Apache discovers significant oil, gas resources in southern Delaware Basin

Apache Corporation recently confirmed a significant new resource play, “Alpine High”, that the company has discovered in the southern portion of the Delaware Basin, primarily in Reeves County, Texas. The company estimates hydrocarbons in place on its Alpine High acreage position are 75 trillion cubic feet (Tcf) of rich gas (more than 1,300 British Thermal Units) and 3 billion barrels of oil in the Barnett and Woodford formations alone. Significant oil potential in the shallower Pennsylvanian, Bone Springs and Wolfcamp formations are also seen.

The announcement serves as the culmination of more than two years of extensive geologic and geophysical work, methodical acreage accumulation, and strategic testing and delineation drilling.

Key highlights of the discovery:

• Apache has secured 307,000 contiguous net acres (352,000 gross acres) at an attractive average cost of approximately US$1,300 per acre.
• Alpine High has 4,000 to 5,000 feet of stacked pay in up to five distinct formations including the Bone Springs, Wolfcamp, Pennsylvanian, Barnett and Woodford.
• 2,000 to more than 3,000 future drilling locations have been identified in the Woodford and Barnett formations alone. These formations are in the wet gas window and are expected to deliver a combination of rich gas and oil. Initial estimates for the Woodford and Barnett zones indicate a pretax, net present value (NPV) range of US$4 million to US$20 million per well, at benchmark oil and natural gas prices of US$50 per barrel and US$3 per thousand cubic feet (Mcf), respectively. Expected well costs in development mode for a 4,100-ft lateral are estimated to be approximately US$4 million per well in normally pressured settings and US$6 million per well in over-pressured settings.
• Apache has drilled 19 wells in the play, with nine currently producing in limited quantities due to infrastructure constraints. This includes six wells in the Woodford, one well in the Barnett and one well each in the shallower Wolfcamp and Bone Springs oil formations.

“While other companies have focused on acquisitions during the downturn, we took a contrarian approach and focused on organic growth opportunities. These efforts have resulted in the identification of an immense resource that we believe will deliver significant value for our shareholders for many years,” said John J. Christmann IV, Apache’s chief executive officer and president.

Apache is increasing its 2016 capital spending by approximately US$200 million for the year and raising its full-year capital guidance to approximately US$2 billion to accelerate the delineation and development of the Alpine High play. Capital spending on the Alpine High play in 2016 will represent more than 25% of Apache’s total capital spending program.