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April, 2002

Horizontal Drilling in the Permian Basin

    The first reported horizontal well (Fig1) was drilled in the Montoya formation in Pecos County by Exxon Mobil in 1999.  The well produced more than 17 MMcfd and produced more than 4 bcf of gas in less than a year with an estimated ultimate recovery of 20-30 bcf.    Since that time EOG Resources, who signed a farmout agreement with Abraxas where EOG obtained a 75%working interest in Abraxas' Montoya rights, has had success with 14 of their 15 horizontal wells.  Abraxas has also reported good success with horizontal drilling in South Texas and Wyoming.  

Fig 1. Deviated Well Drilling. (From USGS, downloaded from http://energy.usgs.gov/factsheets/Petroleum/drilling.html 4/4/02)

    Pure Resources from Midland TX is also active in horizontal drilling.  Pure Resources controls 1 million acres in the Permian basin with with ownership interests in more than 150 fields.  The Devonian and Montoya acreage may account for nearly a quarter of Pure Resources' total Permian basin operations.  The initial horizontal Devonian well drilled by Pure Resources was producing 5.3 MMcfd of gas. Pure Resources reported in early November that it was in the process of completing its first horizontal Montoya well.  Company officials have predicted that there are at least 40 potential drilling locations in the drilling area.

       Tom Brown Inc.  from Denver is one of the most resent to join the development.  They entered in to a mutual interest and development agreement with Chevron USA Inc.  in Feb. of 2001 to develop (using horizontal drilling) the potential large natural gas resource of the Montoya trend in Reeves County.  Tom brown reported that the Lyda 1 horizontal well at its Deep Valley prospect in the Permian Basin tested noncommercial and will be abandoned temporarily pending possible re-entry into the Devonian formation.  Officials say that the company has started a 3D seismic survey covering more than 240 sq miles. 

Sonoran Pipeline project Scrapped by Texas, California Firms

The plan to build the major natural gas pipeline from the San Juan Basin in northern New Mexico to California because the Sonoran Pipeline was not able to secure sufficient binding transportation agreements.  Kinder Morgan Energy Partners L. P. (Houston, Texas) and Calpine Corporation (San Jose, California) announced the plans for the pipeline in May of 2001.  Larry Pierce (spokesman for Kinder Morgan) says that the bidding process was successful but several factors have hindered the project.  "The perceived electricity crisis does not exist to the same extent today; the country is in an economic downturn, and events like September 11th are all factors that may have added to peoples unwillingness to commit."  Since the originally successful bidding, several individuals who committed to the project have backed out. There are currently  no plans to pursue the project any further.

• Summarized from an article written by Eric Billingsley, "Sonoran Pipeline project Scrapped by Texas, Calif. firms" New Mexico Business Weekly, March 8-14, 2002, p. 7

Oxy Permian to Increase Hobbs' Well Production

Oxy Permian has received approval from the New Mexico Oil Conservation Division to use CO2 injection on its well sites located in south eastern New Mexico.  The first phase will include approximately 250 wells covering 5,000 acres of land.  Oxy says the project is the largest capitol project slated for 2002.  With expenditures and capitol in excess of $500 million, Investors include Chevron USA, Texaco Exploration and Production, ExxonMobil Production Company, Marathon Oil Co., and Kerr-McGee Oil and Gas.  

• Summarized from an article written by Eric Billingsley, "Oxy Permian to increase Hobbs' well production" New Mexico Business Weekly, March 8-14, 2002