Oil & Gas News

Apache resumes drilling in Alpine High play

Apache Alpine High Oil Play

Apache Corp. generated national – and even international – headlines in the fall of 2016 when it announced what it believed was a multi-billion-barrel discovery in Reeves County, the Alpine High.

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The company also estimated the discovery contained about 75 trillion cubic feet of natural gas. After working to develop the new play, Apache made the decision in 2019 to stop drilling in Alpine High in response to a drastic drop in both natural gas and natural gas liquids prices and direct that capital to oilier assets in the US, Egypt, and the North Sea.

But the rally in natural gas and NGL prices that began last summer has prompted the company to return to its headline-generating play. That return began last year when Apache decided to complete several drilled, uncompleted wells in the Alpine High – an estimated six wells.

Those newly completed wells provided good results and prompted officials to add a fourth rig to its US operations – the third in its Permian Basin footprint – to put to work in the Delaware Basin. Once that rig completes six oil wells in the Delaware Basin, it will head to the Alpine High play in Reeves County, where it will drill two three-well pads. Already the company has received two permits to drill in the Alpine High. Once it arrives, probably mid-summer, plans are to have the rig operate in the Alpine High all next year.

Crude prices have undoubtedly been robust, Apache officials tell the Reporter-Telegram, but natural gas and NGL prices have rallied so significantly they have made the Alpine High not only economic but competitive with other potential projects in Apache’s portfolio. Officials say they didn’t need natural gas at $9 per Mcf to make Alpine High work but they will take advantage of those prices. They are also taking advantage of the relatively new and environmentally friendly infrastructure – pipelines and processing plants.

Apache also has a contract that lets it access world NGL prices – a fee to Cheniere lets it access European and Asian markets at world LNG prices.

“This is definitely Apache leaning into a favorable environment with respect to natural gas/NGL prices,” Stephen Sagriff, vice president, intelligence with the energy-focused Software as a Service firm Enverus, told the Reporter-Telegram by email.

Sagriff said the company’s first go at Alpine High “was extremely ill-timed due to its overly aggressive development approach, coupled with poor natural gas and NGL prices and Waha basis blowing out due to limited egress out of the Permian. Ultimately, everything that could go wrong went wrong right as the company’s production out of the play significantly ramped up.”

Asked if the return to such a highly publicized discovery might attract other companies, Sagriff said it was more a function of Apache leaning into assets that were left for dead but the company had held onto now that the commodity environment is more favorable.

“Apache’s peers – large cap Permian exposed names – don’t necessarily need to swoop in, as most hold an extremely deep bench of high-quality, oil-weighted inventory in the Permian, with many holding a blend of high-quality, oil- and gas-weighted inventory elsewhere across the major Lower 48 basins,” he wrote. “That being said, it’s hard to imagine the industry as a whole turning a blind eye to Apache’s shift back, especially if initial results look promising, natural gas/ NGL pricing holds up and the overall natural gas macro story, especially medium to long-term holds up or accelerates in the direction that’s bullish longer-term pricing.”

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