Permian briefs

EOG advances Leonard shale drilling program

EOG Resources Inc. has moved out of evaluation and into the drilling phase of operations at its Leonard shale assets in the Delaware basin after three wells in Lea County, NM, came online at rates greater than 1,000 b/d.

Initial production rates from the Dillon 31 No. 1H, No. 2H, and No. 3H ranged from 1,225 to 1,315 b/d, comprising 190-215 b/d of NGL and 1.1-1.2 MMcfd of gas. The wells were drilled on 60-acre spacing.

Bill Helms, executive vice-president of exploration and development for EOG, said the company will test various spacing patterns to determine the optimal development program for the Leonard shale acreage.

"Based on these successful results, we plan to test tighter spacing both between wells and across zones throughout our 73,000-net-acre position," Helms told analysts during a conference call.

This year, EOG plans to utilize two rigs in the shale play and drill 40 net wells.

EOG is actively developing the Leonard A zone and testing other zones and various spacing patterns between wells.

BHP evaluates new Permian horizons

BHP Billiton is evaluating vertical and horizontal drilling opportunities across its 450,000 net acre position in the Permian basin.

Rod Skaufel, president of North American shale for BHP, said the company has been conducting an extensive appraisal program of its Permian position during the last 3 years and is testing multiple prospective horizons.

Speaking to a press briefing in Houston, Skaufel said the Wolfcamp, Bone Spring, and Avalon shales are all showing promise. The company will focus on one horizon, but Skaufel declined to say which one for competitive reasons.

In coming years, BHP expects to increase its Permian basin production to 100,000 boe/d from about 14,000 boe/d currently. It is also seeking to reduce drilling costs to below $4 million/well from a range of $4-6 million/well.

Operations are now focused on Culberson, Loving, Reeves, and Ward counties, Tex.

The company recently sold 30,000 net acres in the south Midland basin, and is now seeking a buyer for a sales package in the Delaware basin.

BHP entered the Permian basin in 2011 through a $12.1 billion merger with Petrohawk Energy. The US-based independent producer was known for its pioneering work in the Eagle Ford shale.

Clayton Williams flows first Wolfcamp C well

Clayton Williams Energy, Inc. reported encouraging results from its first horizontal well targeting the Wolfcamp C in the Delaware basin.

The well, drilled in Reeves County, Tex., produced at a peak 30-day production rate of 776 boe/d, comprised of 82% oil and 8% NGL.

Clayton Williams is working to delineate the potential of the Wolfcamp C across its Reeves County acreage. Drilling was under way at two Wolfcamp C wells in late May, and more wells are planned later this year.

"Given that the company holds 80,000 net acres in the Delaware basin, delineating the Wolfcamp C could go a long way towards increasing the company's [drilling] inventory," J. Marshall Adkins, an analyst with Raymond James, wrote in a research note to investors.

Adkins said the results are consistent with earlier wells targeting the Wolfcamp A in Reeves County.

Fourteen of the company's horizontal Wolfcamp A wells have been online for more than 30 days. The peak 30-day production rate for these wells averaged 756 boe/d, with the final 10 wells averaging about 889 boe/d.

Clayton Williams has three additional Wolfcamp A wells in Reeves County, along with one in Ward County, that are waiting on completion or have been producing for less than 30 days.

Rangeland breaks ground on rail terminal

Rangeland Energy LLC has begun construction of a rail terminal in Loving, NM, that will provide Delaware basin producers access to downstream markets across the US and receive sand for use in hydraulic fracturing.

The 300-acre RIO Hub will provide storage, blending, and rail loading facilities for outbound crude and condensate. Fee-for-service customers include crude oil marketers, refiners, and producers.

Truck-to-rail transload operations are expected to begin in October 2014. The facility will have an initial capacity of 10,000 b/d. High-speed unit train loading facilities are expected to be constructed as customer demand increases. Rangeland expects capacity will ultimately rise to more than 100,000 b/d.

The RIO Hub will also offer unloading, storage, and truck loading facilities for frac sand. The facility will have an initial capacity to handle 500,000 tons/year of frac sand, expandable to more than 1 million tons/year.

The hub will be served by BNSF Railway and is part of Rangeland's larger RIO System.

Rangeland also plans to construct a pipeline that will be part of this system. The 130-mile RIO Pipeline will connect the RIO hub to the RIO State Line Terminal at the border of Texas and New Mexico, and then on to the proposed RIO Midland Terminal.

Rangeland has secured the Midland Terminal site and completed routing and environmental surveys for the RIO Pipeline.

The company is now working with potential customers to obtain the volume support required to begin construction.

Rangeland, based in Sugar Land, Tex., was formed in 2009. It is backed by EnCap Flatrock Midstream LLC, a private equity firm.

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