Alpine High Announcement

On September 7, 2016, Apache Corp. announced its discovery of the Alpine High, located primarily in southern Reeves County. Here is an excerpt from their announcement:

HOUSTON, Sept. 7, 2016 /PRNewswire/ — Apache Corporation (NYSE, Nasdaq: APA) today announced that after more than two years of extensive geologic and geophysical work, methodical acreage accumulation, and strategic testing and delineation drilling, the company can confirm the discovery of a significant new resource play, the “Alpine High.” Apache’s Alpine High acreage lies in the southern portion of the Delaware Basin, primarily in Reeves County, Texas. The company estimates hydrocarbons in place on its acreage position are 75 trillion cubic feet (Tcf) of rich gas (more than 1,300 British Thermal Units) and 3 billion barrels of oil in the Barnett and Woodford formations alone. Apache also sees significant oil potential in the shallower Pennsylvanian, Bone Springs and Wolfcamp formations.

Key highlights of the discovery:

  • Apache has secured 307,000 contiguous net acres (352,000 gross acres) at an attractive average cost of approximately $1,300 per acre.
  • Alpine High has 4,000 to 5,000 feet of stacked pay in up to five distinct formations including the Bone Springs, Wolfcamp, Pennsylvanian, Barnett and Woodford.
  • 2,000 to more than 3,000 future drilling locations have been identified in the Woodford and Barnett formations alone. These formations are in the wet gas window and are expected to deliver a combination of rich gas and oil. Initial estimates for the Woodford and Barnett zones indicate a pretax, net present value (NPV) range of $4 million to $20 million per well, at benchmark oil and natural gas prices of $50 per barrel and $3 per million cubic feet (Mcf), respectively. Expected well costs in development mode for a 4,100 foot lateral are estimated to be approximately $4 million per well in normally pressured settings and $6 million per well in over-pressured settings.
  • Apache has drilled 19 wells in the play, with nine currently producing in limited quantities due to infrastructure constraints. This includes six wells in the Woodford, one well in the Barnett and one well each in the shallower Wolfcamp and Bone Springs oil formations.

While we all celebrate this new discovery that may benefit mineral owners and the industry, we want to sound a cautionary note. This new play is far from being proven, especially in this current commodity price environment. Furthermore, our world today is full of significant risk factors that may affect oil and gas development, ranging from domestic energy policies that are increasingly unfavorable to the oil and gas industry, technological developments, to a world economy that is fragile in the midst of terrorism and war.

An oil and gas discovery is always good news, but don’t count your chickens before they hatch. Speculation will drive up offers from mineral buyers. Carefully evaluate your financial position so you can make wise decisions when high offers come. They most likely won’t stay high forever. While Caple Royalty Services does not claim to have a crystal ball, we are here to help you make the best decisions for the long-term financial security of your family.

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