9 X the investment per well to yield 15X the reserves
With its 2016 reserves up 14% to 27.7 MMBOE from 24.4 MMBOE in 2015, consisting of about 90% oil, a small Midland, Texas-based oil company, Ring Energy (ticker: REI) has decided it’s time to go horizontal.
Horizontal well pilot program finds success
Ring anticipates spending about $70 million in 2017, primarily in the Permian basin. The company said it will drill 36 total wells in 2017. Most of these wells will be drilled in the Central Basin Platform of the Permian, where the company owns nearly 26,000 net acres. Ring has previously developed this acreage with vertical wells, with all but three of the 195 drilled wells having vertical designs. The company recently began horizontal development, though, and completed a three well pilot program testing horizontal wells in 2016.
This pilot program was successful, and 22 of the 28 planned wells in the Central Basin Platform will be horizontals. The company estimates that although horizontal wells are almost nine times more expensive to drill than vertical wells, they produce fifteen times the net reserves.
Source: Ring Q4 Investor Presentation
Grabbed Delaware basin assets for about $3,750 per acre
Ring Energy also owns about 20,000 acres in the Delaware basin, a property that was acquired in mid-2015 for $75 million. Eight new wells will be drilled in 2017 in the Delaware, and 12 existing wells will be worked over. Ring is currently exclusively using vertical wells to develop this asset, though horizontal wells may be drilled in the future.
