Ring Energy, Inc. (REI) acquired the Northwest Shelf (NWS) in April 2019 located in Yoakum County, Texas, and Lea County, New Mexico. The NWS is targeting the San Andres formation, a “conventional shallow carbonate reservoir” at approximately 5,000’ (approximately 86% oil). The San Andres reservoir on the NWS is thicker and more consistent than the Central Basin Platform (CBP), resulting in a gentler decline rate, boasts a higher rate-of-return (IRR), and higher return on investment (ROI’s) than the CBP. For this reason, REI has focused the majority of their 2020 development drilling on the NWS.
At the time of acquisition, the NWS asset included 49 horizontal San Andres wells that had been drilled and completed by the previous operator. Upon closing, REI immediately spudded their first horizontal San Andres well and as of 4Q’2020 has drilled and completed 20 successful horizontal San Andres wells.
The purchase of the NWS assets included 1,385 surface acres on which 13 saltwater disposal (SWD) wells were drilled and completed with a permitted capacity of ~241,000 Bw/d. Other infrastructure assets in the purchase include 15 water supply wells with greater than 12,000 Bw/d of supply capacity, 5 frac ponds that are centrally located, and 3 caliche pits that provide all the caliche needed for road materials and new locations. This REI-owned and operated infrastructure provides significant savings in drilling, completion, and ongoing monthly operating costs.
Top Tier Returns
The benefits of horizontal drilling enable San Andres reserves to be economically accessed beyond traditional field boundaries at reduced development costs, have increased ultimate oil recoveries, and generate individual well IRRs that exceed an average of 98% (based on $40/bbl oil net realized price received) and includes electric submersible pump-to-rod conversion costs.