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Matador Hones Eagle Ford Strategy; Talks Batch Drilling, Frac Design

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   |    Monday,August 18,2014

Matador Resources Company has reported a second quarter 2014 update on its Eagle Ford operations.

Matador had two drilling rigs operating in South Texas during the second quarter of 2014 as the Company continued to develop its Eagle Ford acreage. During the second quarter of 2014, the Company completed and began producing oil and natural gas from nine gross (6.2 net) Eagle Ford wells, including six gross (5.4 net) operated and three gross (0.8 net) non-operated Eagle Ford wells. Matador completed three operated Eagle Ford wells on its Northcut lease and two wells on its Martin Ranch lease in La Salle County and one well on its Lyssy lease in southern Wilson County. The three non-operated wells were completed on its Troutt lease in La Salle County. The Northcut wells began producing in mid-April, the Martin Ranch wells began producing in mid-May and the Lyssy well began producing in mid-June. As a result, these six wells did not contribute fully to production volumes for the second quarter of 2014 or for the first half of 2014.

Matador had as much as 10 to 15% of its production capacity shut in or restricted at various times during the second quarter of 2014 due to the Company’s:

1. batch drilling operations and other operating practices aimed at cost savings, improving operational efficiencies and increasing estimated ultimate recoveries,
2. increased completion activity from industry in these areas,
3. protection of producing wells during the drilling and completion of offsetting wells by both the Company and other operators, and
4. continuing strategy to manage bottomhole pressure through the practice of producing wells on restricted choke sizes

For the six months ended June 30, 2014, Matador completed 21 gross (17.3 net) Eagle Ford wells, including 17 gross (16.2 net) operated wells and 4 gross (1.1 net) non-operated wells. At August 6, 2014, Matador had two drilling rigs operating in the Eagle Ford — one on its Lyssy lease in southern Wilson County and one on its Pawelek lease in Karnes County.

The Company continues to execute its Eagle Ford development plan in accordance with its original plans and expectations for 2014. In April 2014, the Company replaced the drilling rig operating in the central portion of its acreage in Karnes and Wilson Counties with a newer “walking” rig. The company now has two “walking” rigs in the Eagle Ford and plans to conduct batch drilling and other developmental operations on its properties using these two rigs for the balance of 2014. Matador has already achieved significant improvements in both drilling times and costs since employing the new “walking” rig on the Company’s central Eagle Ford acreage in the last few months. On the first few wells drilled with this new “walking” rig, Matador has reduced spud to spud drilling cycle times by one to three days per well, as compared to earlier wells drilled in this same area. Further, the Company estimates that it has reduced well costs by $300,000 to $400,000 per well compared to recent wells drilled without using the new “walking” rig. Matador has been conducting batch drilling operations with a “walking” rig on its western Eagle Ford acreage in La Salle County since August 2013and has achieved significant improvements in both drilling times and costs in this area since that time too. Recent wells on the Company’s western acreage (e.g., the Martin Ranch and Northcut wells) have drilling times, from spud to total depth, of 8 to 10 days per well and total drilling and completion costs near or below $6.0 million per well.

Downspacing

The Company’s downspacing efforts in the Eagle Ford shale have continued to achieve results similar to those previously reported. In Karnes County, the Company has drilled recent wells on its Sickenius, Pawelek and Danysh leases with 40 to 50-acre spacing. Matador is pleased with the results of the Company’s Generation 5, 6 and 7 fracture designs in this area and in almost all cases the wells are outperforming the previous 80-acre wells drilled on these properties using earlier generation fracture treatments.

The initial flow rates and flowing pressures on these newer wells on comparable choke sizes have been consistently better than those observed on the 80-acre wells, and the flowing pressures observed on these wells suggest minimal depletion at these locations from earlier wells. On the Company’s Northcut lease in La Salle County, 40-acre infill wells have delivered comparable to better initial results than the previous 80-acre wells drilled on this lease using earlier generation fracture treatment designs, and initial flowing pressures observed on these wells also suggest minimal pressure depletion at these locations. On Matador’s Martin Ranch lease, there have been more indications of pressure interference between wells, especially for those 40-acre infill wells drilled near or between the better wells in the center of the property, which includes most of the Martin Ranch infill wells drilled thus far. 

Batch Drilling & Frac Design Changes

Still, given the incremental recovery associated with these infill wells and the significant improvement in well costs currently being achieved which continues to improve rates of return, the Company believes the continued development of its Martin Ranch lease on 40-acre spacing using batch drilling and Generation 7 or later fracture treatment designs will be the best way to maximize oil recovery and overall project economics. 

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Matador continues to project rates of return of 30 to 40% or greater from these wells at current drilling and completion costs and commodity prices. In addition, as the Company drills new wells in the northern and western portions of the Martin Ranch lease, there are fewer true infill wells to be drilled. Matador expects these newer wells to encounter essentially original reservoir pressure and to be stimulated with Generation 7 or later fracture treatment designs tailored to its 40-acre development plans. The Company will also continue to test 40 to 50-acre spacing on its other properties in northwest La Salle County throughout the remainder of 2014.