Eagle Ford, North Louisiana Operations

WildHorse Resource Development Corporation (ticker: WRD) will join Centennial Resource Development (ticker: CDEV) and Extraction Oil & Gas (ticker: XOG) as one of 2016’s new public E&P companies. The shares of WildHorse are expected to trade on the New York Stock Exchange under the ticker symbol “WRD,” the company said in a press release.

WildHorse said it would sell 27,500,000 shares of common stock and grant the underwriters of the offering a 30-day option to purchase up to an additional 4,125,000 shares of the company’s common stock. Barclays, BofA Merrill Lynch, BMO Capital Markets, Citigroup and Wells Fargo Securities are acting as book-running managers for the offering.

WildHorse Resource Development IPO Targets $650 Million

WildHorse Resource Development IPO Targets $650 Million

Interests

WildHorse reported in its registration statement that it has a total of 375,000 net acres under lease that include approximately 267,000 net acres in the Eagle Ford and approximately 108,000 net acres in North Louisiana.

The company said it expects to operate 2,511 gross (1,943 net) of 4,391 gross (2,298 net) horizontal drilling locations, of which 1,890 gross (1,509 net) are located on the Eagle Ford acreage and 621 gross (434 net) are located on the North Louisiana Acreage.

WildHorse Resource Development IPO Targets $650 Million

Source: WildHorse Resource Development

“We have an approximate 80% and 70% average working interest in our operated horizontal drilling locations in our Eagle Ford and North Louisiana Acreage, respectively. In Southeast Texas, we operate in Burleson, Lee and Washington Counties where we primarily target the Eagle Ford Shale, which is one of the most active shale trends in North America. In North Louisiana, we operate in and around the highly prolific Terryville Complex, where we primarily target the overpressured Cotton Valley play,” the company said.

The company was created by affiliates of NGP. It is led by Chief Executive Officer Jay C. Graham and President Anthony Bahr. Graham and Bahr co-founded Memorial Resource Development which was acquired by Range Resources (ticker: RRC) in a $4.4 billion transaction in May 2016.

Production summary

“For the nine months ended September 30, 2016, our pro forma average net daily production was 18.7 MBoe/d (approximately 44% oil, 48% natural gas and 8% NGLs). During 2015, our pro forma average net daily production was 17.7 MBoe/d (approximately 48% oil and 43% natural gas and 9% NGLs). On a pro forma basis, as of September 30, 2016, we produced from 427 horizontal and 458 vertical wells, in each case, operated and non-operated.

 

Nine Months Ended
September 30,
Year Ended
December 31,
2016 2015 2015 2014
Oil (MBbls) 2,246.9 2,312.5 3,100.9 207.0
Natural gas (MMcf) 14,766.3 11,875.4 16,766.7 9,551.7
NGLs (MBbls) 407.0 418.2 564.1 89.4
Total (MBoe) 5,114.9 4,709.9 6,459.5 1,888.4
Average net daily production (MBoe/d) 18.7 17.3 17.7 5.2

“We have grown our production from 4.5 MBOEPD for the three months ended March 31, 2014 to approximately 14.0 MBOEPD for the three months ended September 30, 2016, representing a CAGR of approximately 57%, and our production for the three months ended September 30, 2016 was 17.9 MBOEPD after giving pro forma effect to the acquisitions,” the company reported.

WildHorse Resource Development IPO Targets $650 Million

46 years of drilling inventory

WildHorse reported that it has identified a total of approximately 4,391 gross (2,298 net) drilling locations across its acreage. “Based on our 2017 drilling program, our identified locations represent an inventory of approximately 46 years.”

Acreage Horizontal Drilling
Locations(3)(4)
Net Acreage Average
WI %(1)
Average
NRI %(2)
  Gross     Net
Eagle Ford 266,501 82 % 64 % 2,977 1,650
North Louisiana(5) 108,437 74 % 57 % 1,414 648
Total 374,938 79 % 62 % 4,391 2,298

Drilling history

WildHorse said it started 2016 running one rig but released that rig in March 2016 in response to low commodity prices.

WildHorse drilled and completed two horizontal wells, and participated in a third horizontal well that was drilled and completed by another operator, during the nine months ended September 30, 2016. “In our North Louisiana Acreage, we intend to recommence drilling by adding one rig in late 2016 and one rig in 2017.”

In early October 2015, WildHorse subsidiary Esquisto reduced its drilling program to one rig, which it ran until February 2016, at which point it ceased drilling due to the commodity price environment. Esquisto drilled and completed two successful operated horizontal wells during the three months ended March 31, 2016. During the second quarter of 2016, Esquisto recommenced drilling under a one-rig drilling program and drilled and completed a total of eight successful operated horizontal wells during the second and third quarters of 2016. “In our Eagle Ford Acreage, we are currently running a one-rig program and intend to add three additional drilling rigs in 2017.”

Eagle Ford

WildHorse entered the Eagle Ford through a grassroots leasing effort in Burleson County, with the goal of redeveloping the area with horizontal drilling and modern completion techniques.

“Since that time, we have completed multiple bolt-on acquisitions and in-fill leases to build our current position in the Eagle Ford. We divide our Burleson County acreage into sub-regions, which we refer to as Burleson Main, Burleson North, Burleson West and Burleson South, based on our assessment of depth and reservoir characteristics, such as gas to oil ratio, pressure and clay content. All of our drilling activity has historically been focused in our Burleson Main area. We have identified a substantial inventory of 2,977 gross drilling locations within our Eagle Ford Acreage, consisting of 2,518 gross drilling locations in Burleson County, Texas, 423 gross drilling locations in Lee County, Texas, and 36 gross drilling locations in Washington County, Texas. The wells in our Eagle Ford Acreage have shown a strong track record of increasing EURs and a decreasing trend in drilling and completion capital costs.

“As of September 30, 2016, our Eagle Ford position included approximately 267,000 net acres. Also, as of September 30, 2016, approximately 46% of our Eagle Ford Acreage was then held by production, with an average working interest of 82%, and, as of June 30, 2016, 21% of our 61 MMBoe of proved reserves were developed, 93% of which were liquids. To date, we have drilled and completed 33 wells, acquired 388 wells, including the wells acquired in the Burleson North Acquisition, and participated in 25 wells resulting in total net production of approximately 10.6 MBoe/d (75% oil, 13% natural gas and 12% NGLs), including non-operated production. In 2016, we expect to dedicate $117.3 million to developing our Eagle Ford Acreage.”

“To date, our drilling program has predominantly targeted our Eagle Ford locations in Burleson County. While not included in our estimate of future horizontal drilling locations, we believe significant additional locations may also exist in the Austin Chalk trend in Burleson County and the Eagle Ford in Washington County. On our North Louisiana Acreage, our horizontal drilling locations target the Upper Red, Lower Red and Upper Deep Pink zones in the RCT and Weyerhaeuser Areas in the overpressured Cotton Valley formation in the Terryville Complex. To date, our drilling program has predominantly targeted our Upper Red locations in the RCT Area. While not included in our estimate of future horizontal drilling locations, we believe additional locations may also exist in additional Cotton Valley intervals across our North Louisiana Acreage.”

WildHorse said it has reduced drilling and completion costs per completed lateral foot by approximately 67%, from $2,958 per foot using Generation 1 hydraulic fracturing design to approximately $966 per foot for our wells completed using Generation 3 hydraulic fracturing design, “in part by drilling our last 18 wells in an average of approximately 11 days.

“Additionally, as we have transitioned our completion techniques in our Eagle Ford Acreage from Generation 1 to Generation 3 hydraulic fracturing designs, we have increased EURs by approximately 29% per completed lateral foot from an average of 76 Boe per foot to 98 Boe per foot. In our North Louisiana Acreage, we have reduced our drilling and completion costs per completed lateral foot by approximately 22%, from approximately $1,987 per foot for the nine months ended September 30, 2015 to approximately $1,559 per foot for the nine months ended September 30, 2016. Our drilling and completion cost reductions coupled with our completion design improvements are generating enhanced single-well recoveries and attractive returns in the current commodity environment, and we believe we can further optimize our results through these and other technologies across our acreage position.”

North Louisiana

“As of September 30, 2016, our North Louisiana Acreage included approximately 108,000 net acres. Also, as of September 30, 2016, 46% of our acreage was then held by production, with an average working interest of 74%, and 49% of our 47 MMBoe of proved reserves were developed, 98% of which were natural gas. As of September 30, 2016, we had drilled and completed 13 wells, acquired 605 wells and participated in two wells resulting a total net production of approximately 8.1 MBoe/d (3% oil, 95% natural gas and 2% NGLs), including non-operated production. In 2016, we expect to dedicate $20.2 million to developing the North Louisiana Acreage.”

Reserves

WildHorse published the following table summarizing estimated net proved, probable and possible oil, natural gas and NGL reserves of WildHorse and Esquisto on a combined basis as of June 30, 2016 without giving effect to any of the acquisitions. Cawley prepared Esquisto’s reserves estimates and audited WildHorse’s reserves estimates.

 

Estimated Total Proved Reserves
Oil
(MBbls)
Natural
Gas
(MMcf)
NGLs
(MBbls)
Total
(MBoe)
%
Liquids
%
Developed
Eagle Ford 49,003 26,518 7,269 60,692 93 % 21 %
North Louisiana 703 274,246 306 46,717 2 % 49 %
Total   49,706    300,764   7,575 107,409 53 % 33 %
Estimated Total Probable Reserves
Oil
(MBbls)
Natural
Gas
(MMcf)
NGLs
(MBbls)
Total
(MBoe)
%
Liquids
Eagle Ford 60,675 26,758 7,439 72,574 94 %
North Louisiana 612 164,640 28,052 2 %
Total   61,287    191,398   7,439 100,626 68 %
Estimated Total Possible Reserves
Oil
(MBbls)
Natural
Gas
(MMcf)
NGLs
(MBbls)
Total
(MBoe)
%
Liquids
Eagle Ford 105,989 46,761 12,887 126,669 94 %
North Louisiana 3,953 1,063,042 181,127 2 %
Total 109,942 1,109,803 12,887 307,796 40 %

 


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