Delaware Basin development heats up with summer

 

The increasingly crowded Delaware Basin continues to attract more development even in a low-price market, as efficiency improvements have lowered breakevens and companies slowly explore near proven infrastructure. According to our North America Well Analysis Tool, Felix Energy II is one of the latest to enter the basin, and our analysts explore the potential in this new position.

Will the newest iteration of Felix Energy again create value, this time in the Delaware Basin? Our North America Well Analysis Tool reveals that the company recently made a quiet entrance into the buzzing basin, permitting six wells in Winkler and Ward counties.

The permits are offset to wells Energen divested in June, leading us to believe this new iteration of Felix, backed by EnCap, was one of the unnamed buys of that package. Although Energen considered the acreage "non-core," we model the wells breaking even around $US50 per barrel, with upside for Felix in improved well design. Their location borders what we define as the Bone Spring Pecos River Region sub-play.

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Felix Energy Delaware Basin wells

Despite the Wolfcamp historically not performing as well as the Bone Spring north of the Pecos River, there are some hopeful signs — one Wolfcamp well drilled in 2014 on a 5,000-foot lateral had an IP30 of 946 barrels of oil equivalent per day. It will be interesting to see whether Felix tests the deeper formation for additional pay, and if it can replicate the success it found in selling its STACK position to Devon Energy for US$1.9 billion.

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You can purchase our full US Upstream Week In Brief on demand to read this week's top stories in the North America Upstream sector, including a new tax law's impact on Alaska's Cook Inlet; a bolder forecast for NGLs as chemicals demand rises; shrinking oil and gas debt offerings as investors balk at risk concerns and companies seek to balance the books; and our latest supply update and rig-count dashboard.

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