Energen Corporation today announced that its oil and gas exploration and production company, Energen Resources Corporation, has purchased 40,000 acres in the Permian Basin from SandRidge Energy Inc. for $110 million plus standard closing adjustments.
Based on 320-acre spacing, the company has identified 62 net potential drilling locations in the 3rd Bone Spring play on 21,300 net acres in Loving, Reeves, Ward, and Winkler counties; this acreage is in the heart of the emerging Bone Spring play. Unproved Bone Spring reserves (net unrisked) are estimated to exceed 21 million barrels of oil equivalents (MMBOE); oil comprises 78 percent and natural gas the remaining 22 percent. The company expects to invest approximately $465 million to develop the Bone Spring potential in this acreage acquisition.
“This is an exciting purchase for us,” said James McManus, chairman and chief executive officer of Energen. “Not only does it provide additional acreage that we were seeking in order to expand our Bone Spring activity, it offers upside potential in the Avalon Shale and, possibly, in the Wolfcamp trend. The Permian Basin has long been Energen Resources’ second largest area of operation, and we have had a solid base of oil reserves for quite some time. This acquisition – our fourth in the Permian Basin in the last 18 months – further solidifies our prominence in this prolific, domestic oil-producing region.”
A horizontal drilling play targeting the 3rd Bone Spring Sands at a vertical depth of 10,500-11,500 feet, the typical Bone Spring well has estimated ultimate recovery of 400,000-500,000 BOE; Energen Resources estimates that drilling and completion costs are approximately $7.5 million per well.
Energen has drilled 8 Bone Spring wells to-date in Ward and Winkler counties and participated in another 23 wells on its existing Bone Spring acreage (18,300 net acres; 12,300 net undeveloped acres) in the Permian Basin, and the company has previously announced plans to drill another 5 net wells in 2011. This acquisition brings Energen Resources’ total acreage position in the 3rd Bone Spring play to more than 33,000 net undeveloped acres and approximately 100 net drilling locations.
Energen Resources also believes the entire 40,000 acres is prospective for the Avalon shale and, possibly, the Wolfcamp trend. The company plans to drill at least one Avalon well in 2011; if successful, Energen’s new acreage position offers some 125 potential Avalon shale locations (320-acre spacing). Together with existing acreage, this acquisition brings the company’s total Avalon potential to more than 60,000 net undeveloped acres and more than 180 drilling locations.
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