The Permian Basin has become synonymous with stacked-pay potential. The idea that an operator can drill multiple horizons across its acreage footprint has been a key driver in the basin’s rise to prominence.
It’s shown up in the manic M&A market, where asset transactions trade at $/acre multiples that were practically inconceivable just a few years back. The sky-high production outlooks for the Permian include a myriad of producing horizons over the next couple of decades.
With more than 15 zones in the Permian seeing horizontal development or testing, the chore of understanding the potential for each is monumental. Often times, either for sake of brevity or lack of understanding, the rich strat column of the Permian is generalized and extrapolated.
But it’s important to hone in on what each interval looks like in isolation. One such target in the Midland Basin is the storied Spraberry.
What is the Spraberry?
Before the Spraberry generated hype as an unconventional target, it was a conventional West Texas oilfield. Once dubbed the “largest uneconomic oilfield in the world” the Spraberry was a popular Midland Basin target through oil booms in decades past.
Unlike the Wolfcamp, it’s not a true shale and consists primarily of fine-grained, low-permeability and naturally fractured silt zones and fine-grained sandstones deposited as large basin-floor submarine fan systems. For a more detailed explanation of the geology see this piece we put together back in 2015 where we predicted the Spraberry wouldn’t keep pace with the Wolfcamp (we stand by it).
Operators today talk about the Spraberry primarily as a formation that can be drilled in addition to the Wolfcamp, and activity is still overwhelmingly directed at the Wolfcamp.
Similar to the way the industry has branded strata within the Wolfcamp as benches, operators have segregated layers of the Spraberry – the upper, middle and lower.
Most development has been focused in the Lower Spraberry. It’s still relatively early days in its unconventional revival, but understanding its potential has ramifications on everything from share price to oil price.
Wood Mackenzie is partnering with reservoir intelligence firm NUTECH Energy to take a deeper look at the subsurface characteristics of the Permian Basin.
In its latest Midland Basin Study, NUTECH has analyzed log and core data from over 160 wells to build a 3D static model that allows one to visualize the structure and a variety of petrophysical characteristics across seven distinct zones.
The comprehensive study also includes decline curve analysis, executed with a methodological approach, that tells a powerful story on how well performance varies across the basin.
Three things stand out from the analysis we carried out:
The heart of the conventional Spraberry trend field is not the sweet spot for horizontal development.
We overlaid a rough outline of the legacy Spraberry trend field on a hear map. The legacy overlay was where the majority of vertical development in the play occurred.
Looking at the Lower Spraberry, the map showed strong results in confined pockets down the fairway of the field but the play itself stretches beyond historic boundaries. Decades’ worth of dense (20-acre spacing) vertical drilling may have caused pressure sinks and reservoir depletion.
One area to watch Spraberry development is Howard and Glasscock counties, which fall outside of the boundaries of the original field.
With much less vertical development to contend with, and a rich reservoir, operators across the board in these areas are reporting strong results. NUTECH’s analysis indicates potential for wells to produce between 65 mboe to 95 mboe per 1,000 ft of lateral. In fact, the Spraberry is the second best target in these counties following the Wolfcamp A bench. Conventional wisdom about the Spraberry doesn’t apply to unconventional development.
The Lower Spraberry should remain the primary target in the short term.
Sure, it’s nice for operators to announce that they may be able to effectively target three zones in the Spraberry, but the data today suggests just one.
It doesn’t mean delineation of the Upper and possibly Middle Spraberry won’t occur down the line (and some are working on it already), but the Lower Spraberry is the only zone we currently consider to be widespread commercially. Not only is there more data for operators to study in the Lower Spraberry, but the results are consistently better as well.
Lower Spraberry wells are typically two to three times more productive per 1,000 ft lateral than those in the Upper Spraberry. We don’t currently model any commercial development in the Upper Spraberry.
It’s not a blanket formation and is variable across the play.
The Spraberry is, like all other unconventional plays, variable across the basin.
Since the Wolfcamp is highly productive across the Midland, there is tendency to think other formations will be as well. Just because an operator has a position in the Midland doesn’t mean it’ll be able to commercially develop the Spraberry across all or part of its position.
Extrapolating results from small pockets of success could ultimately prove costly – there are many factors to consider. For example, some of the best wells in the play have been drilled around the city of Midland where there are fewer legacy vertical wells.
A detailed understanding of the subsurface is necessary, which begs the question…
Which operators have the best chance to make the Spraberry work?
The most active operators in the Spraberry are Diamondback, RSP Permian and Pioneer Natural Resources. These also mark some of the most accomplished in the play.
Diamondback and RSP Permian have had success on the western edge of the basin, just outside the conventional field. Pioneer has an expansive position and lots of exposure to the formation, but it will take time to fully delineate across its position.
There is another group of operators that are ramping up operations, and unsurprisingly their positions correlate with some of the best parts of the play.
In our view, Energen, Parsley Energy, Callon Petroleum, Encana and SM Energy have enviable positions on the eastern edge of the basin. Callon Petroleum currently leads the way in terms of well performance, but our North America Well Analysis Tool shows strong results from all of these operators.
The hype around the Spraberry may have cooled down, but for these operators there is plenty to be excited about.
