Tickers in this Article: WLL, AREX, EP, XEC
El Paso Corporation (NYSE:EP) has a large position in the Permian Basin that it is using to prospect the Wolfcamp formation. The company plans to make this play a core area over the next three years

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Wolfcamp Shale
El Paso has 138,000 net acres under lease with exposure to the Wolfcamp Shale in the Permian Basin. The company estimates that it has unrisked resource potential of 220 million barrels of oil equivalent (BOE) on its properties here. This estimate includes only the resource potential from the Upper Wolfcamp shale where the company has more than 800 locations to drill.

El Paso plans to make the Wolfcamp Shale a major core area for the company and will have between five and seven rigs operating on its acreage by 2013.

El Paso estimates that wells here will cost between $4 million and $6 million to drill and complete, and have an estimated ultimate recovery between 300,000 and 380,000 BOE. The company is looking for an internal rate of return between 25% and 35% assuming a price of $80 per barrel for oil.

2011 Wolfcamp Program
El Paso is planning to operate between two and three rigs in the Wolfcamp in 2011, and will focus on delineating the extent of the play on its acreage. El Paso has completed four wells to date into the Upper Wolfcamp Shale and reported initial 24 hour production rates ranging from 292 to 393 BOE per day. This production was mostly oil, ranging from 80% to 90% of the total production. El Paso also has two other wells being completed, including one with a 7,000 foot lateral and 24 hydraulic fracturing stages.

Other Players
Many operators are flocking into the Permian Basin in the search for new oil plays that can be developed with horizontal drilling. Approach Resources (Nasdaq:AREX) has 134,500 net acres that are exposed to various formations in the Permian Basin, including the Wolfcamp. The company estimates that it has more than 1,200 Wolfcamp locations to drill.

Whiting Petroleum (NYSE:WLL) has 83,000 net acres under lease and is operating four rigs at the Big Tex prospect in the Permian Basin. The company is targeting the Wolfcamp and Bone Spring formations and plans to drill 23 wells here in 2011.

Cimarex Energy (NYSE:XEC) already has a substantial base of operations in the Permian Basin, with 30% of its proved reserves in this basin at the end of 2010. The company is putting 54% of its capital into the Permian in 2011 and will drill 135 net wells here during the year targeting the Wolfcamp, Bone Spring and Avalon Shale formations.

Bottom Line
El Paso has built up a large leasehold in the Permian Basin with exposure to the Wolfcamp Shale and plans aggressive development of this formation over the next five years. (For related reading, also take a look at El Paso Is Loving The Eagle For Shale.)

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