Houston-based Occidental Petroleum Corp.'s (Oxy) most significant U.S. oil and natural gas results in 3Q2017 were found in the Permian Basin's Sand Dunes area of New Mexico, where drilling results are shattering expectations, executives said Thursday during a conference call with analysts.
CEO Vicki Hollub said the well results were "exciting," and the team is "confident in its ability to sustain these results" and surpass a 2018 growth target of another 80,000 boe/d.
Despite a $70 million negative impact on quarterly income from Hurricane Harvey, Oxy had increases in net income year/year. Hollub said the hurricane's impact was on petrochemical and midstream businesses, a one-time event.
President Jody Elliott, who runs U.S. oil and gas operations, said the latest quarter produced "record-breaking results" in the greater Sand Dunes area across multiple benches. Oxy brought on seven wells with 30-day production rates averaging 3,750 boe/d, with three of the wells ranked among the 15 all-time best wells in the Permian, Elliott said.
The record results spanned the Second and Third Bone Spring and the Wolfcamp XY formations, "making the greater Sand Dunes area very attractive from a full-cycle returns perspective, and our engineering gives us confidence of repeat-ability of these results across the remaining 2,000 undeveloped locations in the greater Sand Dunes," Elliott said.
Oxy plans to shift one or two rigs to the area at the beginning of 2018, keeping the Permian rig count at its current 11-rig level. The number of wells online in the New Mexico area should increase to 26.
The Permian’s "strong growth" to return in 4Q2017 and into 2018.
In response to analysts' questions, Elliott said initial results from Sand Dunes were "very representative," with appraisal work in greenfield areas using the latest technology and four- and six-well pad development.
"We believe these initial well results extend across that inventory," he said.
With the better-than-expected initial drilling results, Hollub said that Oxy may reach its 80,000 boe/d added production overall earlier than by the end of next year. Oxy's increased use of 3-D seismic technology has given her confidence in predicting "what wells will do and where we need to drill," she said. New Mexico results are a major breakthrough, she added.
Net income was $190 million (25 cents/share) in 3Q2017, compared with year-ago losses of $241 million (minus 32 cents) and to sequential income of $507 million (66 cents). Revenue climbed to $1.9 billion from $1.7 billion in 3Q2016.