Four presenters at EnerCom’s 22nd The Oil & Gas Conference® announced earnings and operational updates for Q2.

Northern Oil and Gas

Northern Oil and Gas (ticker: NOG) said that its average production had grown 4% from the first quarter to the second, up to 13,794 BOEPD. The company produced a total of 1,255,280 BOE over the course of the quarter.

During the second quarter it added 4.3 net wells to production. As of the end of June, 2017 Northern had 16.1 net wells with an internal rate of return of approximately 30% at $50 per barrel pricing. At the same time, the company had leased approximately 148,571 net acres in the Williston basin and Three Forks formations. Approximately 86% of its acreage position in North Dakota—84% of its total acreage—was developed, held by production, or held by operations.

Tom Stoelk, Northern’s interim CEO and CFO, said that the company’s production was above the company’s expectations.

The company’s capital expenditures totaled $30.7 million

Northern Oil and Gas Q2, 2017 Earnings Call Q&A

Q: In terms of M&A’s Northern said that it would rather by a buyer than a seller. What kind of deal would Northern look for on the acquisition side and what factors would the company consider?

A: I think we’d evaluate it very carefully … but size would definitely be a factor with respect to it. We have had and continue to have discussions with capital providers that have suggested joint venture type things, so you might enter into a kind of sidecar sort of situation with respect to it. If the transactional size were, let’s say, $50 million or below I think we probably looked pretty hard, it probably kind to do most of it internally, possibly going to the equity market with respect to that. Equity has suffered recently obviously but I think hopefully our improved performance and what people look at the quality of really our assets, the deep inventory of wells that we have high average IRRs, really demonstrated over the period. The mix of kind of what we’re participating in is enhanced completions, which are really driving the returns in the EURs participating in.

A lot of the best wells are in the Basin. So, I think it’d be – if it were a larger size, we’d probably have to bring a partner in with respect to that.

Key Energy Services

In its Q2 update, Key Energy Services (ticker: KEG) said that its revenues in its Fluid Management service grew by 5.4% over Q1 revenues to $18.9 million. Its Coiled Tubing services revenues experienced even more growth, climbing 71.6% over Q1, up to $9.2 million.

The company’s largest, completion driven coiled tubing units experienced an increase of 110% in activity levels—as the company deployed a large-diameter unit early in the quarter. The company also experienced 17% higher pricing on the coiled tubing units.

The company divested non-essential assets for approximately $20.7 million. The majority of the assets divested were frac-stack and well testing assets, formerly within its Fishing and Rental Services segment.

Key’s president and CEO, Robert Drummond, said that Key’s customers have “allocated more of their incoming cash flows to growth-oriented new well drilling and completion rather than production maintenance spending,” and believes that, as customers’ cash flow increases “they will increase their spending on production maintenance activities.”

Midstates Petroleum

Midstates Petroleum (ticker: MPO) reported a net income of $13.7 million during Q2. The company’s production averaged 22,490 BOEPD during Q2—81% of which was sourced from the company’s Mississippian Lime acreage where it added a second rig. The remainder of the production was sourced from the Anadarko basin.

Midstates’ production was comprised of 29% oil, 25% NGLs and 46% natural gas.

During Q2, the company invested approximately $25.9 million of operating capital. Most of that capital was directed toward development in the Mississippian Lime assets. Over the course of the quarter, the company spud seven wells and put four wells on production. Midstates’ average drilling, completion and facility costs came in around $2.8 million for the first half of 2017.

The company sold non-core assets in Lincoln County, Oklahoma for $7.0 million, during July and has engaged SunTrust Robinson Humphrey in order to explore strategic alternatives for its Anadarko and NW STACK acreage. Midstates intends to transition to a Mississippian Lime pure-play company.

Penn Virginia

In its second quarter update, Penn Virginia Corporation (ticker: PVAC) announced that its production had reached 10,159 BOEPD during the second quarter—74% oil, and 8% higher than the company’s Q1 production.

The company’s net income for the second quarter totaled $21.3 million.

The company said that performance out of its Lager 3H well has exceeded company expectations, producing at a rate of 1,000 BOEPD at 70% crude oil over the course of 95 days. It also had success out of its Zebra 6H and 7H wells.

Penn Virginia agreed to purchase 19,600 net acres from Devon contiguous to its Eagle Ford acreage for $205 million—further allowing the company to drill extended lateral wells in the area. In the new acreage, the company has identified 91 gross potential drilling locations targeting the lower Eagle Ford formation, with 43 of those as potential extended reach lateral locations. The company also said that potential existed for testing in the upper Eagle Ford and Austin Chalk, in its new acreage.

Over the course of the quarter, Penn Virginia drilled seven gross (2.3 net) wells and brought seven gross (3.0 gross) wells to production in the Eagle Ford. The company began completion activities on its eight-well pad, formed by two pads—the Chicken Hawk and Jake Berger four-well pads. Penn Virginia increased its acreage to approximately 57,000 net acres through the lease or extension of approximately 1,000 acres.

Penn Virginia updated its guidance to reflect its new acquisition. The new full year production guidance was set to between 10,600 and 11,200 BOEPD, and the new full year capital expenditures guidance was set to between $140 and $160 million.

Penn Virginia Q2, 2017 Earnings Call Q&A

Q: Looking at the upper Eagle Ford and the Austin Chalk, how do you see testing those zones as we move into 2018?

A: Well, we’re currently testing two upper Eagle Ford completions on our super pad, those are two 4 well pads that are adjacent in each one of those has a upper Eagle Ford completion in them and they are offset by a lower Eagle Ford completion and in both instances for both pads, they will be traced and we’ll be able to evaluate any contribution or cross talk between the two formations, that’s an area where we’ve had some success in the past in the upper Eagle Ford.

So we’re excited to see what these will do with a slickwater completion. In terms of the Austin Chalk, that’s probably third on the list of things that we’re going to focus on, obviously being the lower Eagle Ford, the Upper Eagle Ford and then the Chalk, but the upper Eagle Ford, we do intend to test in the near future as well as probably in the 18th as well and it will probably be in co-development phase where will stack and staggered next to another one.

Northern Oil and Gas, Key Energy Services, Midstates Petroleum, and Penn Virginia Corp. are presenting at EnerCom’s The Oil & Gas Conference® 22

NOG, KEG, MPO, and PVAC will be presenting companies at the upcoming EnerCom conference in Denver, Colorado—The Oil & Gas Conference® 22.

The conference is EnerCom’s 22nd Denver-based oil and gas focused investor conference, bringing together publicly traded E&Ps and oilfield service and technology companies with institutional investors.  The conference will be at the Denver Downtown Westin Hotel, August 13-17, 2017. To register for The Oil & Gas Conference® 22 please visit the conference website.


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