Efficiency Gains, Higher EUR Wells Means Fewer Rigs Needed at Pioneer
Pioneer Natural Resources has decided to put on hold further rig additions to its Spraberry/Wolfcamp operations in the Permian Basin as efficiency gains and the drilling of higher estimated ultimate recovery (EUR) wells will allow the company to deliver forecasted growth using fewer rigs than the 28 previously anticipated.
Pioneer officials credited the company’s strong Spraberry/Wolfcamp horizontal drilling program for the production growth the company saw from second to third quarter 2015. Pioneer recorded third quarter 2015 production of 211 thousand barrels of oil equivalent per day (Mboepd) – 52 percent of which was oil – up 7 percent from the second quarter and above the top end of its third quarter guidance range of 205 Mboepd to 210 Mboepd, the company said in its third quarter 2015 earnings presentation. The Houston-based company’s Spraberry/Wolfcamp production grew by 15 Mboepd, or 13 percent, from this year’s second quarter. Oil production also grew 10 thousand barrels per oil per day.
The company also updated its 2015 full-year production growth forecast to 11 percent from a little more than 10 percent, and also increased its Spraberry/Wolfcamp full-year growth rate from the 22 to 24 percent range to 25 to 26 percent. Pioneer Chairman and CEO Scott D. Sheffield said in a Nov. 2 press statement that the company is putting rigs back to work and expects to be able to deliver compound annual production growth of more than 15 percent over the 2016-2018 period using fewer rigs than previously estimated due to improving capital efficiency and well productivity.
This year, Pioneer has achieved a decrease in drilling and completion capital costs versus 2014 of approximately 25 percent, and expects capital costs to fall by more than 30 percent compared to 2014 by early 2016, the company said in its presentation. The company also has seen a 20 reduction in horizontal tank battery costs versus 2014; by early next year, Pioneer anticipates these costs to fall by more than 25 percent compared with 2014.
Pioneer also saw an 18 percent reduction in lease operating expenses per barrel of oil equivalent in third quarter 2015 versus 2014, and saw the average time to drill, complete and place a three-well horizontal pad on production reduced to 135 days in the Spraberry/Wolfcamp, or a reduction in drilling time by seven days per well.
The company added eight rigs in the northern Spraberry/Wolfcamp area between July and late October. The current rig count stands at 18 rigs, including 14 in the northern area and four rigs in the southern Wolfcamp joint venture area.
During the third quarter, Pioneer placed 33 horizontal wells in the Spraberry/Wolfcamp on production. Early production from the 28 wells targeting the Wolfcamp B and the two wells targeting the Wolfcamp A intervals are on average tracking EURs of over 15 percent above a type curve that is expected to recover 1 million barrels of oil equivalent over the well’s life, with average 24-hour peak production rates of about 1,900 boepd. Average production from all Wolfcamp B and Wolfcamp A interval wells drilled since 2013 in the northern Spraberry/Wolfcamp continues to track EURs of 1 MMboe.
The timing of future rig additions will hinge on the pace of incremental efficiency and productivity gains and overall well economics. Based on the company’s current type curves and cost estimates, Stifel analysts anticipate that the company will need to ramp up its northern rig count throughout 2016 and exit the year with an incremental eight rigs to meet its more than 20 percent oil growth target for 2017 and 2018. Stifel forecasts the company’s drilling and completions capital expenditures to rise from $1.7 billion in 2016 to just over $2.2 billion in both 2017 and 2018.
Pioneer’s economics of its 9,000 foot laterals, which cost $8 to $8.5 million and are expected to fall to $7.5 million to $8 million in 2016, remain impressive, according to a Nov. 3 Stifel analysts note.
“Including infrastructure costs, management estimates its northern Wolfcamp wells generate a 50 percent IRR [internal rate of return] at the current strip and are economic down to approximately $40/bbl.”
The company is the largest acreage stakeholder in the Spraberry/Wolfcamp, with approximately 600,000 gross acres in the northern part of the play and about 200,000 gross acres in the southern Wolfcamp JV area.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Pioneer Natural Resources Profit Hurt By Higher Costs, Hedging Loss (Aug 07)
- Shale Companies Sink On Investor Disappointment, Hedging Losses (Aug 01)
- Pioneer Chairman Says Permian Faces Shut Ins on Pipe Shortage (Jun 20)