DENVER—High-intensity completions, including 10 million pound and higher frac jobs, are resulting in “high capital efficiency” that allows Oasis Petroleum Inc. to grow production at “mid-double digit” rates, while spending within cash flow at a $50 per barrel (bbl) West Texas Intermediate (WTI) price, company president Taylor Reid told attendees of Hart Energy’s recently held DUG Bakken & Niobrara conference.

Moreover, the company expects to continue growing at similar rates in 2017 and 2018, while generating free cash flow—that is, cash flow in excess capex—from its Willison Basin operations. This assumes only historical productivity levels, Oasis noted, whereas wells will be using higher intensity completions.

Reid said Oasis Petroleum was “very encouraged” by recent results from Bakken wells in its Wild Basin area using 10 million and 20 million pound frac jobs.

Once past a 120-day facility-constraint, for example, a Bakken well using a 20 million-pound frac job was trending towards an estimated ultimate recovery (EUR) of 1.8 million to 2 million barrels of oil equivalent (MMboe), according to Reid. This compares with an existing type curve of 1.55 MMboe for a well using a 4 million-pound frac job. A well using a 10 million-pound frac job was also “substantially outperforming” the type curve, with the improved results showing up earlier due to the absence of a facility constraint.

“We’ve moved our completion program this year from an average of a little over 4 million pounds last year to an average of 10 million pounds this year for our high-intensity fracs,” Reid said. “And we’ll be testing 20million- and 30 million-pound frac jobs, as well.”

Oasis estimated that it currently has some 770 gross locations in its “core” Wild Horse and Indian Hills areas, which have WTI breakeven prices of sub-$40/bbl. Coupled with 844 locations in “extended core” areas with breakeven costs below $45/bbl, Oasis said it had over 20 years of “highly economic inventory at current pace of completion.” Inventory has grown through acquisitions and by driving down breakeven costs with the higher intensity completions.

For 2017, Oasis has planned for capex of $605 million, to be spent mainly in its key Wild Horse area.

Oasis plans to add two rigs at mid-year, for a total of four rigs, and to build up its inventory of drilled-but-uncompleted (DUC) wells. Factoring in its asset acquisition from SM Energy Co., Oasis projected its production would grow from 62,000 boe/d in the fourth quarter of last year to a 2017 exit rate of 72,000 boe/d, representing an increase of 16%. For next year, Oasis projected a further rise of over 15% in output to north of 83,000 boe/d at year-end with a five-rig program.

Narrowing differentials are also expected to help Willison Basin economics as a result of the startup of the Dakota Access Pipeline. Differentials are projected to fall to $2/bbl to $3/bbl from $4.76/bbl in 2016 and as much as $9.34/bbl in 2014.

“For the first time in many years, since the 2009 timeframe, there’s going to be enough pipe capacity to move all the volumes out of the basin,” Reid said.

In terms of improving capital efficiency, well costs of $10.6 million in 2014 have fallen to $5.5 million and $6.5 million, respectively, for wells with 4 million-pound and 10 million-pound frac jobs. Although well costs are $1 million higher for the latter wells, Oasis believes the higher intensity wells will deliver “at least a 25% uplift” in EUR, Reid said, with further improvement in economics if the $6.5 million well cost can be brought down over time as more such wells are drilled.

Lower well costs have cut finding and development (F&D) costs at the wellhead down from a base of $14/boe in 2014 to about $6/boe for “core” areas apart from Wild Horse. For Wild Horse on its own, F&D costs have fallen to as low as $4/bbl, “which is huge,” Reid said.

Reid identified infrastructure as important on several fronts, not just in terms oil price realizations as producers transport oil to market. In addition, produced water is a major cost, and gas infrastructure requires attention, according to Oasis.

“Capturing that water efficiently, putting it into gathering systems, and putting it into disposal wells, is the best way to combat your lease operating expense (LOE),” Reid said. “And infrastructure is becoming equally important on the gas side of the business. If you can’t capture the gas, given the flaring laws in North Dakota, you’re going to have a problem.”

For Oasis, its gas gathering and water handling infrastructure generated $80 million in EBITDA in 2016, and it is projected to generate at an annualized rate of $155 million by the fourth quarter of 2017.

For reasons of lowering LOE and gas capture, Oasis’ infrastructure “is a strategic asset for our overall operations,” Reid said. And while offers for the asset were rejected in the downturn as not compelling, “it continues to be one that provides an avenue to monetization in the future.”

Chris Sheehan can be reached at csheehan@hartenergy.com.