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Newfield Thinking 2017 Ramp-Up in Oklahoma’s SCOOP, STACK

Heading into 2017, Newfield Exploration Co. is preparing to accelerate activity in the Anadarko Basin, going from drilling to hold by production (HBP) to full-field development, the operator told analysts during a conference call Wednesday to discuss 3Q2016 results.

The exploration and production (E&P) company, headquartered in The Woodlands, north of Houston, is plotting its course for next year after striking a deal in August to sell nonstrategic acreage in Texas to focus on developing Oklahoma’s reservoirs in the STACK (the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties) and the SCOOP (the South Central Oklahoma Oil Province) (see Shale Daily, Aug. 3).

CEO Lee Boothby said the E&P has plenty of options to accelerate production growth or pull back should oil prices deteriorate.

“Even at today’s prices, we are seeing excellent returns in SCOOP and STACK and any uplift in oil prices from here simply brightens our view...We are working multiple scenarios today, scenarios that encompass lower-for-longer oil prices as well as more bullish cases that move oil prices to $50/bbl and higher...with prices strengthening from here we would expect to add significant drilling activity in the Anadarko Basin.”

Newfield expects 2016 capital expenditures to total $750 million, the upper end of its $700-750 million guidance, reflecting plans to add rigs to the Anadarko Basin later this year.

The August sale of its Eagle Ford Shale acreage and the other Texas assets provides a near-term cash infusion to accelerate SCOOP and STACK development depending on the price scenario, Boothby said.

Boothby said about 25 pilot wells from seven different operators are planned or running in the STACK. Newfield has or plans to have interest in close to half of these pilots, providing additional data for the operator to design its drilling and completion strategy.

“Spacing configurations today vary greatly with everything imaginable being tested. The good news is to date we have not seen any data that suggests any of the wells are being too tightly drilled,” Boothby said. “It is early, and we will need to capture 12-24 months of production data from these various pilots to make a more definitive final conclusion on optimized spacing.”

During the transition from pilots to multi-well pad development in the Anadarko, production results could be “lumpy” for a while as operators figure out how to deploy capital to go after the basin’s stacked targets, such as the Meramec formation.

“Do you decide you know the answer on how many layers there are and you drill all the wells right up front, or do you go through and attack a layer -- for instance, attack the Meramec, fully develop that and then come back later for the Osage, Woodford” and the others? “We’re just going to have to work through what the optimal scenario there is,” he said.

Drilling more wells on a pad up front could mean “capital burn for the better part of a year, and we’d be telling you that if we followed that approach fully and completely, that production occurs sometime the year following.”

Newfield has been moving toward larger completion designs in the Anadarko, with the E&P “seeing the same things in the SCOOP and STACK as in other active basins: bigger volumes and more proppant seems to be better when it comes to completions.” Newfield plans to use larger completions, with 2,100 pounds of sand/foot and 2,100 gallons of liquid/foot, on its upcoming Dorothy and Chlouber pilots, with production results expected early next year, he said.

Production for the quarter totaled 15.2 million boe, weighted 42% oil, 19% natural gas liquids and 39% natural gas. Domestic production totaled 14.3 million boe, with production from the Anadarko Basin averaging a record 93,400 boe/d.

Lease operating expenses totaled $60 million, down from $71 million in the year-ago quarter, while transportation and processing costs increased to $71 million from $52 million. General and administrative costs totaled $65 million, roughly flat from $66 million a year ago.

Newfield reported a net income for the third quarter of $48 million (24 cents/share), compared with a net loss of $1.23 billion (minus $7.52) in 3Q2015. Revenue totaled $392 million, compared with $377 million.

 

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