October 03, 2017

Tracking the Big Three in the Permian

Stratas Advisors

This excerpt is from a report that is available to subscribers of Stratas Advisors’ North American Shale service.

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Pioneer Resources, Apache Corp. and Occidental Petroleum are leading the production pace in the Permian Basin. Production and development activity are occurring primarily in the Delaware and Midland sub-basins, and to a lesser extent in the Northwestern Shelf of New Mexico and the Central Basin Platform.  There are numerous formations within each sub-basin  ̶  stacked by depth and offering multiple pay zones  ̶  that harbor unconventional oil and gas resources.

 

Stratas Advisors takes a look at the trio of giants operating in North America’s most prolific shale play.

 

 Operator Metric 2014 2015 2016 1Q17 2Q17 2017E
Pioneer Natural Resources  Capital ($MM) $2,702  $1,940 $1,868 $600   $2,300
Completed Well Cost ($MM)  $11.0 $8.6 $7.2 $6.8 $7.5-$8.8  
Rig Count    14 14 17 18 18
Production (Mboe/d)    125 171 200 213 222-226
Drilled Wells      247 60
240-280 
TIL'd Wells      236 38 61 230
Apache Corporation  Capital ($MM)  $3,135  $1,433 $906 $365   $1,457
Completed Well Cost ($MM)    $3.5  $3.5 $3.5 $4.3 $3.0-$4.0
Rig Count  40  12 6 9 17  
Production (Mboe/d)  158  168 161 152 146 170-180 
Drilled Wells    241 88 75 36 250
Completed Wells    241 88 75 36 250
Occidental Petroleum  Capital ($MM) $2,638  $2,655 $1,212 $400 $385 $1,500-$2,000
Completed Well Cost ($MM)  $8.7 $9.5 $6.5 $6.2   $6.0-$6.5
Rig Count    15 4 6 11 11
Production (Mboe/d)  222 255 269 274 288 280-300
Drilled Wells      67 26 26 100-120
TIL'd Wells      88 21 26 130

Source: Stratas Advisors, company news releases

Pioneer Resources

With about 800,000 gross acres (690,000 net) in the Permian, Pioneer continues to high-grade its position by agreeing to divest 5,600 net acres in Upton and Andrews counties for $63 MM in 1Q17, while also evaluating offers to sell 20,500 net acres in Martin County.

Completed well costs have increased to 2015 levels as the company implemented its third version of completion techniques (larger proppant concentrations and tighter cluster spacing).

 Additionally, Pioneer has seen production grow by close to 25% from 171 Mboe/d at year-end 2016 to 213 Mboe/d through 2Q17. This upward trend is expected to continue through the rest of 2017, with production projected to average about 225 Mboe/d on the year.

Apache Corp.

With one of the largest finds in recent years under its belt in the Alpine High discovery, Apache remains one of the top operators in the Permian. APA currently has two frac crews and 17 rigs running in the basin, with eight of the rigs being utilized in the Alpine High region.

Significant well delivery improvement was achieved in the Midland Basin in 2016, with wells reportedly outperforming peer-type curves. Production is expected to increase by roughly 10% in 2017 as further delineation of the Alpine High discovery continues to confirm an extensive play fairway and over-pressured regime within the play.

Occidental Petroleum

Occidental has continued to prove its dominance in the Permian Basin with a position of about 2.5 million net acres encompassing both its Resources and EOR business areas. By year-end 2016, the company managed to increase its horizontal well locations to 11,560 and its average lateral length to 8,600 feet.

In 2Q17, the company reported a 128% increase in drilling locations with break-evens of less than $50/bbl from 1,250 in year-end 2016 to 2,855 currently. Occidental effectively reduced well costs by 22% and operating expenses by 25% in 2016, and brought 26 wells online in 2Q17 vs. 16 in 4Q16.

This increased activity observed in early 2017 is expected to carry over into the rest of the year with Oxy projected to bring 130 wells online and maintain 11 active rigs in the Permian through year-end.

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