Comments from John White at Roth Capital. John covers a lot of the companies in our Sweet 16 and in our Small-Cap Growth Portfolio. Note his comments about RSPP.
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EOG Resources (EOG-NC) reported 1Q 2017 results on 5/8/2017 and we took notice of the recent well results in the Northern Delaware Basin, in particular the Whirling Wind wells. EOG stated these wells are a record for Permian Basin horizontal well results and, in our opinion, this is easy to believe after you read the results. The Whirling Wind is a 4 well Wolfcamp package located in southern Lea County, New Mexico; these wells were completed with average IP-30’s of 5,060 BOE per day for each well.
We inquired of EOG as to the specific formation the captioned wells were completed in, Lower Wolfcamp A, Wolfcamp B, or Wolfcamp XY, but EOG would not offer a more specific description. And that’s the answer we were expecting as EOG has a long term and well-deserved reputation for “tight-holing” (industry jargon for withholding information). Further, we don’t blame them for this practice: when you are one of the industry leaders in numerous categories, why share information if you don’t have to?
We knew these wells were in close proximity to RSP Permian’s (RSPP-Buy) acreage in northern Loving County but wanted to find out just how close the RSPP acreage is to the recent EOG wells. We contacted RSPP and were informed that at their nearest point these wells are 4 to 5 miles from the RSPP lease line. In our opinion, we would expect the geology to be very similar to matching much of the geology underlying the RSPP northern Loving county acreage.
In our view, these recent EOG wells are strong derivative data points pointing to potentially strong future results for RSPP’s Northern Delaware Basin acreage.
RSPP announced in its 1Q 2017 earnings release and accompanying presentation that it has drilled and completed its first horizontal well in the Delaware Basin. The Crockett Reese St #2403H, a 6,900' lateral well in the lower interval of the Wolfcamp A, had established a peak 7-day average rate of 1,882 BOE per day with 71% oil. This well is still cleaning up and flowing back frack fluid with 2,500 psi of flowing tubing pressure.
RSPP is currently running six operated rigs, with four in the Midland Basin and two in the Delaware Basin. A third rig to operate in the Delaware is slated to arrive in later in May.