Southern Delaware Basin
In July 2016, the Company purchased one-half of the seller’s interest in approximately 12,100 gross undeveloped acres (~ 5,000 net acres) for up to $25 million in the Southern Delaware Basin of Texas, currently one of the most active and economically attractive oil and gas basins in the United States. We were also fortunate to be able to raise approximately $50 million dollars in a publicly marketed equity offering that will provide additional financial flexibility to fund the acquisition and development of our Permian position.
Since the closing of the purchase, we and our partner have increased our leasehold footprint to approximately 6,250 acres, net to Contango.
In December 2016, the next two wells, the Rude Ram #1H and the Ripper State #1H, were drilled from a common surface location one mile south of the Lonestar-Gunfighter, each well also targeting the Upper Wolfcamp. Both wells are scheduled to be completed in mid-March, with initial production from both wells expected to commence in April. In February 2017, we spud our fourth well, the Grim Reaper #1H, approximately 1.5 miles to the southeast of the Rude Ram and Ripper State. The Grim Reaper is also targeting production from the Upper Wolfcamp with extensive open hole logging analysis and rotary sidewall cores to be taken through the Bone Springs, Upper, Middle and Lower Wolfcamp for evaluation of productivity in a number of zones before drilling a 10,000 foot lateral within the Upper Wolfcamp. We have exercised our rig option for our fifth well, the Gunner #1H, which is planned to spud approximately two miles to the northeast after conclusion of the drilling of the Grim Reaper. The Grim Reaper is expected to be completed in April and the Gunner will follow soon thereafter.
Specifics of our acreage are as follows:
- Located in western Pecos County, Texas.
- Primary focus is three benches (Wolfcamp A, Wolfcamp B and emerging Bone Springs formations), all of which have proven to be productive in the area by offset operators, thereby providing us with the equivalent of 37,500 "effective" gross acres over the three formations.
- Average Wolfcamp interval of approximately 400 feet and Bone Springs interval of approximately 2,000 feet.
- 200 gross potential locations spread over the three potential formations that offer excellent returns, even at current commodity prices and current estimated drilling and completion costs - using internally estimated average production type curves based on offset operations data and assuming drilling of 10,000 foot laterals.
- Additional upside exists in future downspacing and additional zones being delineated within the thick Bone Springs section and/or Middle and Lower Wolfcamp intervals.
- Acreage is adjacent to and surrounded by current horizontal Wolfcamp activity.
- Active offset operators included Halcon, Diamondback, Oxy, and Concho Resources, among others.
- Existing infrastructure in place to service development of asset.
- No significant near term expirations.