Bakken Operators Slash Budgets for 2015

Bakken Producers Slash 2015 Budgets
Bakken Producers Slash 2015 Budgets

As the free-fall in crude prices continues, major Bakken operators are expressing their caution by slashing their budgets for 2015.

Marathon Oil is the latest giant to announce that its projected budget will curb exploration spending by a whopping 20% for 2015. Though the company still forecasts spending in upwards of $4.4 billion, the decrease is another sign that the spiraling oil prices are casting a dark shadow over the incredible growth that is taking place in the shale regions.

We remain confident in our investment opportunities in the three U.S. resource plays,” Marathon Oil President and Chief Executive Officer Lee Tillman said in a statement. “Our 2015 capital program is not opportunity constrained but will reflect sound discipline in managing cash flows in the current price environment.

Related: Eagle Ford and Bakken Drilling Permits Fall 30%

This news comes as oil plunged Thursday to an incredible $54.11, prices not seen since 2009. And Marathon is not the only E&P company to back off on growth plans. ConocoPhillips is also shaving 20% off for 2015, by deferring investment in unconventional plays. The company, however, is continuing to affirm its commitment to Bakken region, which continues to be a major source of growth for the company. Bakken’s largest operator, Continental Resources, also seems to be getting skittish as it announced Wednesday it will reduce spending in 2015 by $600 million and delay new rig starts while they wait out the current situation.

For more on 2015 budgets visit Reuters.com

ConocoPhillips' Bakken Shale Production Up 80% in Q4 2013 to 43,000 boe/d

Bakken Rig
Bakken Rig

ConocoPhillips Bakken Shale production was 43,000 boe/d in the fourth-quarter of 2013, surpassing fourth quarter 2012 production of the formation by ~ 80%.

In the Lower 48 and Latin America, that accounted for about ~12% of the company's total production.

Read more: Conoco Phillips Increases Bakken Spending in its 2014 Budget

ConocoPhillips Production Growing Rapidly in the Bakken

In the fourth quarter of 2012, Conoco's Bakken production averaged 24,000 boe/d.

At the beginning of 2013, production was only expected to grow by 10%, but with the ~80% increase to 43,000 boe/d, Conoco is well within its 2013 target goal to produce an average of 40,000 boe/d over the next 4 - 5 years.

ConocoPhillips Capital Budget in Unconventional Drilling

In 2014, Conoco will spend ~$9 billion on its North American operations. Approximately $4.3 billion will be focused on the Bakken, Eagle Ford and Niobrara Shale. In 2013, Conoco's production in the Bakken, Eagle Ford and Permian grew 31% from ~167,000 boe/d in the fourth-quarter of 2012 to ~218,000 boe/d in 2013.

Bakken Contribution to Conoco's Reserves

The growth in unconventional drilling has contributed greatly to Conoco's reserves.

CEO Ryan Lance, said, “2013 was a significant year for the company and we achieved several important, strategic milestones... [the company] achieved conventional and unconventional exploration success... [and] our capital program yielded strong organic reserve replacement.

In 2013, Conoco added 470 million boe in Lower 48, primarily in liquids-rich shale plays, including the Bakken and Eagle Ford.

ConocoPhillips Production in 2013 and Plans Moving Forward at a Glance

  • ConocoPhillips Bakken Shale Q4 production up ~80% from 2012 to 43,000 boe/d
  • ~ 12% of ConocoPhillips Lower 48 Production is in Bakken
  • $4.3 billion will be focused on the Bakken, Eagle Ford and Niobrara Shale in 2014
  • 470 million boe in Lower 48 reserves added in 2013, primarily in liquids-rich shale plays, including the Bakken and Eagle Ford
  • 31% production growth in Bakken, Eagle Ford and Permian to ~218,000 boe/d in Q4 2013

Read more at ConocoPhillips.com

ConocoPhillips Increases Bakken Spending in Its 2014 Budget

ConocoPhillips Bakken Leashold and Mineral Acreage Map
ConocoPhillips Bakken Leashold and Mineral Acreage Map

ConocoPhillips' 2014 budget includes spending $16.7 billion, with 55% of the total allocated to North America.

Within North America, Conoco expects continued growth from the Eagle Ford, Bakken, and Permian plays.

Approximately $4.3 billion will be spent on development drilling in the Lower 48 states. The budget includes increased investment in the drilling programs in the Eagle Ford, Bakken and Permian.

2014 is an important year for ConocoPhillips,” said Ryan Lance, chairman and chief executive officer. “Since becoming an independent E&P company, we have set out to deliver a unique value proposition of 3 to 5 percent volume and margin growth with a compelling dividend.

Conoco has a five-year plan to spend $5 billion in the Bakken to grow production to more than 50,000 boe/d by 2017. The company has over 626,000 acres prospective for the Bakken and estimates a drilling inventory of more than 1,400 wells.

Read more at conocophillips.com

Oil & Gas Industry Focused on Innovation - Deloitte Oil & Gas Conference

Deloitte - Technically Recoverable Tight Oil
Deloitte - Technically Recoverable Tight Oil

Several key leaders from across the industry shared their optimism at the annual Deloitte Oil & Gas Conference on November 16th.

The conference agenda covers the global oil & gas industry, but US shale plays dominated the conference. Many of the speakers reiterated that we're no longer in a "shale revolution", but a renaissance that will last for years to come.

The industry is focused on innovation. New technologies are needed to address challenges presented in shale development. Whether it is lowering operating costs or utilizing currently flared gas through a gas-to-liquids (GTL) process, the industry sees room for growth.

A few key points and statistics we noted while at the conference:

  • Oil production has grown to 1980s levels
  • 15% of technically recoverable shale gas and 17% of technically recoverable shale oil resources globally are located in the US
  • The US will pass Russia as leading O&G producer this year; will pass Saudi Arabia next year
  • Shale has increased our current trade balance by $200 million/yr and is predicted to give us oil independence by 2020
  • US has increasing geopolitical influence in critical regions due to growing oil & gas production
  • The oil export ban needs reform. Otherwise, refinery changes are needed and we will consume more expensive crude.
  • Operators are focused on cutting costs to increase valuations
  • According to Maynard Holt, "we may be in the 8th inning of the shale game, but we're in the 3rd inning of the completion/cocktail game"
  • Since 2008, foreign firms have invested over $100 billion in US unconventional assets
  • Over that period, Chinese companies have spent $44 billion to acquire N. America based energy firms and assets
  • Gas-to-liquids technology is becoming more and more attractive with current oil and gas prices
  • Skip Horvath, Natural Gas Supply Association predicts that natural gas will hit $6.00 by 2020, "assuming Washington leaves us alone over the next few years."

"This boom isn't just for a few years. We believe the shale revolution really has staying power" -Ryan Lance, ConocoPhillips CEO

About the Deloitte Oil & Gas Conference

The Deloitte Oil & Gas Conference is an annual conference for oil and gas executives and leading industry experts to share their views on important issues facing the global oil and gas industry. The objective of this conference is to provide a forum for executives and managers from companies in all sectors of the oil and gas industry, commercial and investment bankers, industry analysts, service providers to the oil and gas industry, representatives of government agencies, trade groups and policy planners, to understand emerging issues.

ConocoPhillips' Bakken Oil Production Impacted By Bad Weather - Still Growing

ConocoPhillips Bakken Leashold and Mineral Acreage Map
ConocoPhillips Bakken Leashold and Mineral Acreage Map

ConocoPhillips' Bakken production grew 3% over the first quarter to average 30,000 boe/d in the second quarter of 2013. Production was impacted by extreme weather in May and June, but the company stated it is "back on track" and running 11 rigs in the region.

See related article: Wet Weather Forcing Delays in Bakken Oilfield.

Conoco plans to grow production from 30,000 boe/d to 45,000 boe/d by 2017. Current development plans project to more like 50,000 boe/d or more over the next few years. It's safe to say the company's published estimates are conservative.

ConocoPhillips has an over 600,000 acre position in the Bakken and expects its ultimate resource potential is more than 600 million barrels.

Read the company's full press release at conocophillips.com