EnerCom Dallas E&Ps are positioned for whatever 2019 offers up
The 2019 EnerCom Dallas oil and gas investor conference, which is taking place 48 stories above the streets of downtown Dallas this week, presented oil and gas producers and institutional investors a terrific view of some extra thick Texas-sized fog on Wednesday, along with a diversified group of presenting companies in U.S. shale basins, the Gulf of Mexico and Latin America.
EnerCom CEO Glen Parrott opened the conference with a look back through the morning fog at 2018 and a view ahead of what the industry has in store for 2019. In a section of his talk entitled “Downturns Then and Now,” Parrott pointed out how drilling and completions technologies have allowed rig counts to decline by 40% compared to pre-2014 downturn levels, and yet in 2018 the industry was still able to generate new production. Parrott said, 729 rigs will be required to keep production constant in 2019.
Coming to the rescue in the Permian Basin in 2019 will be new takeaway for both the booming oil and natural gas production that is coming out of the basin. Parrott outlined new pipeline capacity of 2.1 million barrels of oil per day and 3.8 Bcf/day of natural gas takeaway scheduled to be completed in the Permian in the second half of 2019. Meantime E&P spending in 2019 is going from flat to down, Parrott said, projecting that the industry would see a 64% decrease in spending, driven largely by lower commodities prices, debt reductions and investor pressure.
Wild cards lurking in 2019
Parrott mentioned some of 2019’s wild cards:
- Will OPEC+ extend the production cuts past June?
- Will the Iranian sanction waivers expire in May?
- Canada’s provincial cuts will destroy demand for U.S. natural gas liquids – how long will they last?
- The Green New Deal: as unrealistic as its promises may be, its chief promoter is a 29-year-old millennial powerhouse–New York Congresswoman Alexandria Ocasio-Cortez, a self-declared Democratic Socialist, who has shown a strong influence on young voters. The energy wild card is that the GND that she and other Democrats are heavily promoting seeks to move the U.S. totally off of fossil fuels within 10 years. Parrott pointed out that she tweets as much as President Trump.
The E&P investor presentations at EnerCom Dallas began with Unit Corp. (stock ticker: UNT, $UNT) President and CEO Larry Pinkston saying, “Unit is in as good a shape as I’ve seen it in 38 years with the company.” Pinkston said that Unit’s E&P segment would continue drilling during the first half of 2019. The company would take stock at midyear and slow down in the second half if oil prices have not improved. Pinkston said Unit’s business plan has been to replace 150% of reserves every year. He said the company plans to spend between $270 million and $315 million in 2019.
GeoPark (stock ticker: GPRK, $GPRK) founder and CEO Jim Park gave a full rundown of his company’s operations in five countries in Latin America. “While our North American oil brothers have been scrapping for every acre, this whole southern continent has been left wide open,” Park said. GeoPark has put together five million acres and the company has “a continuous 16-year growth track record. We’re on the NYSE and we were the number one performing E&P stock in 2017 and 2018,” Park said.
“Volatility is our life in this industry and we say ‘bring it on’.”
Park said that his company has been successful at putting capital where it does the most good. He said the 2019 spend is targeting $220 million to $240 million and that $100 million of that is earmarked for GeoPark’s Peru project. “We were invited by Peru to participate in their return to the upstream business.”
http://www.enercomdallas.com/company-pages/geopark/
“This is not the old Haynesville. This is the renaissance of the Haynesville,” Goodrich Petroleum (stock ticker: GDP, $GDP) President and COO Rob Turnham told the EnerCom Dallas crowd during the Goodrich Petroleum presentation. “What’s made the play is completion evolution.” Clearly the best EURs in the play are highly correlated with proppant per foot.” Turnham said that 3,500 pounds per foot is the midpoint for Goodrich’s Haynesville wells. He said that the company has refined the program to the point where they spend 80% of the capital to get 2.5 times the results. Turnham said the Haynesville returns are better than many of the oil basins.
http://www.enercomdallas.com/company-pages/goodrich-petroleum/
Talos Energy (stock ticker symbol: TALO, $TALO) Founder, President and CEO Tim Duncan talked about his company’s efforts on the Mexico side of the Gulf of Mexico. “We were the first to win something after 80 years of no private companies. “They were expecting Exxon and they got us,” Duncan joked. “The government had set up a low barrier of entry, so we were able to get in and compete with the Hunts, the Shells and the Enis.”
Talos participated in what Duncan called “a heck of a discovery in shallow water.”
http://www.enercomdallas.com/company-pages/talos-energy/
Fleur de Lis Energy is both a fund and an operator. Fleur de Lis SVP Chris Holley described the firm as a one-stop shop. “We are an acquisition company.” Holly said that when the firm evaluates an asset, “we manage around three things: reserves, operations, commodity price.”
When the firm buys an asset Holly said it puts in place a very robust hedging strategy. “It locks in our return–we’re hedged through payout. We tell our PE partners, direct invest partners and royalty partners, we are highly confident we won’t impair any of your capital.”
Looking back through the M&A in 2018, Holly said, “there is no better time for us to be in the market than when one company buys another and the buyer is trying to decide what’s core and what’s non-core. ”Holly said In the first half of 2019, FDL is anticipating to review ~$2.9 Billion worth of assets.
http://www.enercomdallas.com/company-pages/fleur-de-lis/
