We are an independent oil and natural gas company focused on the acquisition,
development, exploration and exploitation of unconventional, onshore oil and
natural gas reserves in the Permian Basin in West Texas. This basin, which is
one of the major producing basins in the United States, is characterized by
an extensive production history, a favorable operating environment, mature infrastructure,
long reserve life, multiple producing horizons, enhanced recovery potential
and a large number of operators.
We began operations in December 2007 with our acquisition of 4,174 net acres
in the Permian Basin. Our total net acreage position in the Permian Basin was
approximately 105,894 net acres. In addition, we, through our subsidiary Viper
Energy Partners LP, or Viper, own mineral interests underlying approximately
107,568 gross (6,404 net royalty) acres primarily in Midland County, Texas in
the Permian Basin. Approximately 41% of these net acres are operated by us.
We own Viper Energy Partners GP LLC, the general partner of Viper, which we
refer to as the general partner, and we own approximately 74% of the limited
partner interest in Viper.
Our activities are primarily focused on horizontal development of the Spraberry
and Wolfcamp formations of the Midland Basin and the Wolfcamp and Bone Spring
formations of the Delaware Basin, both of which are part of the larger Permian
Basin in West Texas and New Mexico. The Permian Basin is characterized by high
oil and liquids rich natural gas, multiple vertical and horizontal target horizons,
extensive production history, long-lived reserves and high drilling success
rates.
Multi-year drilling inventory in one of North America’s leading oil resource
plays. We have identified a multi-year inventory of potential drilling locations
for our oil-weighted reserves that we believe provides attractive growth and
return opportunities. At an assumed price of approximately $50.00 per Bbl WTI,
we currently have approximately 2,722 gross (1,802 net) identified economic
potential horizontal drilling locations on our acreage based on our evaluation
of applicable geologic and engineering data. These gross identified economic
potential horizontal locations have an average lateral length of approximately
8,600 feet, with the actual length depending on lease geometry and other considerations.
These locations exist across most of our acreage blocks and in multiple horizons.
Of these 2,722 locations, 2,223 are in the Midland Basin and 499 are in the
Delaware Basin. The Delaware Basin locations do not include locations attributable
to the Pending Acquisition. In the Midland Basin, 1,018 are in the Lower Spraberry
or Wolfcamp B horizons where we have drilled a large number of wells, 805 are
in the Wolfcamp A or Middle Spraberry horizons where we have drilled a limited
number of wells and 355 are in the Clearfork or Cline horizons where we have
drilled very few wells. Our current location count for the Lower Spraberry horizon
is based on 500 foot spacing in the Spanish Trail property in Midland County
and 660 foot spacing in other areas of Midland, Martin, northeast Andrews, Howard
and Glasscock counties, and 880 foot spacing in all other counties. For the
Wolfcamp B horizon, the horizontal location count is based on 660 foot spacing
between wells in Midland, Martin, northeast Andrews, Howard, and Glasscock counties,
and 880 foot spacing in all other counties. In the Wolfcamp A horizon, the horizontal
location count in based on 660 foot spacing in Howard and Glasscock counties,
880 foot spacing in Reeves, Ward and Pecos counties, 880 foot spacing in Midland
and southwest Martin counties and 1,320 foot spacing in other counties. The
horizontal location count for the Middle Spraberry is based on 880 foot spacing
in Midland, Martin and northeast Andrews counties and 1,320 foot spacing in
other counties. In the Cline and Clearfork horizons, the horizontal location
count is based on 1,320 foot spacing except for the Clearfork in central Andrews
County which is based on 660 foot spacing. In the Delaware Basin, 303 locations
are in the Wolfcamp A or Wolfcamp B horizons, and 196 locations are in the 2nd
Bone Spring or 3rd Bone Spring horizon. The horizontal location counts are based
on 880 foot spacing in the Wolfcamp A and Wolfcamp B horizons, and 1,320 foot
spacing in the Bone Spring horizons. The ultimate inter- well spacing may vary
from these distances due to different factors, which would result in a higher
or lower location count. The two-stream gross estimated ultimate recoveries,
or EURs, from our future PUD horizontal wells, as estimated by Ryder Scott as
of December 31, 2016, range from 494 MBOE per well, consisting of 366 MBbls
of oil and 769 MMcf of natural gas, to 1,273 MBOE per well, consisting of 995
MBbls of oil and 1,667 MMcf of natural gas, for wells ranging in lateral length
from approximately 7,500 feet to approximately 10,000 feet, in intervals including
the Clearfork, Middle Spraberry, Lower Spraberry, Wolfcamp A, and Wolfcamp B.
Ryder Scott has estimated gross EURs of 620 MBOE for our Wolfcamp B wells in
Midland County and 998 MBOE for our Lower Spraberry wells in Midland County,
which constitute 47% of our remaining PUD horizontal wells, in each case based
on 7,500 foot lateral lengths. In addition, we have approximately 871 square
miles of proprietary 3-D seismic data covering our acreage. This data facilitates
the evaluation of our existing drilling inventory and provides insight into
future development activity, including additional horizontal drilling opportunities
and strategic leasehold acquisitions.
Experienced, incentivized and proven management team. Our executive team has
an average of over 25 years of industry experience per person, most of which
is focused on resource play development. This team has a proven track record
of executing on multi-rig development drilling programs and extensive experience
in the Permian Basin. In addition, our executive team has significant experience
with both drilling and completing horizontal wells in addition to horizontal
well reservoir and geologic expertise, which is of strategic importance as we
expand our horizontal drilling activity. Prior to joining us, our Chief Executive
Officer held management positions at Apache Corporation, Laredo Petroleum Holdings,
Inc. and Burlington Resources.
Favorable operating environment. We have focused our drilling and development
operations in the Permian Basin, one of the longest operating hydrocarbon basins
in the United States, with a long and well-established production history and
developed infrastructure. We believe that the geological and regulatory environment
of the Permian Basin is more stable and predictable, and that we are faced with
less operational risks in the Permian Basin as compared to emerging hydrocarbon
basins.
High degree of operational control. We are the operator of approximately 98%
of our Permian Basin acreage. This operating control allows us to better execute
on our strategies of enhancing returns through operational and cost efficiencies
and increasing ultimate hydrocarbon recovery by seeking to continually improve
our drilling techniques, completion methodologies and reservoir evaluation processes.
Additionally, as the operator of substantially all of our acreage, we retain
the ability to increase or decrease our capital expenditure program based on
commodity price outlooks. This operating control also enables us to obtain data
needed for efficient exploration of horizontal prospects.