HOUSTON–(BUSINESS WIRE)–WildHorse Resource Development Corporation (NYSE: WRD) announced today plans to construct a wholly-owned in-field oil and produced water gathering system. The project will be constructed and operated by WRD with completion expected in mid-2019.
“The construction of an in-field oil and produced water gathering system will be the first phase in developing a midstream opportunity which can further improve our already superior realizations. With an in-field oil gathering system, we can reduce trucking by delivering our barrels from the wellhead to a central point in the field,” said Jay Graham, Chairman and Chief Executive Officer of WRD. “In addition, the oil and produced water gathering system will lower our lease operating expense on a barrel of oil equivalent basis and allows us to facilitate completions using recycled water. Within the next few months, we expect to announce the second phase of our midstream infrastructure which will include a third party long-haul pipeline that will connect to a constructed central terminal and oil gathering system in the field. WRD expects that these projects will further improve our leading pricing realizations, reduce LOE, and maintain our advantaged takeaway capacity. Furthermore, WRD’s in-field sand mine is set to come online earlier than expected which further improves economics benefitted by the midstream projects as well.”
The initial phase of construction consists of approximately 50 miles of oil gathering pipeline and approximately 55 miles of water gathering pipeline. The oil and produced water gathering lines will utilize the same right-of-way where practical to reduce costs. WRD estimates construction of the in-field oil and produced water gathering system to cost approximately $50 million consisting of approximately $35 million for the oil gathering system, which includes the central terminal, and approximately $15 million for the produced water system with an in service date by mid-2019. The proposed water gathering line is expected to reduce produced water transportation and disposal costs by approximately 50%, which equates to an expected $0.25 per boe improvement to LOE. WRD expects that the gathering system, upon completion of additional takeaway, will deliver approximately $1.00 per barrel improvement in realized oil pricing.
WRD is also currently evaluating proposals for the construction of a third-party long-haul pipeline, the second phase of the midstream infrastructure project. Upon completion, WRD expects to have the ability to transport 100% of its oil volumes on pipeline to premium Gulf Coast markets, including the rapidly growing market for crude exports. WRD expects to announce this proposal within the next few months. The third-party long-haul pipeline is expected to provide further transport cost reductions in addition to the previously mentioned $1.00 per barrel.
Sand Mine Update
In addition to the midstream projects, WRD is ahead of schedule on the construction of its in-field sand mine, which was originally expected to come online by the first quarter of 2019. First sand loadings are now expected as early as November 1, 2018 and operational capacity for WRD’s full sand requirements is expected by November 30, 2018. WRD anticipates completing the sand mine project within the original guidance range of $65 to $75 million. WRD expects to save $400K to $600K per well and improve Eagle Ford IRR’s by up to approximately 16%.
About WildHorse Resource Development
WildHorse Resource Development Corporation is an independent oil and natural gas company focused on the acquisition, exploration, development and production of oil, natural gas and NGL properties primarily in the Eagle Ford Shale and Austin Chalk in East Texas.