New Frontiers: The Cline shale might not be the next big thing

— In this week's Oilgram News column, New Frontiers, Starr Spencer talks about the quick rise--and sort of fall--of the Cline shale in West Texas.

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When the Cline Shale first moved into the public eye a couple of years ago, the West Texas play quickly set aflame industry’s imagination of a Saudi Arabia-like reservoir that would provide tens of billions of barrels of crude for the oil-hungry US market.

“Shale oil field 3 times bigger than the Eagle Ford (and 6x bigger than the Bakken),” read one headline.

“Cline Shale could be biggest in US history,” read another.

But the Cline, alone, has not yet lived up to the hype, although exploration there is still in its infancy compared to the slightly more mature and greatly prolific Wolfcamp formations above it.

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So, does the Cline contain the 30 billion barrels of recoverable oil that was widely-touted in the press?

“I don’t think we would agree that’s a viable number,” Benjamin Shattuck, research analyst at energy consultants Wood Mackenzie, said. “Twelve to 18 months ago, the Cline was the next big thing. But the data just wasn’t there to support it.”

While some operators have had some success, that has been confined to “a very limited scope of the play,” Shattuck said. “So far variability has been high and results not that great, and at the same time, results improving in the Wolfcamp to the west.”

But the Cline could likely be an adjunct to the Wolfcamp, analysts say. “I’d definitely say it looks hopeful at this point,” Tom Tunstall, research director for the Institute for Economic Development at the University of Texas-San Antonio, said of the formation.

Wells in the Cline—which is sometimes referred to as the Wolfcamp D zone—certainly appear to have potential. For example, one recent Cline well drilled by Pioneer Natural Resources, the University 7-43 10H, debuted at a stunning 3,605 b/d of oil equivalent in its first 24 hours.

Pioneer touted the well, sited in Andrews County about 60 miles northwest of several other Cline wells drilled in Glasscock County, as showing “the best initial production of any Midland Basin interval.”

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Located around 9,000-10,000 feet deep in a ghost-shaped spread, the Cline is one of the deepest of at least a dozen productive “stacked” or layered formations that have been drilled in the Permian. It spans several counties in the Midland sub-basin of the eastern Permian and is said to be 250-plus feet thick.

Big independent Devon Energy prominently brought the Cline to industry’s notice two years ago during a quarterly conference call. But last August, company officials said they had decreased rig activity there after seeing “a lot of variability” in the formation.

At the time, the company was running two Cline rigs, both of which would drill what Devon Executive Vice President of Exploration and Production Dave Hager called “mini-developments” in Sterling County, “seeing how low we can get well costs to have economic developments there. ...We need to do some studying before we go back out there with a significant program.”

Javan Ottoson, president and chief operating officer for Denver-based SM Energy, said in a recent conference call that these are early days for the Cline.

“There’s no question that some of the...early vertical wells didn’t go quite as deep the way that play worked out,” Ottoson said. SM plans to drill the Cline this year, mainly because its depth would allow the company to hold the acreage by production, preventing expiration of the leases.

Because operators that produce the Cline are typically also drilling the Wolfcamp horizons above it, it is difficult to separate out just how much oil the formation alone produces or could produce. Analysts say that at the very least, industry needs to understand the zone better.

Because it is relatively deep within the Permian, operators say accessing the Cline can add as much as $1 million more to drilling costs than a typical Wolfcamp well. But recent operator comments show industry still appears enthused over its potential.

For example, Range Resources has drilled a Cline well, “which we’re really encouraged by,” Chief Operating Officer and Senior Vice President Ray Walker said during the company’s Q3 conference call. “We haven’t seen any of the wells clean up like this [so]early.”

Big Permian operator Apache is focusing on Glasscock County, which is also seen by other operators as the heart of the play; the company, which holds holds 520,000 net Cline acres, claims to be the leading Glasscock Cline player with about 40 horizontal wells last year.

Apache also said play is yielding what it characterized as “increasing estimated ultimate recoveries with additional frac [fracture-stimulation] stages, changing frac design and optimized landing points.”

“We are still on a learning curve in the Permian Basin,” Apache CEO Steve Farris said.—Starr Spencer in Houston

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