By November 29, 2016 0 Comments Read More →

US independents raising 2017 capex, especially in Permian Basin

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Changes in E&P growth

Encana increased growth guidance to focus on high-return wells, with bulk of capex landing in Permian Basin

With oil prices holding steady at around US$45/bbl for several months, many operators feel the worst is over and are consequently raising 2016 production guidance and capex spend, according to Wood Mackenzie.

In general, operators are doing more with less and eking out greater productivity from wells, and operators with recent acquisitions are guiding upwards.

Relative to the start of the year, US-focused players and independents increased capex spend more rapidly than the large-cap operators or NOCs, likely due to the smaller, more nimble independents’ ability to respond more rapidly to price fluctuations.

Callon Petroleum increased production guidance by 30 per cent and is raising its spending by 80 per cent due to its bolt-on Permian acquisition, and Rice Energy also increased capex and production guidance after its acquisition of Vantage Energy, though its capex increase will drive growth primarily in 2017 and 2018.

Eagle Ford-focused Sanchez Energy increased capex guidance after the appraisal of its Catarina Asset and realizing lower well costs (as low as US$2.8 million).

Carrizo Oil & Gas has increased guidance throughout 2016 to account for strong well performance across its Eagle Ford and Delaware Basin assets.

Newfield’s domestic production guidance is up 9.6 mboe/d (7%) due to strong performance of its North STACK extended-lateral wells, which have exceeded initial type curve assumptions, according to Wood Mackenzie.

The company also plans to add rigs before year-end, accelerating its mission to hold leases by production and resulting in a total increase of US$100 million (15%).

Marathon slightly raised both its capital guidance and the low end of production guidance after better-than-expected well results, its acquisition of PayRock in the STACK and re-allocation of capex away from the Bakken.

Northeast-focused Antero has been able to revise production guidance upwards by 5 per cent while holding capex guidance steady, citing improved well performance.

Meanwhile, Southwestern increased its capital budget from roughly US$100 million to US$475 million from Q1 to Q3 of 2016, while only increasing production guidance by 5 per cent.

On the other end of the spectrum, ConocoPhillips dramatically cut its 2016 capex at the start of the year, slashing over US$2 billion from its previous guidance and dropping its rig count to three from 13 at year-end 2015.

Only recently did the company mention plans to increase Lower 48 rig count to eight by year-end.

Despite this, better well performance in the Eagle Ford and Bakken, as well as lag effects from the ramp down in rig activity, has mitigated declines.

Murphy Oil also guided downwards due to its limited inventory of Eagle Ford wells and decision to scale back growth, as most of its acreage is held by production.

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