Your account already exists. Please login first to continue managing your settings.
A privately held E&P has combined its Granite Wash, Cleveland, Marmaton, and Tonkawa assets with an international super-independent's legacy western Anadarko basin position.
Horizontal liquids production in the Anadarko basin continues to spur increasing oil output in the Texas Panhandle and northwestern Oklahoma region. Chief among the basin's commercial zones and targeted for its multipay potential and variability across its stacked intervals, the Pennsylvanian-age Granite Wash has reemerged as a horizontal play and is delivering the highest rate of return.
According to George Solich, former president and CEO of Cordillera Energy Partners III LLC, while many thousands of vertical wells have established the Granite Wash, where there is "extremely good well control," there have only been about 1,000 horizontal wells completed in the play to date. So Granite Wash operators, he said, stand at the front end of "a very long [unconventional resource] development program."
A blockbuster deal
The Cordillera team had built a premium position in the deepest sedimentary basin onshore the US using an acquire-and-exploit corporate strategy by the time Apache Corp. announced plans to merge the Granite Wash-focused company into its own legacy assets in the western Anadarko basin.
Exiting April 2012, Apache closed the acquisition of Solich's privately held company for US $3.1 billion in cash and stock. The deal involved 312,000 net acres in the western Anadarko basin, where Apache has maintained a significant presence for 50 years, with wells producing approximately 24,000 boe/d in Roger Mills, Ellis, and Beckham counties in Oklahoma and Lipscomb, Ochiltree, Hemphill, Roberts, and Wheeler counties in the Texas Panhandle as of April 2012.
Taking the reins of Cordillera, Apache now has more than doubled its position in the basin. Apache estimates the Cordillera assets have a proved reserve base of approximately 71.5 MMboe, with significant upside potential in more than 14,000 drilling locations.
'Piecing together the story'
Having amassed a significant stake in these midcontinent plays, particularly in the versatile Granite Wash, Solich said the company has developed a deep understanding of the Anadarko basin's characteristics and nomenclature. "We originally got into the Granite Wash in a trade-out of the Barnett shale and into the Texas Panhandle in 2003," he said. "So we've been at it for nine years."
At that time, Solich said, Cordillera drilled five vertical Granite Wash wells in Hemphill County near the Mendota West field with promising results.
"We decided to take a harder look at the Granite Wash – the entire section – and see if we could start understanding it in a little more detail," he explained. "Piecing together the story, I'll describe [what we found] like this: the Granite Wash is made up of 11 different distinct zones that at its thickest can be up to almost [1,000 m] 3,500 ft."
But there are "huge nomenclature issues" in western Oklahoma and the Texas Panhandle, Solich said. "What's reported as Granite Wash or Upper Granite Wash could be A, B, C, or D, or the Lower Granite Wash could be a variety of different zones," he explained. "The real difficulty and maybe lack of understanding the Granite Wash comes from this nomenclature issue."
Taking a holistic view of the play, the company set out to create a database that would normalize as well as digitize all of the logs it could possibly find throughout the entire area, Solich said, "kind of recreating our own [formation] tops so we could define [the productive] zones.
"We ended up over the course of many years having a digitized, integrated database that had more than 200,000 proprietary tops, and we knew which zones we were actually in, and we knew which zones were productive from other wells vertically and horizontally in the basin.
"It was a long process that really helped us define the limits of the reservoir in the Granite Wash and in some of the other zones such as the Marmaton," he said.
According to Solich, Cordillera's ability to put together a database and to use it as an exploratory tool has driven the company's results and the value of its growth over the last three or four years.
Upper Granite Wash economics, multipay zones
"One of the beauties of the Granite Wash play is the multipay potential up and down the column, and that is what attracted Cordillera from the beginning," he continued, adding that the company believes the Anadarko basin is one of the most economic plays in the country, "at least in the Upper Granite Wash."
Cordillera and much of the industry has primarily focused on the Granite Wash proper, specifically the upper portion where there is significant liquids-rich payout. "The Lower Granite Wash is a little dryer – it still has liquids content, but not to the extent of the Upper Granite Wash," he added.
Meanwhile, the Granite Wash's EUR variability depends on which zones a company is looking at and where it operates in the play. "I think the variability is somewhere between 600,000 boe to 1.7 MMboe per well, with huge initial production (IP) rates," Solich said. "IPs can vary tremendously as well, but we've seen [Upper Granite Wash] IPs as high as 3,000 b/d and 27 MMcf/d of gas. Most of the Upper Granite Wash wells are 100% rate-of-return projects, depending on cost and price."
Completed well costs can range from US $6.5 million to $10 million depending on depths, the number of frac stages, and the size of the fractures, according to Solich.
Additionally, "there's several other zones continuing to be developed [alongside the Granite Wash] like the Hogshooter, which many people consider to be a wash," he said.
The four major zones Cordillera has targeted by order of importance are the Granite Wash; the Tonkawa oil play, which the company has been pursuing over the last four years; the Marmaton, which Solich said Cordillera has had success exploiting in Roger Mills County in particular; and the Cleveland formation.
In March, the company released positive operating results for six of its completed wells in the region, including a "prolific" Marmaton well and Cleveland oil producer in western Oklahoma and the Texas Panhandle, respectively, as well as two successful Granite Wash and Tonkawa wells.
The Skyy 2-33HC well targeting the Marmaton formation, for example, had an IP of 4,546 boe/d, including NGL recovery at a 6:1 conversion ratio and accounting for residue gas shrinkage, the company said in a public statement.
'Multi-decade' development plans
As it combines with Apache, Cordillera will be in a transition period until the end of October 2012, when its Anadarko basin rigs and operations will merge into its new parent company's portfolio.
In January, when the merger was announced, Apache reported it expects to drill approximately 160 wells on the Cordillera acreage this year for a total of 220 wells, including its existing acreage, in the basin. Cordillera is turning over 11 operated rigs to the super independent.
"When we signed the agreement with Apache, five of our rigs were working the Granite Wash, two were working the Marmaton, and four were working the Tonkawa," Solich said. "It's my understanding that [Apache] will increase the number of rigs in this play over time on all four of these zones: the Granite Wash, Cleveland, Marmaton, and Tonkawa. Clearly it's a multi-decade development program."
Reflecting on the recent transaction, Solich said his former company has been left "in good hands." Going forward, a new venture called Energy IV LLC is being formed by the old principals of Cordillera.