Shale Daily / Gulf Coast / Eagle Ford Shale / E&P / Permian Basin / NGI All News Access

Oxy Execs Tout Analytics Skills in Squeezing Out Higher Production

Back in the black and confident its refocused operations will stay there with a Permian Basin emphasis, Occidental Petroleum Corp. (Oxy) on Thursday detailed its deployment of various analytics to get better results out of reconfigured reserves following the sale of its South Texas assets.

CEO Vicki Hollub emphasized that Oxy's closing of the sale of South Texas natural gas properties marks the final step in the company's four-year effort to divest what it considers to be low-margin, low-return assets in order to concentrate on its higher-potential holdings in the Permian Basin and a number of overseas plays.

The net after tax proceeds of about $600 million from the South Texas sale will be re-deployed in the Permian, Hollub said during a conference call with analysts.

"Given that Permian margins are three times higher than South Texas gas, only 9,000 boe/d of Permian resources production is needed to replace the cash flow from South Texas' 27,000 boe/d production," she said. "This is part of a deliberate, high-return growth strategy."

Hollub and Jody Elliott, president of U.S. oil/gas operations, said Oxy's ability to deploy analytics and operational expertise will squeeze even higher returns out of what they consider to be a portfolio of the highest quality assets in both the Permian and overseas. "Our organization and culture in grounded in producing more oil at less cost," Hollub said.

Elliott said that superior use of analytics is the key. "It is really multiple areas that make the difference," he said. "We're combining more geologic and completion data to speed up the process of finding optimum frack [hydraulic fracturing] designs.

"We're using analytics, Oxy's own drilling dynamics, and what we call 'drilling dynamics II,' which injects more predictable on motor yields and performance in a program centered on reservoir modeling. In general, we are excited about what analytics can do to create real step changes to our business going forward."

The foundation for Oxy's approach is establishing what Elliott called "a key understanding of the reservoir," determining if the underlying rock has higher concentrations of conventional fabric or is a source rock shale that is very organic.

Hollub said all of Oxy's assets are producing double-digit returns, and it is now in a position to take full advantage of that.

"In a cyclic industry like we're in, we were in a position in which we were very much impacted by changes in oil prices, but now we're in a situation where we are generating positive earnings and positive returns on capital deployed," Hollub said. "We've gone through the painful process of exiting assets producing 300,000 boe/d in which every dollar we spent was a high-cost, low-return project to a position in which we can grow production with the best possible quality assets."

For 1Q2017, Oxy reported net income of $117 million (15 cents/share), compared with a loss of $272 million (minus 36 cents) for 4Q2016. On average daily production from all its operations, Oxy produced 584,000 boe/d in 1Q2017, 129,000 boe/d in the Permian, which represented a 6,000 boe/d increase over the final quarter last year.

ISSN © 2577-9877 | ISSN © 2158-8023

Recent Articles by Richard Nemec

Comments powered by Disqus