Independent geologist Rich Masterson says he originated the Wolfbone unconventional play that is now heating up the Delaware Basin of West Texas. It follows logically in this Midlander’s career path, as he’s been generating hundreds of prospects throughout the greater Permian Basin since he graduated from Trinity University, San Antonio, with a geology degree in 1974. He’s worked for Texaco, Monsanto Oil Co. and Southwest Royalties, and consulted to many other firms and investors.

Since 2004, he has prepared prospects covering more than 150,000 acres in the Wolfbone play that have been leased, drilled or are now being developed by players as diverse as Devon Energy, Browning Oil/J. Cleo Thompson, Occidental Petroleum, Brigham Energy, Energen, Shell/Chesapeake Energy and Concho Resources.

Not just a rock hound, Masterson also loves music and plays guitar. And as a teen in 1968 he played classical violin at Hemisfair in San Antonio.

Today he is on the board of visitors of the McDonald Observatory in remote West Texas. He and his wife, Blix Ann, love the Davis Mountains there.

Rich Masterson

Investor: What made you decide to be a geologist?

Masterson: Dinosaurs were a big deal in the 1950s, so when I was five, I wanted to go on an adventure and find some. I made the decision in college and I’ve been happy ever since.

Investor: You’ve been working the Delaware and Midland basins your whole career.

Masterson: I worked the deep Delaware for Texaco and Monsanto. I worked the San Andres Formation in Levelland Field—we drilled more than 150 wells there. That gave me the confidence in finding oil and gas.

Investor: What led you to discover the Wolfbone?

Masterson: A company called TROX pursued my idea of buying leases in the deep Delaware Basin, stacking as many organic-rich rock zones as possible from the Bone Spring Lime to the Atoka high-pressure gas pay. The Barnett Shale was becoming economical at the time, thanks to new frack and horizontal technology, so I thought it could be applied here. But it meant we had to do a 180-degree change in our thinking.

We found that the Delaware siltstones had better reservoir parameters than the Barnett and would be capable of oil production. Making cross sections of mud logs that tied zones throughout the basin, it was apparent that the over-pressured oil and gas shows were consistently in the same geologic intervals. These intervals were tested from south of Carlsbad, N.M., to Fort Stockton, Texas. In 2008, during the mini bust, I took production test analogies from these tight intervals in the Brushy Canyon, Bone Spring Upper and Lower Avalon, the 2nd Bone Spring Detrital, the 2nd Bone Spring Siltstone, the 3rd Bone Spring Sandstone, the Wolfcamp siltstones and Wolfcamp sandstones, and I recommended drilling vertical Wolfbone wells that commingled the various zones.

TROX sold some of those prospects south of Pecos, but J. Cleo Thompson and Eagle Oil & Gas drilled the first wells targeting the Wolfcamp A, B, C, D siltstone packages with the 2nd and 3rd Bone Spring silts and sands. Through production testing, coring and modern shale logging suites, the horizontal targets were further delineated.

Investor: There have been some huge asset sales in the Permian lately—what’s your take on that?

Masterson: Several of the smaller independents have sold out their large acreage positions to larger independents and majors because of the large capital needed to fully develop and hold their leases.

Investor: What’s your assessment of the Delaware today?

Masterson: It’s a big trench, essentially, with about a mile of gross pay; 3,000 feet of net pay. You have several assets such as high pressure, which packs more hydrocarbons in the rock. It has better pore throat size than the shales. It’s huge. It’s deeper, it’s more costly to drill, but it has greater reserves per square mile than the Midland Basin. The Bakken and the Eagle Ford are big plays, but the Delaware is bigger by five- to 10-fold in pay thickness. There are 10 intervals that can be drilled economically, each horizontally.

It depends where you are, but Wolfbone EURs per well on 160-acre spacing average half a million barrels of oil and 750 million cubic feet of gas. You could have 16 wells per section, easy. Maybe more.

The denser concentration of bigger frack jobs, the better logging and the science really made it economical. Every six months there’s another leap in the reservoir evaluations. The impediments now will be, how do you define the interval and get the production allowable? How do you write a lease with 10 pay zones: Is it one field or 10? The Railroad Commission is going to have to address this.

Investor: Is A&D activity about to explode in the Delaware?

Masterson: Pricing has started to go up and $22,000 an acre is just a matter of time. Mineral buying is almost impossible now, because the mineral owners know they have multiple pay zones. We were buying acreage for $75 to $150 an acre in 2005, and now the edgy stuff is $3,500 an acre and the good stuff, you cannot buy. Watch in the coming year whether companies sell out, and how competitive the bidding will be.