The Horizontal San Andres

Relatively new for investors, the HZ San Andres could generate very strong economics and IRRS.

ON MAY 9, Ring Energy (REI-Buy) announced plans to drill three horizontal (Hz) San Andres wells in Andrews County, Texas. We provide equity research coverage of Ring Energy and our rating is Buy with a $14.00 price target so we decided to dig a bit deeper into the Hz San Andres play on the Central Basin Platform of the greater Permian Basin.

Following REI’s announcement, it became apparent to us that this play is relatively new for investors and analysts involved with publicly traded E&P companies. This play, we believe, has been “under the radar” for a couple of reasons. One, the play has been dominated by private E&P companies. Two, in our view, the play gets overshadowed by the much more intense industry activity in the nearby Midland Basin involving the Spraberry and Wolfcamp formations. As for other publicly traded companies in this play, the only other name we know of is Apache Corporation (APA-Not Covered), which we were told is not currently active in the play.

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