PXD is one to watch in the Texas "Super Shale" play

Matt Badiali
2 Comments|October 10, 2013

How do you turn a 1,750-square-mile oilfield into a 4,700-square-mile oilfield?
 
You stack several producing layers on top of one another.
 
That's what is going on in several places around the U.S. The most underrated right now is in the Wolfcamp Shale in West Texas. And there's one key company to watch here...
 
The Wolfcamp is special because it isn't just one layer of rock that is rich in oil and gas. It has many layers, what the industry calls "stacked pays."
 
I wrote about this phenomenon back in June...
 
Longtime readers know that shale fields are responsible for an incredible boom in oil and gas production. These deposits come in the form of thin layers of oil-soaked rock.
 
If you could see them exposed in a cliff, the rocks would look like layers in a cake... And sometimes, several layers of the cake hold oil and gas. We call that a "stacked pay."
 
 
 
The Wolfcamp Shale is comprised of several fields. One is the "Wolfberry."
 
The Wolfberry is actually a compound name created by merging the Wolfcamp Shale with a layer called the Spraberry Formation. The two exceptional shale layers overlap each other. It's a prime example of how stacked pays create a "super shale."
 
The prospect of a super shale has the oil industry flooding the area... According to industry data service Rigdata, the Wolfberry has 330 drill rigs operating there right now. That is up from 13 drill rigs in June.
 
While the Wolfberry is fantastic, it's just one of several Wolfcamp shales. There are other layers that make the Wolfcamp even larger. They carry names like the Wolfbone (Wolfcamp + Bonespring), Wolf-Fork (Wolfcamp + the Clear Fork), and the Cline.
 
Because the Wolfcamp has those multiple layers, it has much more oil in place per square mile. That makes it one of the best shales in the U.S. today. Take a look:



As you can see in the table, the Wolfcamp is thick, thanks to its stacked pays. It's substantially thicker than the best-developed shales to date. It holds far more oil as well.
 
Pioneer Natural Resources Co. (NYSE: PXD, Stock Forum) is one of the leading oil companies in the pay right now. And it has a very wealthy, high-profile partner: The company agreed to sell 40% of its 207,000 net acres to Chinese oil company Sinochem Petroleum.
 
Sinochem agreed to pay $500 million cash and another $1.2 billion toward drilling and completion costs. That's enough money to cover 75% of the cost to develop all of Pioneer's acreage in the area. The Chinese are desperate for oil... and the specialized knowledge it takes to access shale fields.
 
According to Pioneer's numbers, the industry can recover 50 billion barrels of oil from the stacked layers in the Wolfcamp. To put that in perspective, it's equal to about 21 years of U.S. oil production at the 2012 rate.
 
This is definitely an area – and a company – to watch.

Rate this article
3 stars
v
Usefulness

Clarity

Credibility
Add to favourites icon Add to favourites

Comments

ferret_ca
you may want to take a look at lvl.v for a really cheap leveraged way to play the wolfcamp shale. not sure how they got their position there but it is for real. cheers ferret
2.5 stars
October 10, 2013
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

Pandora
What I can't really figure out is how you can have a producer in the area (Pioneer) that trades at $200/share and yet Lynden (V.LVL) has trouble maintaining 75 cents (Cdn $ no less). Something just seems completely off in this picture. They have 18,500 acres in Wolfbery and an interest in 102,000 acres in Mitchell Ranch all valued at the lowly price of 71 cents per share yesterday. Is it a management thing or is it the Cdn flag on the property or some other element that is just not obviou...
4 stars
March 1, 2014
Rate this comment
0 stars
v
Usefulness

Clarity

Credibility

Leave a Message

You must be logged in to access this feature.