The Spraberry field is the largest oil field in the Lower 48 states of the US, and Pioneer holds nearly 900,000 gross acres in this field. The field is the company’s key asset and contributed 36.1% towards its production and 57.3% towards its proved reserves in 2011. Its reserves in the Spraberry field are expected to consist of 90% oil, with the remainder as natural gas. The development of the field is expected to boost Pioneer’s oil production in the future. Increasing oil production in a scenario of high oil prices compared to natural gas prices will support the company’s profitability, thereby increasing its cash flows in the future. Pioneer plans to focus on supplementing its production growth from the Spraberry field through the development of the upper and lower Spraberry formation, the Dean formation and the horizontal Wolfcamp formation.
The company has been aggressively allocating capital to fuel its drilling and development activities in the Spraberry field. Pioneer has allocated around $1.8 bn towards the Spraberry field in 2012; of this, $1.5 bn will be invested in the Spraberry vertical formation and $275m will be invested in the horizontal Wolfcamp shale. It plans to drill 660 vertical well in the Spraberry vertical formation and 35-40 wells in the horizontal Wolfcamp formation, thereby boosting its development activities in the field. The company expects a total net resource potential of more than 3 billion boe from the Spraberry field. Its reported Estimated Ultimate Recovery (EUR) is nearly 140 Mboe per well, with a 40-acre spacing in the field. Pioneer is currently working towards reducing the space between the drilling locations in this field from 40 acres to 20 acres. Furthermore, the company has started drilling in the Strawn, Atoka and Mississippian formations, which are located at greater depths. According to Pioneer, these new targets are expected to increase its EUR to nearly 240 Mboe. The downspacing and new drilling targets together are expected to increase the company’s drilling inventory and resource potential from the Spraberry field in the long term.
The company also plans to aggressively accelerate its horizontal drilling in the Wolfcamp formation, where it expects an average EUR of around 575 Mboe/well at a lateral length of 7,000 feet. Pioneer expects better operational economics from this formation compared to other targets in the Spraberry field. It therefore plans to increase the number of horizontal rigs in the Wolfcamp formation from four in 2011 to seven by the end of 2012. Pioneer expects to drill 35-40 horizontal wells in this formation in 2012. Furthermore, the company anticipates maintaining the focus on reducing cost and improving operational metrics. In line with this objective, it purchased rigs, fracture fleets, pulling units and other well services, which helped Pioneer to optimize the operating cost in the field. Currently, Pioneer owns 15 drilling rigs, seven fracture stimulation fleets and drilling equipments such as the pulling units, frac tanks, hot oilers, water trucks, blowout preventers, construction equipment and fishing tools.
Pioneer’s enhanced development activities in the field are expected to grow its crude oil production in the future. Analysis expect the company’s production from the Spraberry field to increase with a CAGR of 30.8% during 2011–2016. Higher production is expected to support its overall profitability and cash flows in a scenario of high oil prices compared to natural gas prices. Thus, the Spraberry field is expected to play a pivotal role in Pioneer‘s production base development, upcoming resources, overall profitability and future cash flows.
Source: ASDReports.com - Market Research
Date: Nov 13, 2012