The Cline shale play in West Texas’ Midland Basin is an abundant sedimentary rock formation of Pennsylvanian-aged shale (325-286 million years old). The play is found 9,000-9,500 feet underground and spans 140 miles north-to-south and 70 miles east-to-west. Fisher and Nolan counties have been the focal points, with recent increased leasing activity in Tom Green and Irion counties.
Cline’s Characteristic Challenges
The shale exhibits 6%-12% porosity and indicates potentially excellent yield of high-quality light crude. However, it is a tight oil play: Operators have discovered that being profitable in the Cline requires expensive and time-consuming horizontal wells, at $5-$9 million per well. In addition, operators will need to overcome two regional obstacles in order for the profitability to gain momentum:
1. Lack of Housing
Small towns near the Cline are trying to keep up with the demands of the rapid influx of new companies and their work forces. This unforeseen population boom has overwhelmed local real estate, and supply has not met demand for homes. Many of the affected counties are experiencing severe housing shortages.
2. Lack of Distribution Opportunities
The region lacks distribution infrastructure, and operators face the challenge of transporting the vast quantities of crude from the Cline to areas where it can be sold and/or processed. After an oversupply of crude in the region drove down the price, operators are now investigating transport solutions. Centurion Pipeline LP has announced pipeline plans to expand its existing pipeline system starting this year.
Drilling Productivity among Cline’s Major Players
Despite the Cline’s obstacles, analysts guess that 80-100 wells have been drilled, but production is largely kept under wraps due to operator confidentiality.
Although much is still anecdotal, overall productivity evidence shows promise. Some major players, including some of those shown in this map, have been forthcoming with concrete examples of their Cline yields:
- Apache Corporation: The largest acreage holder has 520,000 net acres and 2,321 horizontal wells. The “Barracuda 45-2H” had a peak flow rate of 810 barrels of oil equivalent per day (boe/d) and a 30-day average of 623 boe/d.
- Devon Energy: Total leased area encompasses 500,000 net acres. The “Averett #17H” averaged 400 boe/d over 30 days, and another horizontal well in the play produced 450 boe/d in 30 days.
- Laredo Petroleum: As of November 2012, they had completed 33 gross horizontal wells — more than any other operator in the play — with average output of 500 boe/d. Their 2013 capital budget includes $60 million for exploratory drilling, land, geological and geophysical activities, plus another $40 million for pipeline infrastructure.
- Pioneer Natural Resources: The peak 24-hour rate for the “University 3-31 #4H” was 485 boe/d, and the average 30-day rate was 404 boe/d.
- Callon Petroleum: The “Neal #321H” peaked at 827 boe/d in 24 hours.
- Gulfport Energy Corporation: The “Janey 16-H” produced a peak 24-hour rate of 618 boe/d and a 30-day average of 486 boe/d.
Conclusion: A Strong Outlook
With these early results, analysts predict that Cline will yield more than 30 billion barrels of recoverable oil. This would surpass the output from both the Bakken and Eagle Ford shale plays (at 4.3 billion and 7-10 billion barrels of recoverable reserves, respectively, per the U.S. Geological Survey).
Even if the Cline doesn’t live up to these lofty expectations, all signs point to a very prolific future. The Cline only began making headlines two years ago; in that short time, the evidence has been mounting that the play could rank as one of the largest shale discoveries in the United States. Cline’s projected output is a major factor in the country’s expectations of leading the world in oil production by 2017, exemplified by Laredo’s graphical representation (above) of the Cline’s growing impact on the company’s total company oil production.
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