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  • Roger S. Conrad

E&P Update

By Elliott H. Gue on Sep. 20, 2016

Although the company has drilled more than 600 horizontal wells in the Northern Delaware Basin, the operator continues to hone its drilling and completion processes to unlock additional efficiencies and productivity gains.

During Concho Resources’ second-quarter earnings call, management highlighted the results of its four-well Monet density test in Lea County, New Mexico. These wells targeted the upper portion of the Avalon Shale and involved varying amounts of proppant and different completion techniques. These tests resulted in a significant uplift in initial production rates relative to wells that the company drilled last year.

Over the past several quarters, the exploration and production company has blocked up its acreage in this area through bolt-on acreage acquisitions, ensuring that the firm can drill wells with longer laterals to boost production.

Across the Texas border, the southern Delaware Basin boasts some of the best upside potential of any US shale play. Toward the end of the first quarter, Concho Resources purchased 12,000 acres in the North Harpoon area to augment its core acreage and has already deployed two rigs there.

Concho Resources continues to test well and completion concepts in the southern Delaware Basin, a play that remains in its early innings. Expect rapid improvement in well productivity, drilling efficiency and returns as upstream players improve their understanding of this resource and optimize their operations.

The company’s assets in the Midland Basin should also generate productivity gains from longer laterals and the transition to pad development.

Concho Resources has reduced its overall lease operating expenses by 12 percent since the second half of 2015, primarily through permanent cost-saving measures, such as shifting water disposal volumes from trucks to pipelines. Expenses should also decline as the company high-grades its portfolio by blocking up acreage in its core positions through bolt-on acquisitions, asset swaps and by divesting extraneous properties.

 

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