Pioneer had no idea it had the prime position in what might be the biggest oil patch in U.S. history.
In the fall of 2011, Tom Spalding, a slim geologist with salt-and-pepper hair, stood before the board of directors of Pioneer Natural Resources, an oil and gas exploration company, to make a presentation unlike any he’d made in his 14 years there.
Using two flatscreens in Pioneer’s suburban Dallas boardroom, Spalding, the company’s vice president for geoscience, walked directors through the results of weeks of research. He and his team had explored for undiscovered oil in horizontal shales deep within the Permian Basin, a vast rock formation beneath West Texas. They had analyzed seismic data and core samples of 7,000 company wells as well as information on decades-old wells archived at the University of Texas. “When we first did it, we couldn’t believe it,” Spalding recalls. “We had to go back to check our measurements.”
He showed the board a schematic of 13 slabs stacked one atop another like something out of a Frank Gehry sketchbook. Almost every tier was splashed in bright red, signifying the presence of crude. Crucially, there was scant evidence of the saltwater zones that often dot such diagrams and can spell doom. It was all oil.
Pioneer’s chief executive officer, Scott Sheffield, watched with anticipation. He’d been drilling vertical wells in the Permian since 1979 with only modest success. After hearing his geologist, he ordered the drilling of two horizontal test wells.
Those wells cost four times what a vertical did, but wound up spewing seven times the crude. Sheffield called for more horizontals. He had the money to invest because he’d sold off seemingly sexier oil projects and avoided borrowing while other independent drillers were wagering yet again that oil prices would forever climb.
By 2015, Sheffield had stopped drilling new vertical wells altogether and diverted almost all of Pioneer’s effort and money into the Permian’s shale. All of which helps explain how Pioneer—a $26 billion company with less than a 10th of ExxonMobil’s market value, almost no oil fields beyond Texas, and the same boring CEO for more than 30 years—is now showing the world how to thrive amid the worst oil bust since the 1980s.
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