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    Permian gearing up for increased output

    The use of horizontal rigs and hydraulic fracturing technology has revived the Permian Basin. According to RBN Energy calculations, at over 1.5 MMb/d, the region represents nearly 19% of total US crude output. Active drilling rigs in the area stood at 547 in mid-May, according to Baker Hughes, with most of the rigs focused on the Spraberry trend. Overall, the stage is set for the region to reap economic benefits from drilling in the play. Looking a little closer at one slice of the region, the Institute for Economic Development at The University of Texas at San Antonio (UTSA) compiled a report that found that oil and gas activity in the Cline Shale region of the Permian Basin could, in fact, have a $20 billion economic impact on its own—supporting more than 30,000 jobs by 2022.

    Included in the report are the various overlapping fields in the Permian Basin, including the emerging Cline Shale on the northeastern edge of the play. While the Permian Basin includes 39 counties, the UTSA study focused on 10: Fisher, Glasscock, Howard, Irion, Martin, Mitchell, Nolan, Reagan, Scurry and Sterling counties and included a secondary study of Brown, Coke, Coleman, Runnels, Taylor and Tom Green. Including the Cline, the report considered counties where the popular Wolfberry/Sprayberry and Wolfcamp reservoirs are present. Given that the study, paid for by the West Texas Energy Consortium, accounts for only a slice of the region, the $20 billion impact estimate is a moderate one—the study noted the potential economic impact could reach $34 billion.

    North McElroy unit in Crane, Texas. Photo courtesy of Apache Corp.
    North McElroy unit in Crane, Texas. Photo courtesy of Apache Corp.

    "Our research indicates that while Howard County and the Big Spring area are still expected to have the largest economic impact, Reagan and Irion counties are expected to see significant increases in gross output between 2012 and 2022," said research director Thomas Tunstall. The Cline, Wolfcamp, and Wolfberry/Sprayberry overlap in these counties.

    In mid-May, Unimin Corp. reported on the opening of its newest proppant distribution terminal. The Lubbock, TX-based center joins six others in the Texas and Oklahoma region to serve hydraulic fracturing operations in the North Permian Basin and northern sections of the Cline Shale. Unimin's Lubbock terminal is served by two Class 1 railroads via the Plainsman Short Line Railroad, and is accessed by over the road vehicles via Texas State Highway 331 and US Interstate I-27.

    Apache Corp. continues to be one of the largest operators in the Permian Basin, with more than 13,500 producing wells in 155 fields over 3.3 million gross acres with exposure to numerous plays. In its 1Q14 report the company noted a milestone of record production from the Permian, producing an average 150,000 boe/d, up 25% from the prior-year period. The company averaged 38 rigs in the area in 1Q14 and spud 202 gross wells (80 horizontals).

    Exxon Mobil Corp. added to its large leasehold in the area in May. Executing an agreement to add nearly 26,000 acres through subsidiary XTO Energy Inc., the supermajor increased its position in the Permian to nearly 1.5 million total acres. Nearly all of the acreage, acquired from LINN Energy LLC, is located within the portion of the Midland Basin that is most prospective for horizontal Wolfcamp and Spraberry development. In exchange, LINN Energy received a portion of XTO's interest in the Hugoton gas field in Kansas and Oklahoma.

    "This Midland Basin leasehold is in a prolific area where we expect rapid, profitable development of multiple horizons in the Wolfcamp and Spraberry formations," said Randy Cleveland, president of XTO Energy. "With this agreement and our previously announced transaction with Endeavor Energy Resources, we will increase our operated position in the Midland Basin Wolfcamp core to roughly 100,000 net acres and our total position in the basin to 300,000 net acres." Current production of the acquired assets is estimated at approximately 2,000 boe/d. XTO will also receive 1,000 net acres in the New Mexico Delaware Basin that augments its existing leasehold and near-term development.

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