Huge oil and gas discovery spurs Apache to raise budget by 11 per cent

US explorer says drilling reveals major new shale reserve in Texas and prompts the company to up spending to $2 billion with more wells to survey.

Above, rigs contracted by Apache drill for crude oil locked tight in shale in West Texas. Terry Wade / Reuters

Apache said it made a "significant" discovery in a Texas shale formation that holds enough crude oil to supply every refinery on the US Gulf Coast for a year.

The Alpine High discovery in West Texas contains an estimated 3 billion barrels of oil and 75 trillion cubic feet of natural gas, Apache said on Wednesday. The asset is in the Delaware Basin, a subsection of the Permian Basin that has been a hotbed of acquisition activity among oil explorers this year.

Shares rose 7.9 per cent to $55.74 at 8:34am before the start of regular trading in New York.

“This is a world class resource,” the chief executive John Christmann told investors at a Barclays conference in New York on Wednesday. “We are very early in starting to understand how big this is going to be.”

Apache amassed drilling rights across 307,000 contiguous acres in the region at an average cost of US$1,300 per acre, according to the company. The Houston-based firmy has already drilled 19 wells in the area and has identified 2,000 to 3,000 more drilling sites.

To accelerate drilling in the discovery, Apache raised its full-year 2016 capital budget by 11 per cent to $2 billion, it said. Alpine High will account for about one-quarter of the company’s drilling budget this year.

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