Three independent producers took the stage at Oil and Gas Investor ’s 5 th annual Energy Capital Conference in Houston in June to discuss pricing and challenges facing E&Ps in today’s economic environment.
Floyd Wilson is chairman and chief executive of the newly formed Halcon Resources Corp., already with positions in nine oil-targeted resource plays and $1.5 billion in acquisitions since January. Wilson sold his Petrohawk Resources Corp. to BHP Billiton in 2011 for $15 billion.
Tom Ward is chairman and CEO of SandRidge Energy Inc. A historical gas-weighted company, SandRidge over the past three years has refocused to oil and natural gas liquids through aggressive acquisitions and leasing.
Jim Denny is executive vice president of operations for Magnum Hunter Resources. Magnum Hunter has operations in the Marcellus shale of West Virginia, the Bakken shale in the North Dakota Williston Basin, and the Eagle Ford shale in South Texas.
Highlights of their comments follow.
On horizontal oil development and the price of crude:
The U.S. has “a bursting basket” of shales and producers are just now starting to unlock the reserves, said Halcon’s Floyd Wilson. “We’ve seen wells come on at rates higher than I’ve seen in my life. We’re seeing wells like we’ve never dreamed” of because of technology.
As a result of new domestic oil coming online, he anticipates there is going to be a reset of the discovery price of crude based on new supply. “There is going to be some turmoil in the pricing,” he said. “It’s difficult to think you’re going to have a stable oil price going forward.”
SandRidge’s Tom Ward sees $85 oil as the new normal based specifically on finding and development costs. He notes the largest oil companies in the world are coming to the U.S. to drill.
“There is a tremendous amount of supply, but it does cost more to get that supply out. Somewhere around $85 you can make a decent return, but below that returns start to fall out.”
The recent downward trend of crude does not have Ward concerned about laying down oil rigs, when queried. In fact, “At $80 to $90 oil is where we start buying. In the Permian, we start hedging.”
Wilson shared the sentiment: “At $80 to $90, it’s all pretty good.”
Magnum Hunter’s Jim Denny has a slightly higher view. “Ninety dollars is probably the inherent price of oil right now.