HOUSTON—Whether an oil and gas company opts to develop resources in the Lower 48 or international deepwater boils down to taste, panelists said at the NAPE Global Business Conference in early February.

Does the company prefer the predictability of conventional U.S. plays or how cash flow generative international projects can be once in motion? What about how lengthy international projects can be from lease to first oil? Or fluctuating oil prices that loom overplays globally causing hesitation? Could the company successfully pursue both?

In deciding between the two, or both, a keen focus and set of interests are pertinent parts of a company’s strategy. That was the view of panelists Graeme Gordon, Hess Corp.’s (NYSE: HES) manager of exploration, and Steven Otillar, partner at Akin Gump Strauss Hauer & Feld LLP.

“What we’re certainly seeing is different companies doing strategically different things; some companies are putting all their capital into onshore [while] other companies have a mixture,” Gordon said Feb. 7.

Both speakers agree that deepwater and onshore aren’t in competition but are facing external threats that sway companies in either direction.

On the international front, Otillar and Gordon dived into components steering companies away from exploring deepwater projects.

Otillar pointed out how long development timelines have halted some operators from moving forward. From lease to first oil, some companies can face—give or take—a nine-year gap during which they experience negative cash flow from the start.

“There are ways to reduce that timeline. Obviously, if you’re going near infrastructure it means that cash flow can be a lot less, but if you’re going for a greenfield you have to take some risks upfront if its big enough,” Gordon said.

He also noted the importance of looking at the full chain economics in these cases. Locking in proper well rates, getting cost structure under control and making breakevens as low as possible, he said, are the “flavor of the month metrics” that make for a good strategic trajectory.

“It’s really going to have to be focused. … Only the best projects are going to move forward right now,” Gordon said.

For those leaning toward the Lower 48, being at the right play at the right time is important.

In October 2017, Hess divested $2.65 billion in its overseas assets to focus on its higher-return assets such as the Bakken. Hess’ divestiture from its Norway ties through back-to-back deals was a part of its strategy to pivot from costly and mature areas.

RELATED: Hess’ Offshore Deals Haul In $2.6 Billion; Free Cash For Bakken, Guyana

“All the majors are somewhat obligated to focus on their core assets,” Otillar said. “You can either monetize that asset or let it go.”

According to Otillar, Marathon Oil Corp. (NYSE: MRO) increased its capex for E&P by 60% but planned to put 90% of its dollars toward the Lower 48. On the other hand, he added, ConocoPhillips Co. (NYSE: COP) would be going 50/50 on international and domestic spending.

“A lot depends on your assets and your current portfolio,” he said. “I still don’t feel the international pull that we’ve seen before because it just seems that on the supply side there’s still a lot of room to grow.”

But Otillar contends there are also threats emerging against the Lower 48. The Permian’s Delaware Basin, he said, has run out of “reasonably priced core areas.” He doesn’t see what more can be done in the basin at current acreage prices.

“As we’ve run out of reasonably priced core areas I think the threat is not so much the international. I think it’s just a different skill set entirely. It’s going to be folks looking at different opportunities around the world,” he said.

For example, A&D activity in the Permian Basin saw acreage prices soar within the past several years, peaking with QEP Resources Inc.’s (NYSE: QEP) $57,000 per acre Midland Basin acquisition in October 2016.

With growing activity and over-drilling, Otillar said he is concerned the Lower 48’s “core of the core” sweet spots will run out of juice. He suggested companies consider moving into the more risky, noncore areas and pushing the boundaries to get the returns.

Still, the geology of the U.S. has made it highly favored for those stuck between setting up shop onshore or offshore.

While the Lower 48 and international deepwater share a fair amount of risks, there are lucrative opportunities that can be found in both with the right strategy, Gordon said.

“It’s going to have to be this mix between the two,” he said. “It’s just how you position yourself.”

Mary Holcomb can be reached at mholcomb@hartenergy.com.