Permian Basin 2018

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PERMIAN BASIN: PRODUCTION FORECAST 86 | October 2018 | trajectory that it is on. … It is performing very strongly," he said. Positive results were also shared for other wells, including the six-well Dogwood pad in the play's dry gas area where 660-ft spacing in the Woodford and Barnett formations were tested. "The Dogwood wells went online around the beginning of the year and continue to deliver at a stabilized gross rate of nearly 50 million cubic feet per day. This pad has been producing for more than 180 days with a cumulative production of 11 Bcf, and we see no signs of interference," Sullivan said. "We believe that this performance on 660-foot spacing in the dry gas window has positive implica- tions for future additional inventory in the source interval where we have assumed 800- to 1,000-foot spacing in our current location count." The next phase of optimization at Alpine High includes testing spatial positioning within and between target intervals as well as refining landing zone targeting, drilling longer laterals where pos- sible and increasing the use of larger stimulations, Christmann said. The plans are part of the reason why Apache is upping capital guidance in the play. During the second quarter, the overall oil and gas capital investment for Apache—which also has assets in the North Sea, Egypt and elsewhere in the Permian Basin—was $833 million, including $116 million for Alpine High midstream, the company said in its second-quarter 2018 earnings release. The company shelled out about $1.7 billion in total capital investment for the first six months of the year and expects to spend about $3.4 billion total for the year. That's up from prior guidance of $3 billion, Apache said. "This spend level anticipates a full year of Alpine High midstream investment, which may change with a potential transaction," the company said. "The incremental capital is necessary to align and optimize drilling and completion activity in the Midland Basin and to fund investment in longer laterals, larger completions and facility expansions at Alpine High. These activity modifications incor- porate learnings from the company's recent stra- tegic tests and are expected to result in increased productivity and improved returns." Given today's strip prices, Apache said the cash flow from operations will fully fund the capital increase. Supply cuts courtesy of an OPEC-led initiative have helped buoy oil prices. Since the downturn, which forced oil companies to become more effi- cient, oil prices have steadily increased, rising to around $70/bbl from lows below $30 in 2016. On Aug. 1, Apache reported $1.9 billion in oil and gas revenue for the second quarter, up from $1.38 billion a year earlier. Earnings were $195 million for the second quar- ter, compared to $572 million a year ago. Apache said the latest earnings results "include a number of items outside of core earnings that are typically excluded by the investment community in their published earnings estimates." On the call, executives said the company is hit- ting goals when it comes to bringing down drilling and completion costs, which fell by 25% despite downward pressure on service costs. Apache tar- geted well costs below $1,380 per treated lateral foot, but costs are now averaging less than $1,260 per treated lateral foot, according to Sullivan. Most of the savings were attributed to oper- ational efficiencies. "On the completion side we've really been able to reduce pump time substantially," Sullivan said. "We're drilling out our plugs even quicker, and we've even made progress just on frack crew moves. This has given us a 20% reduction in our cycle time, which for a 1½-mile lateral is about a $400,000 saving." Apache also raised its U.S. production guid- ance to 260,000 boe/d. It was previously between 250,000 and 258,000 boe/d. Q "The benefits of pad drilling coupled with continual progress on well costs and well productivity are driving a positive bias to our production outlook for next year." — John Christmann, Apache

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