QEP Energy Co. expects to add four rigs this year to two already drilling on Permian basin acreage it is acquiring from EnerVest Ltd. for $950 million.
The wholly owned subsidiary of QEP Resources Inc., Denver, has identified nine targets for horizontal drilling in a 3,000-ft vertical section of the Midland subbasin. In a deal that was to have closed by Jan. 31, QEP is acquiring an average working interest of 94% in 26,519 net acres, mainly in Martin and Andrews counties, Tex.
Chuck Stanley, chairman, president, and chief executive officer of QEP Resources, told analysts he expects three rigs to be drilling horizontal holes and three to be drilling vertically on the acreage by the end of 2014. Two rigs likely to be added to the drilling program in 2016 would drill horizontal wells.
Stanley said the company sees the potential to drill more than 200 vertical wells on 20- and 40-acre spacing and as many as 775 horizontal wells on the acquired leasehold, in which its average net revenue interest is 75%. The acreage has 264 operated vertical wells now producing a total 6,700 boe/d, of which 68% is oil. The property has no producing horizontal wells.
QEP estimates proved reserves net to its interests at 47 million boe, 32% proved developed-producing.
The nine strata QEP sees as amenable to horizontal drilling occur on the acquired acreage at true vertical depths of 8,500-11,500 ft. Stanley called the Wolfcamp A, B, and D (Cline) and Lower Spraberry shale "primary targets."
Lateral lengths will be 5,000-10,000 ft, depending on location. Stanley estimated costs at $7.5-8 million/well with lateral reach of 5,000 ft, $9.4 million at 7,500 ft, and $10.75 million at 10,000 ft.
Stanley said he expects QEP to collect and study core samples on the acquired acreage in 2014 and to drill 9-10 horizontal wells. He forecast production will increase to 33,000 boe/d by 2018.
The chief executive described the acquired property as "a foothold" to which the company might "bolt on" smaller properties through acquisition.
"We'll take the opportunities as they come," he said.