E Bakken Update: How To Invest In The Delaware Basin Part 1

In my most recent article, I covered the Delaware Basin. This play is one of the best in the US. The lower for longer thesis with respect to oil prices makes it very important for the investor to focus on the lowest cost plays. Operators that can operate at $40/bbl WTI have a much better chance of survival than those with higher breakeven prices.


(Source: Bloomberg Research)

The above graph is provided by Bloomberg Research. It has not only broken down breakeven prices by play, but also county. This provides pinpoint accuracy and a better view of where the lowest cost plays are located. The Delaware Basin in Reeves County has the lowest breakeven price at $25/bbl. DeWitt County in the Eagle Ford is at $27/bbl. The best Bakken wells are in the Mandaree area of McKenzie County. This leasehold was surveyed in my last article, and is at $30/bbl. The Midland Basin is represented by Howard County's Spraberry play at $30/bbl. The Wolfbone play as a whole (Delaware Basin) averages just $32/bbl. The Bone Spring is just $32, and is the lowest horizontal play average. The Spraberry (Midland) and Bakken plays average $40/bbl. The Wolfcamp play average is $43/bbl.

The Delaware Basin currently has two main targets. This includes the Bone Spring and Wolfcamp. Both have multiple intervals, so there are additional targets in each. The Wolfbone is also in the Delaware and is a low cost vertical play. This allows operators to drill a number of horizontals and infill using vertical wells. 


(Source: Emerald)

The above map provides a more up to date location of both the Wolfcamp and Bone Spring. It also shows where natural gas, as a percentage of resource, increases. The more natural gas produced, the higher the well pressures. This has provided some excellent results.


(Source: OilandGasInvestor Permian Perseveres)

The gas-prone Wolfcamp provides some huge EURs, and much lower breakevens throughout the play. As we move from east to west, we also see the play deepen.  It is at its deepest in the Lea/Loving area. 

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Michael Filloon 3 years ago Author's comment

Oil rigs up one, total rigs up 8.