Wolfcamp capex is set to exceed $12 billion in 2014, or 80% of what will be spent in the Bakken according to Wood Mackenzie’s latest in a series of North American key plays analyses. Today, the Wolfcamp ranks third in tight oil spend compared to the Bakken and Eagle Ford, but could overtake the Bakken for the number two   spot by as early as 2017.

"Due to the ramp up of rigs in the first and second quarter, we expect capital expenditure to exceed $12 billion in 2014," says Benjamin Shattuck, Upstream Analyst from Wood Mackenzie.  Wolfcamp crude and condensate production will average 200,000 barrels per day in 2014 and will reach 700,000 barrels per day by the end of the decade.

The Wolfcamp, Shattuck explains, is still in its early development phase with less than 10% of total capital spent so far.  An influx of new entrants with capital caused Wood Mackenzie to raise its 2015 capex forecast by over $4.3 billion to $13.9 billion.  The Wolfcamp is now projected to generate nearly $30 billion in remaining value.

The analysis also finds that advancements in stacked pay development are the key driver in the rising acreage value of the Midland Basin. “There is reason to be cautiously optimistic,” says Shattuck, “while we have seen performance improve across all benches of the Wolfcamp, we are still waiting for an operator to effectively develop multiple benches over a sizeable acreage position.”  

Wood Mackenzie's analysis breaks down the Wolfcamp and Cline plays into eight sub-play areas, spanning the Midland and Delaware basins in the Permian.These are the key findings from the analysis:

1.    200,000 b/d of oil in 2014: Total Wolfcamp crude and condensate production will grow to average 200,000 barrels per day in 2014, an increase of 34% on our last update, driven by a rapidly growing rig count and improved results from the northern Midland Basin.
2.    Midland Basin to dominate Wolfcamp production:  The Midland Wolfcamp outpaces the emerging Delaware Wolfcamp due to higher oil cuts, lower well costs and better supporting infrastructure.  With over 40,000 remaining locations, the Midland Basin will drive production for the next two decades.
3.    Stacked pay development shows promise:  Much has been learned about the performance of the benches of the Wolfcamp.  Tracking the Wolfcamp over time has allowed Wood Mackenzie to distinguish which benches perform best.  In the Southern Midland Basin, where the A-, B-, and C- benches of the Wolfcamp have been most targeted, the B- bench continues to outperform, followed by the A- bench and then the C- bench.
4.    M&A market: Progress in stacked pay development has stoked the flames of the M&A market.  Until recently, the deal market was dominated by operators making bolt-on acquisitions to grow out positions in established areas.  However, 2014 has seen a number of entrants new to the Permian get into the play hoping to cash in on the stacked pay potential of the Wolfcamp.
Source: Wood Mackenzie