On Wednesday, OPEC’s secretary-general Abdalla Salem el-Badri told an energy conference that oil price weakness would likely hit output of shale oil hard, the Wall Street Journal reported. “At this price, 50% of tight oil will be out of the market,” el-Badri said.
However, established producers in Colorado’s prolific Wattenberg field seem more likely to ignore OPEC and stick to the business of producing oil from the liquids-rich Niobrara and Codell shales in the DJ Basin. Yesterday, Synergy Resources (ticker: SYRG), Noble Energy (ticker: NBL) and Anadarko Petroleum (ticker: APC) all reported growing production from the Wattenberg Field.
Synergy Doubles Wattenberg Production
Synergy Resources’ net oil and natural gas production of 542,207 BOE (all from the Wattenberg field) more than doubled in its fiscal fourth quarter which ended Aug. 31, 2014, compared to its Q413 production. Synergy averaged 5,894 BOEPD versus 2,479 BOEPD, respectively, aided by bringing online 31 gross new operated horizontal wells. Estimated proved reserves for Q4’14 increased to 16.3 MMBO and 95.2 MMcf of gas for a total of 32.2 MMBOE.
The company currently operates 314 wells and has 298,000 net acres in the DJ Basin. Liquids consisted of 89% of production in Q3’14. Three horizontal drilling rigs are currently in operation and SYRG plans to expend $200-$210 million in fiscal 2015. In addition to its operated horizontal wells Synergy has participated in over 77 gross horizontal wells in the past three years as a non-operator.
For FY2014, Synergy reported $104 million in revenue. Its operating income for the fiscal year more than doubled to $43.5 million, compared to $19.5 million in FY 2013. Net income was $28.9 million, or $0.37 per share, for FY 2014. To date, all of Synergy’s operations have centered in the Wattenberg Field.
$60 – $75 Oil: Business as Usual for Synergy
On Synergy’s earnings call yesterday, co-CEO Ed Holloway addressed the issue of oil prices: “First of all, it’s important for our shareholders to know that over a year ago, when we were setting our strategies and budgets for fiscal 2014 and ‘15, we used $75 of net oil price in our model. While recent oil prices’ volatility is concerning, it’s not a surprise to us, nor were we counting on $100 oil to execute our plans and grow our company.
“We recently ran an analysis of operating at $60 per net barrel of oil, $4 net Mcf of gas, and our EBITDA margin on revenue was over 60% without factoring in any benefit from lower service and drilling costs, which we’d likely incur if commodity prices were to drop further and remain low.”
Synergy is running a three-rig drill program in the Wattenberg.
Noble Energy Q3: DJ Sales Volume Up 15%
Noble Energy reported sales volumes from its DJ Basin operations averaged 102 MBOEPD for Q3 2014, up 15 percent. Liquids made up 67 percent of DJ Basin volumes for Q3 2014 (49 percent crude oil and condensate and 18 percent natural gas liquids), and 33% was natural gas. Noble said its quarterly horizontal volumes in the DJ totaled 74 MBOEPD for the third quarter of 2014, up 30% from the same quarter of last year. The company drilled 75 wells in Q3, including 22 extended reach laterals, for an average lateral length of more than 6,000 feet, and it commenced production on 73 operated wells. Noble is currently operating nine drilling rigs in the DJ Basin.
Noble Energy announced third quarter 2014 net income of $419 million, or $1.12 per diluted share. Noble reported third quarter 2014 adjusted income was $110 million, or $0.28 per diluted share. Net cash provided by operating activities was $945 million. Capital expenditures for the third quarter of 2014 totaled $1.3 billion.
On its Q3 earnings call, Noble’s executives gave no specific details to questions about the effect of the recent commodities price downswing on the company’s 2015 capital allocation plans.
Anadarko Q3: Doubled Wattenberg Sales Volume, Cut Drilling Days to 8.2
Anadarko Petroleum doubled its year-over-year oil sales volumes in the Wattenberg field during the third quarter and averaged approximately 189,000 BOEPD net, an increase of 88%. Liquids sales volumes increased by 75,000 BOEPD (130%) over Q313. Anadarko operated an average of 12 horizontal rigs and drilled 97 wells (136 type-well equivalents) during the quarter. The company’s operated horizontal program averaged more than 143,000 BOEPD, up 155% from Q313. Anadarko reduced drilling cycle times during the quarter to 8.2 days for short laterals from spud-to-rig-release.
Anadarko’s third-quarter 2014 net income attributable to common stockholders was $1.087 billion, or $2.12 per share (diluted). These results include certain items typically excluded by the investment community in published estimates.
R.A. Walker, Anadarko’s Chairman and CEO, answered the commodities pricing question this way: “I think our current view on commodity prices is we want to watch this environment run a little longer. I think we all are recognizing that this is a very steep decline we’ve seen.
“The market has in most people’s estimation not quite found the equilibrium and we don’t know if that’s going to be at a higher price than where the current curve looks like or something lower. So I think as it relates to allocation of capital in ’15, … and our growth associated with that, we’re probably going to want to watch this for a few more months.”
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