Wolfcamp Shale Stocks

Investing in the Largest Oil and Gas Discovery

By Justin Williams
Wednesday, August 28th, 2013

I had to do a double take when I read this: “The Spraberry Wolfcamp could possibly become the largest oil and gas discovery in the world.”

That’s what Pioneer Natural Resources Co. (NYSE: PXD) Chief Executive Officer Scott Sheffield said just a couple weeks ago, according to a report by Oil & Gas Journal.

That’s right, guys; oh, sweet Texas. Things just keep getting bigger and bigger in the Lone Star State. But those are some mighty lofty expectations to put on the Wolfcamp Shale in West Texas’ Permian Basin, right?

wolfberry shale mapPioneer is the largest acreage holder in the Spraberry field, so it's going to want a good outcome. But when it comes down to it, the numbers don’t lie.

The Wolfcamp has 50 billion boe in recoverable reserves to date, sliding right by the Bakken in North Dakota and South Texas’s Eagle Ford, both of which continue to impress on a daily basis.

And the recoverable reserves that were noted were only a fraction of what yet remains undiscovered.

As for the Permian Basin, where the Wolfcamp lies, it was thought to be all but dead and dying in oil and gas production just 6 years ago. But oh no – the province has bounced back in a big way and now has 500 active rigs and is producing 1.3 million barrels per day.

This is a far cry from 2007, when only 850,000 barrels per day were being produced, according to Forbes. In fact, it’s approaching its heyday of the early 1970s, when it reached about 2 million bpd.

Multi-stage fracturing has brought a renaissance of gas and oil to the region. The 500 active rigs make up a quarter of the U.S. total, and the percentage of horizontal wells is double what it was two years ago.

The Wolfcamp is even drawing comparison to the Ghawar field of Saudi Arabia, largely thought to be the biggest in the world, as it closes in on 100 billion barrels of oil equivalent reserves.

At a Glance

One thing that has the oilman wide-eyed at the Wolfcamp is how it compares to other shale plays, especially since it has so many geological zones. To give you a good idea of what I mean, consider that the play contains about 4,000 feet of shale, but it is set up geographically much like many other plays. If we think about the Wolfcamp from a 3D perspective, that 4,000 feet becomes more like 4 million acres.

And that’s when producers find their happy place.

Plays like the Eagle Ford on the other hand are only working with about 300 feet of shale.

And the fact that Wolfcamp is in Texas makes it all the more appealing. Texas is already set up for horizontal drilling and fracking, with all the amenities in place. And regulations are much more lenient when it comes to fracking in Texas. If the shale play were in New York, for example, you might as well be running into a brick wall of opposition.

The only real setbacks you’re going to find in the Wolfcamp is that, like any other large shale play, it’s going to take a whole heck of a lot of money to get the operation off the ground. And that’s where smaller companies, and even medium-sized ones, will face some problems.

They need the big investments and the partnerships. You could have tens of millions of dollars to play with, but that’s only going to fund a couple of wells, and usually you want right around ten to prove a play.

But as you know, a little ingenuity can also go a long way, and there are little tricks to the trade. You can re-enter wells or fracture old wells. And there’s a new technique being employed using pulse injection that builds up pressure, similar to a garden hose with a kink in it, and once released, it pumps out added pressure. This is where the little guy can still make his mark.

Wavefront Technology Solutions Inc. (TSX-V: WEE) provides these new pulsating tools that can reduce drilling times and force greater penetration.

Like any new technology in the oil industry, it’s slow to adapt, but it’s catching on and should be commonplace in the next few years.

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Look Out

I mentioned how Pioneer was the largest acreage holder in the Wolfcamp’s Spraberry field; it has roughly 900.000 gross acres (730,000 net acres). The company has had much success with drilling results and plans to test 13 zones in the next few years.

It also entered into agreement with Sinochem Petroleum USA LCC in January of this year for 40 percent of its interest in the Wolfcamp, according to Pioneer’s website, which would cover approximately 207,000 acres.

The agreement will allow an accelerated development and production of its stronger position to the south.

Big Sky Petroleum Corp. (TSX-V: BSP), out of Canada, has a hefty land position as well, and the company should be looking to partner up and make a move in the near future.

Everything is bigger in Texas, they say, but it looks like West Texas is even bigger.

 

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