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Released February 26, 2020 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--It's no Permian Basin, at least not yet, but the Powder River Basin is attracting a high level of interest from mid-sized Oil & Gas companies, according to speakers at the recent DUG Bakken and Rockies conference in Denver, Colorado.
Industrial Info is tracking about $3 billion of Oil & Gas Production, Pipelines and Terminals projects under development in Wyoming and Montana.
"We're very enthusiastic about the Power River Basin (PRB)," Joe DeDominic, president and chief executive at Anschutz Exploration Corporation (Denver), told about 600 attendees at the February 19 conference. "This year, we'll produce 14,000 to 15,000 barrels of oil per day. The economics are very robust. As the industry moves toward a 'manufacturing' phase, we expect we'll see continued substantial cost reductions." He estimated his company spends about $7 million to drill a new well.
Another operator, Joe Mills, president and chief executive at Samson Resources II LLC (Tulsa, Oklahoma) is similarly smitten by the formation. "We love the Powder River Basin because it has over 5,000 feet of hydrocarbon-bearing sands. We also love that the area is mostly federal land," which precludes larger operators from developing a dominant foothold there.
Samson produced about 10,000 barrels of oil equivalent per day (BOE/d) last year. This year, production is expected to grow to about 15,000 BOE/d. About 85% of its production is crude oil.
Mills said some of the formations in the basin compare favorably to the Eagle Ford Basin, and portions of the PRB are oilier than either the Eagle Ford or Delaware basins. "This has encouraged us as we develop the PRB," he said. Mills added his company's drilling costs have come down "materially," though he acknowledged his company's costs were not as low as Anschutz's.
A third panel speaker, Aaron Ketter, vice president of the Rockies Business Unit at Devon Energy Corporation (NYSE:DVN) (Oklahoma City, Oklahoma), had a similar enthusiasm for operating in the PRB.
Devon had disposed of its assets in the Barnett Shale and in Canada, and the PRB is now one of four areas where Devon is focused. Roughly 20% of Devon's capital outlays in 2018 and 2019 went to the PRB, and the company expects the basin to receive the same proportional share of capital spending this year.
Ketter echoed Mills' comment about the benefits of operating in an area where the largest landowner is the federal government: "It gives operators time to develop their acreage thoughtfully."
Devon's PRB production is free cash flow positive when oil is priced at $47.50 per barrel, Ketter said. The operator recorded "significant" cost savings in drilling & completion (D&C) costs and lease operating expenses (LOE) last year, and Ketter expects that momentum will carry forward into 2020. In the Turner formation within the PBR, Devon's costs have improved 33% since 2018.
"The Powder River Basin is an important part of who Devon is," Ketter said.
The DUG conference panelists agreed the PRB's land costs have declined over the last 12-24 months, and Anschutz's DeDominic said his company's LOE have fallen 25% in the last six months. Mills of Samson said that company's operating costs have declined by more than$1 per barrel since 2018. The third speaker, Devon's Ketter, agreed that land and services costs have declined materially, which he attributed to lower outright rates and improved efficiencies that come from more experience in the basin.
Samson's Mills added, "We have benefitted from the slowdown in other basins. As the Permian and Eagle Ford have slowed down, service costs have come down."
DeDominic of Anschutz said, "The PRB is a fairly low-risk, high-reward operation. Is it the big event the industry is looking for? No."
Operators identified water rights and lack of water infrastructure as obstacles that operators have had to overcome. Two of the speakers said their companies were trucking in their fracking water. Also, the water-to-oil ratio is roughly one-to-one, higher than other basins, which means there is more produced water to dispose of or recycle.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Industrial Info is tracking about $3 billion of Oil & Gas Production, Pipelines and Terminals projects under development in Wyoming and Montana.
"We're very enthusiastic about the Power River Basin (PRB)," Joe DeDominic, president and chief executive at Anschutz Exploration Corporation (Denver), told about 600 attendees at the February 19 conference. "This year, we'll produce 14,000 to 15,000 barrels of oil per day. The economics are very robust. As the industry moves toward a 'manufacturing' phase, we expect we'll see continued substantial cost reductions." He estimated his company spends about $7 million to drill a new well.
Another operator, Joe Mills, president and chief executive at Samson Resources II LLC (Tulsa, Oklahoma) is similarly smitten by the formation. "We love the Powder River Basin because it has over 5,000 feet of hydrocarbon-bearing sands. We also love that the area is mostly federal land," which precludes larger operators from developing a dominant foothold there.
Samson produced about 10,000 barrels of oil equivalent per day (BOE/d) last year. This year, production is expected to grow to about 15,000 BOE/d. About 85% of its production is crude oil.
Mills said some of the formations in the basin compare favorably to the Eagle Ford Basin, and portions of the PRB are oilier than either the Eagle Ford or Delaware basins. "This has encouraged us as we develop the PRB," he said. Mills added his company's drilling costs have come down "materially," though he acknowledged his company's costs were not as low as Anschutz's.
A third panel speaker, Aaron Ketter, vice president of the Rockies Business Unit at Devon Energy Corporation (NYSE:DVN) (Oklahoma City, Oklahoma), had a similar enthusiasm for operating in the PRB.
Devon had disposed of its assets in the Barnett Shale and in Canada, and the PRB is now one of four areas where Devon is focused. Roughly 20% of Devon's capital outlays in 2018 and 2019 went to the PRB, and the company expects the basin to receive the same proportional share of capital spending this year.
Ketter echoed Mills' comment about the benefits of operating in an area where the largest landowner is the federal government: "It gives operators time to develop their acreage thoughtfully."
Devon's PRB production is free cash flow positive when oil is priced at $47.50 per barrel, Ketter said. The operator recorded "significant" cost savings in drilling & completion (D&C) costs and lease operating expenses (LOE) last year, and Ketter expects that momentum will carry forward into 2020. In the Turner formation within the PBR, Devon's costs have improved 33% since 2018.
"The Powder River Basin is an important part of who Devon is," Ketter said.
The DUG conference panelists agreed the PRB's land costs have declined over the last 12-24 months, and Anschutz's DeDominic said his company's LOE have fallen 25% in the last six months. Mills of Samson said that company's operating costs have declined by more than$1 per barrel since 2018. The third speaker, Devon's Ketter, agreed that land and services costs have declined materially, which he attributed to lower outright rates and improved efficiencies that come from more experience in the basin.
Samson's Mills added, "We have benefitted from the slowdown in other basins. As the Permian and Eagle Ford have slowed down, service costs have come down."
DeDominic of Anschutz said, "The PRB is a fairly low-risk, high-reward operation. Is it the big event the industry is looking for? No."
Operators identified water rights and lack of water infrastructure as obstacles that operators have had to overcome. Two of the speakers said their companies were trucking in their fracking water. Also, the water-to-oil ratio is roughly one-to-one, higher than other basins, which means there is more produced water to dispose of or recycle.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
