Earlier drillers in Apache’s Alpine High came up dry, analysis says

A drilling rig sits north of the Davis Mountains Friday, Sept. 16, 2016 in Balmorhea. Houston-based Apache Corporation recently announced the discovery of an estimated 15 billion barrels of oil and gas in the area and plans to drill and use hydraulic fracturing on the 350,000 acres surrounding the town. Apache has leased the mineral rights under the town and nearby state park, but has promised not to drill on or under either. While some residents worry that the drilling could affect the spring at the state park and impact tourism, others are excited for the potential economic boom the oil discovery and drilling could bring. ( Michael Ciaglo / Houston Chronicle )
A drilling rig sits north of the Davis Mountains Friday, Sept. 16, 2016 in Balmorhea. Houston-based Apache Corporation recently announced the discovery of an estimated 15 billion barrels of oil and gas in the area and plans to drill and use hydraulic fracturing on the 350,000 acres surrounding the town. Apache has leased the mineral rights under the town and nearby state park, but has promised not to drill on or under either. While some residents worry that the drilling could affect the spring at the state park and impact tourism, others are excited for the potential economic boom the oil discovery and drilling could bring. ( Michael Ciaglo / Houston Chronicle )

Analysts were skeptical when Houston’s Apache Corp. announced earlier this month that it had discovered 15 billion barrels of oil and gas in an overlooked corner of West Texas’ Permian Basin.

One of those firms has now put the skepticism on paper.

The Houston office of  IHS Markit, a research firm, said in an analysis published Monday that other oil wells drilled in the same area have come up dry, or close to it.

Imre Kugler, a senior consultant at IHS, called Apache’s new find “significant” but concluded that previously drilled wells have been “hit or miss,” he said. Several Permian Basin specialist companies left the area 10 years ago after drilling a handful of unsuccessful wells. And while oil drilling and production has advanced markedly since then, “well performance is critical,” he said.

“You don’t have as much of a cushion or tolerance for failure or poor performance at today’s prices as you did at $120 a barrel,” Kugler said.

The IHS Markit analysis says Apache should break even on oil production at $55 to $65 per barrel, significantly higher than Apache’s own estimates.

The company didn’t immediately respond to a request for comment, but it is well aware of the history of that corner of the basin. Apache executives have said since the announcement that they have discovered a section other drillers didn’t explore and didn’t understand.

Alpine High, they said, is economical at current crude prices, which settled at $45.93 on Monday.

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