Apache: Natural Gas Liquids In The Permian -- May 15, 2019

I probably would not have posted this story, except in light of the Anadarko-Chevron-OXY story. From Bloomberg, Apache bets big on Permian gas liquids. It's a big story -- I am re-posting it as a stand-alone.

A ride through the Permian Basin’s little-drilled southwest corner looks a bit like the rest of the shale patch. Mesquite dots the dry landscape, and bumpy oilfield roads link well sites to the main highways.

But there are a couple of big differences: The drilling rights to about 300,000 acres in the field belong to a single company, Houston-based Apache Corp. And unlike in much of the Permian, the underlying rock here is far richer in natural gas than it is in oil. Welcome to the Alpine High.

These two factors are shifting the focus for one of America’s oldest oil producers in its flagship discovery. After falling oil prices at the end of 2018 forced Apache to cut its budget, the company temporarily stopped its hunt for oil in parts of the field. In the meantime, it’s opening three plants to process the profusion of natural gas it’s found into more marketable propane and butane.

The natural gas liquids “do add value,” said Ryan Luther, a senior research associate for RS Energy Group Inc. Still, that value is only about 40 percent that of a barrel of oil. "I wouldn’t ascribe a terrible amount of value to the Alpine High relative to their other assets,” he said.

In September 2016, Apache said it had made an "immense" find in the Alpine High, with the promise of at least 3 billion barrels of oil in place in two of the five formations. Apache Chief Executive Officer John Christmann described the play as being like a “giant onion,” with the company learning more and more about the discovery as it peeled back each subsequent layer.

But initial tests for crude haven’t shown as prolific a result as seen elsewhere in the Permian, and Apache now talks about crude oil being a byproduct of its natural gas at a time when other drillers can’t get rid of the fuel fast enough.

That’s spurring worry among some investors that Apache may be hanging on to an iffy asset at a time when larger companies might be considering acquisitions in the wake of the bidding war over Anadarko Petroleum Corp. While several central Permian players have found their way onto short lists of expected takeout targets, Apache has been largely absent.

Much more at the link.