BOOM! Company Discovers Enough Crude in Permian to Supply All Gulf Coast Refineries for a Year

SAN ANGELO, TX — An oil company operating in San Angelo and West Texas made a significant discovery of oil in the Permian Basin that the Houston Chronicle reports contains enough oil to supply every refinery on the U.S. Gulf Coast for a year.

In a press release today, Apache Corporation (NYSE, Nasdaq: APA) 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 thousand 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.

"Today's announcement is the culmination of more than two years of hard work by the Apache team. While other companies have focused on acquisitions during the downturn, we took a contrarian approach and focused on organic growth opportunities. These efforts have resulted in the identification of an immense resource that we believe will deliver significant value for our shareholders for many years," said John J. Christmann IV, Apache's chief executive officer and president. "We are incredibly excited about the Alpine High play and its large inventory of repeatable, high-value drilling opportunities. We have thousands of low-risk locations in the Woodford and Barnett formations alone, and we are looking forward to further delineating what we believe will be a significant number of oil-prone locations in the Pennsylvanian, Wolfcamp and Bone Springs."

Related to the press release on the Alpine High discovery, Apache CEO Christmann released a Powerpoint deck that explains that Apache will significantly expand Permian operations if and when oil rises above $60 per barrel. Currently, Apache operates about 700 locations in the Wolfcamp and Spraberry formations of the Permian. With $60 oil, Apache is poised to increase to 2,350 locations at a minimum. The upside potential is 3,200 locations, according to Christmann's deck. According to Bloomberg, West Texas Intermediate oil was at $45.09 per barrel Wednesday morning.

Apache's operational areas, in addition to Reeves County, encompass the four corners of the adjacent West Texas counties of Midland, Glasscock, Upton and Reagan.

In the interim downturn in oil prices, Apache notes that it has "Leveraged innovations of the technical teams to organically capture a major new resource play at a low entry cost" with the Alpine High discovery.

"Our announcement today represents a significant addition to our already deep and highly economic Permian Basin position. With the contribution of Alpine High to our global portfolio of world-class international and North American assets, Apache clearly has more profitable-growth opportunities than at any other time in the company's 60-year history," Christmann concluded.