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Part 1: What’s old is new again

Our presence in northwestern New Mexico and southwestern Colorado goes back three decades. In fact, our San Juan Basin properties were our very first – acquired from a pipeline company in 1983.

Some of our natural gas wells there have been as reliable as Old Faithful, cranking out volumes as far back as the 1950s.

We operate approximately 880 natural gas wells in the San Juan Basin and hold a joint ownership interest in another 2,400 wells.

In 2006, Oil and Gas Investor magazine examined the nuts-and-bolts engineering work we were doing in the San Juan to give mature wells some added oomph.

We lowered field operating pressures, optimized flow rates and drew down bottom-hole pressures – eventually increasing production by 20 percent – from the same wells.

The magazine hailed it as North America’s best field rejuvenation.

Four years later, we unearthed more pay dirt – this time in the Mancos formation, which sits between the overlying Mesa Verde sandstones and Fruitland coals and above the Dakota sandstones.  These three have been the “workhorse” formations for the past several decades.

During 2009, we drilled a number of vertical exploratory wells in the Mancos Shale. With encouraging results, we drilled the industry’s first two Mancos Shale horizontal wells in the basin, yielding a multi-TCF natural gas discovery in 2010.

For WPX, the data also would point to something beyond a natural gas story.

Fast Forward: The Basin is Back (Again)

Gas prices haven’t been that great. But inspired minds know this: Don’t settle for status quo.

We still believe our Mancos discovery from 2010 has plenty of natural gas potential, but it will take higher prices to make the gas portion of the play economic in the San Juan Basin.

“With lower natural gas prices, we decided to start exploring the wet gas/condensate and oil windows in the central and southern parts of the basin,” says Steve Natali, WPX’s senior vice president of exploration.

“While the wet gas/condensate window didn’t appear prospective, we found a unique body of sand encased in the Mancos Shale along the southern margin of the basin, which the industry refers to as the Gallup Sandstone.”

WPX employed both its exploration and operations teams to unlock a promising location and answer the question: Can we find our first oil in New Mexico?

At the beginning of 2013, WPX staked out four well locations and began to test the acreage for oil development. After logging vertical pilot wells in each of the four locations, the team began drilling horizontal laterals, which they then hydraulically fractured and produced, Natali says.

Vertical drilling has been the method of choice for oil production in the area – until now.

WPX employs the most modern and efficient technology, which means using horizontal drilling and hydraulic fracturing techniques for the oil play.

The four pilot wells flowed at a maximum rate of 488, 623, 1,004 and 800 barrels of oil equivalent per day, respectively.

Seventy percent of the hydrocarbon stream was oil and the remainder was natural gas. The wells have an average true vertical depth of 5,400 feet, with horizontal laterals averaging 4,300 feet. We announced our discovery on August 1.

More Mancos oil wells are in development. Tune in to our third-quarter results webcast on Nov. 7 for the latest update.

A Well-Oiled Machine

Another big boost for WPX’s oil discovery – we already have an experienced operations team in place.

WPX’s oil discovery in the Gallup Sandstone is the direct result of having three decades of on-the-ground knowledge, experience and know-how about what’s in the ground in the San Juan Basin.

WPX employs 58 people at its San Juan office in Aztec, N.M. Combined, these individuals have more than 575 years of experience with the company.

“Unlike in other areas, where we’re starting from the ground up, we’ve conducted operations in the San Juan area for three decades,” says Bob Revella, WPX regional vice president.

“We know the vendors and the service providers, and in some instances those relationships go back 30 years.”

Adds Ken McQueen, WPX’s director of operations: “Relationships don’t come overnight. We’ve invested a lot of time working with regulatory agencies, vendors and the people who live in the area. We are a company that is committed to doing things the right way, and it shows.”

Overall, WPX has a total of approximately 159,000 net acres under lease in the San Juan. About a fifth of those acres are located in the Gallup Sandstone oil window. 

Efforts are under way to acquire additional leases. The company’s initial estimate of resource potential on the existing acreage is approximately 66 million barrels of oil equivalent.

“This oil play will make a significant contribution to growing our production and reserves,” says Steve Natali.

Go to Part 2: Making An Energy Map

“Relationships don’t come overnight. We’ve invested a lot of time working with regulatory agencies, vendors and the people who live in the area. We are a company that is committed to doing things the right way, and it shows.”

 

Ken McQueen – Director of Operations

 

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