Tuesday, September 13, 2016

Mike Filloon's Most Recent Update: Apache's Alpine High -- September 13, 2016

Over at SeekingAlpha:
  • Apache's recent Alpine High discovery was the largest in recent memory, and it purchased a large portion of the 450,000 acres.
  • When Silver Run purchased Centennial, it acquired approximately 12,000 acres in and on the fringe of Alpine High.
  • Approximately one-fourth of Silver Run's leasehold may be prospective the Barnett/Woodford which could increase the valuation of those acres substantially.
New major unconventional oil discoveries are few and far between these days. Most large plays have been found, with the exception of deep uneconomic geology. Once operators learned to drill and complete horizontals wells, many plays like the Bakken became economic. Unconventional plays have not only helped the US economy, but is one of the main reasons for our oil glut. This has pushed down oil prices and the US Oil ETF.
Apache may have one of the biggest oil and gas finds in recent memory.
The Alpine High is not only great for Apache, but also for other players with acreage.
The issue is finding other operators with a significant Alpine footprint. The play could be up to 450,000 acres large. Apache has 352,000 gross or 307,000 net acres. It quietly amassed this position for 1,300/acre. Apache estimates Alpine High has 3 billion barrels of oil and 75 Tcf of natural gas. This only includes the Barnett Woodford and not the Bone Springs, Wolfcamp, and Penn.
The reason Apache was able to purchase this leasehold was a misguided perception of whether the area was suitable for drilling. There have been 110 dry holes drilled in this area, and most were looking for natural gas.
Until Apache's announcement, most believed this to be a gas play only. Its structure and clay content were other reasons why the industry ignored the Barnett/Woodford. Many thought the rock was too fractured and jumbled to support a productive well.

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