Apache: Permian discovery holds 3 billion barrels of oil

The Houston-based oil exploration company Apache has made a significant discovery in West Texas’s Permian Basin, estimated at 75 trillion cubic feet of natural gas and more than 3 billion barrels of oil — nearly the equivalent of an entire year of U.S. crude production, the company announced on Wednesday.

The new field sits in the southern portion of the Delaware Basin, the Permian’s western and southern half. It is primarily in Reeves County, south of New Mexico, near the Davis Mountains. Apache is calling the field the “Alpine High.”

RELATED: An already-hot Permian basin continues to draw crowds

The company said it has methodically pieced together 307,000 contiguous acres in the area over the past two years, and done “extensive geologic and geophysical work.” It said it paid $1,300 per acre on average.

Apache also said its oil estimates are for the deep Barnett and Woodford formations alone. It expects there is also “significant” oil potential in the shallower Pennsylvanian, Bone Springs and Wolfcamp formations.

The company has drilled 19 wells and identified 2,000 to 3,000 future drilling locations in the Woodford and Barnett alone, expected to deliver a combination of rich gas and oil worth $4 million to $20 million per well at $3 per million cubic feet in gas and $50 per barrel of oil.

It expects well development for a 4,100 foot lateral to cost $4 million to $6 million.

“Today’s announcement is the culmination of more than two years of hard work by the Apache team,” John J. Christmann IV, Apache’s chief executive officer and president, said in a statement. “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.”

MORE ABOUT APACHE: Cost-cutting narrows 2nd-quarter loss

To speed up the development of Alpine High, Apache increased its estimated capital spending this year by $200 million to about $2 billion. Work on the discovery will represent more than 25 percent of the company’s total capital spending program, it said.