Posted on 07/10/2013 8:42:29 PM PDT by ckilmer
The Cline Shale is huge, liquids-rich and deliciously sweet
The Barnett Shale? That’s so last week. The Eagle Ford? Been there, done that.
Not that there’s anything wrong with these two fields in Texas, of course. It’s just that much of their initial “boom” has already come to pass. Now they’re just about churning out steady and rising production.
For many E&P firms — and investors — finding the field in its “boom” phase is key to getting amazing growth and portfolio returns. Luckily, a little-known field in West Texas could be the next hot ticket for energy producers — especially given its potential to dwarf the monster Eagle Ford – and the next stop in the Texas oil rush for investors.
It’s called the Cline Shale, and only a small handful of producers have begun buying up acreage in the region, which is situated in the heart of Texas’s Permian Basin. Also known as the lower Wolfcamp, the field is only about 140 miles long and 70 miles wide. However, packed within that small space could be a plethora of shale oil and natural gas, to the tune of 3.6 million barrels of recoverable oil per square mile.
Putting it another way, the Cline Shale’s 9,800 square miles could contain a whopping 30 billion barrels of recoverable oil.
That would make the field 50% larger than both the prolific Eagle Ford and North Dakota’s Bakken – combined. The latest estimates for the Bakken top out at 11 billion barrels, while the Eagle Ford top-end figures for recoverable oil are near 10 billion.
The projected drilling window of the Cline is also impressive. Early estimates show that the target zone for oil production is between 200 and 500 feet thick. This would be equivalent to having ten Eagle Ford Shales stacked on top of each other. Of course, that’s partly because the shale formation is actually stacked on top of another. In this case, it underlies the Wolfcamp proper in the west. That allows E&P firms to drill wells with dual completions in each formation. It’s like they’re getting a 2-for-1 sale when they drill.
Moreover, the Cline is liquids-rich. Early estimates show that the shale field is 85% oil and natural gas liquids (NGLs). The oil being pulled from the Cline is also deliciously sweet. So far, the 80 to 100 initial horizontal wells in the region have produced light sweet crude with an American Petroleum Institute (API) gravity of 38 to 42 degrees. This is similar to the Eagle Ford and the kind that refineries all of the country have been salivating to get their hands on — i.e. it’s super easy to “crack” and lends itself to juicy margins.
Then there is the Cline’s lower operating costs to consider.
Operating in the Permian Basin is about 50% cheaper than drilling a well in the Bakken and the region’s long history of producing oil — it was first tapped in the 1930s — means that there is plenty of existing midstream infrastructure to tie into. That contrasts with the Bakken, where pipeline firms are basically working from scratch.
Adding in the fact that the play is in oil-friendly Texas, and it’s easy to see why the Cline Shale “an excellent candidate” for hydraulic fracturing and is quickly becoming one of the greatest oil and gas booms America has ever seen.
Keeping in mind that the field is still in its early stages of drilling and initial production, investors may want give the Cline shale a go in their portfolios. Already, E&P producers have been racking up acreage in the region with firms like Apache (APA), Callon Petroleum (CPE), Chesapeake Energy (CHK) and Gulfport Energy (GPOR) now starting aggressive drilling campaigns in the play.
However, another beaten down oil player could be the best pick to play the Clines potential: beleaguered Devon Energy (DVN).
The independent energy producer has had a long history of operating in the Permian Basin and was one of the first to realize the Cline’s potential to be a gusher. Partnering with Japanese Sumitomo Corp., Devon has unleased $1.4 billion into drilling activities on its nearly 650,000 acres in the play.
Last year, Devon drilled 40 wells in the Cline and, based on the short amount of time spent prospecting, has reported some impressive figures for its wells. That’s prompted the firm to unveil an aggressive drilling program in the Cline, with 140 planned this year in the shale field.
Devon’s stock has stagnated over the last few years. However, if the Cline is even half as good as early estimates, it could finally move the needle at the independent energy producer.
For investors, it represents the best way to get a foothold in next big thing in the shale world.
In the last year, Citibank predicted that the USA would be oil independent in five years. I used to wonder how Eagle Ford and the Bakken could scale up to produce that much oil. And if they did scale up, price of oil would fall below what they could produce oil for profitably—so oil production would fall.
Turns out Eagle Ford and the Bakken don’t have to scale up. The next mega oilfield comes out of west texas permian basin in the cline shale formation.
What’s more they’ll be able to extract the oil in the Cline shale formation at much lower costs than those in the Bakken fields —so even when prices fall their margins will be so high —they can keep on drilling.
We’re coming up to a real sweet spot in the oil patch in the next decade.
Thanks for this article. We sure wish it would extend further north and west than this article indicates!
I’m getting in on the shale boom before Obama and the democrats/communists and their EPA kill that golden goose.
“We’re coming up to a real sweet spot in the oil patch in the next decade.”
IF the Obama and the democrats and their EPA don’t kill all oil production in the USA as they are shutting down coal power plants now.
Texas isn’t the only place they are finding new oil.
True and I’m keeping some of those a secret
Ping.
The United States has vast reserves of oil and this has been known for several decades.
The problem with developing these resources is that they have to be able to sell the oil for 40 - 60 dollars per barrel to be profitable.
During the 80s the oil companies invested in US production due to the oil shortages of the 70’s only to see the Saudis crash oil prices to below 20 dollars per barrel.
For a decade or so it was much cheaper to deplete Saudi oil reserves at rock bottom prices per barrel.
World demand is such that it is now the time to develop US domestic reserves
They’re finding oil all over the place—like southern illinios, Oklahoma, Kansas, Missippi, New Mexico — but Texas is the biggest.
(My wild ass guess is that the Monterey shale formation in California will prove to be too fractured by fault zones to be profitably fracked in any scaled up volumes.)
What’s your favorite —most interesting place they’re finding oil?
you look at any picture of the permian basin and it extends into New Mexico. But maybe the sweetest spots are in Texas.
with cheaper energy then we could be making things in America as we have more oil than other countries , much more oil than China too. cheap energy can power factories etc. it's the EPA, obama , democrats and their gov regulations and environmental laws holding us back.
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