Mcfd of wet gas. The rate has declined to 75 b/d and 750 Mcfd. The well’s completion design utilized smaller fracs in an effort to reduce produced water and maximize hydrocarbon production; instead, hydrocarbon production may actually have been hampered by the use of smaller fracs, the company said.

Energen has 110,000 net undeveloped acres are prospective for Avalon shale and 340 potential drilling locations based on 320-acre spacing.

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