The revitalization of the mature Permian Basin in West Texas continued to capture industry attention on Thursday as Los Angeles-based Occidental Petroleum Corp.'s (Oxy) senior executive for U.S. operations called 2013 a "pivotal year" for transformation of Permian assets.
"We improved our capital efficiency by 25% and reduced our operating expenses by 17% [$3.22/bbl]," said Vicki Hollub, during Oxy's 4Q2013 earnings conference call, adding that the company also began emphasizing more horizontal drilling and unconventionals in the Permian.
Last year, Oxy drilled 49 horizontal wells, and 47 are completed and producing, Hollub said.
"The combination in well cost improvements, our own results and the results of our neighbors has given us the opportunity to dramatically shift our program to more horizontal drilling in 2014," she said, noting that this year Oxy plans to run about 22 rigs on average in the Permian with 17 drilling horizontal wells.
This year Oxy targets 325 new wells being drilled, of which at least half will be horizontal, Hollub said. Last year the company drilled 330 wells, of which about 15% were horizontal, she said.
A focus this year will be to map out the company's plans for hydraulic fracturing and proper well spacing throughout its Permian acreage, said Hollub, who touted Oxy's holdings as "one of the most promising and under-exploited portfolios in the basin." Last year, the company added 200,000 net acres to its Permian portfolio, giving Oxy about 1.9 million prospective acres.
She said Oxy has now identified about 4,500 drilling locations in the Permian, representing 1.2 billion bbl of resource potential. "We expect the [reserve] estimates to grow as we learn more," Hollub said.
Aside from its water and steam flood operations in the Permian, Oxy estimates that it has at least 15 years of growth opportunities in the area. The company plans to double its rigs in the Permian over the next three years, Hollub said.
Overall, the Permian Basin has accounted for about a quarter of all new land wells drilled in the U.S. over the last eight quarters, according to Baker Hughes data. In 4Q2013, the 2,351 wells drilled in the basin accounted for 26% of the U.S. total.
In another old, extensive western oilfield, the Los Angeles Basin where Oxy is based, Hollub said the company plans to spend $500 million in drilling its urban-centered properties is the Wilmington Basin in the Long Beach, CA, area and the adjacent Huntington Beach field to the south.
Hollub said the old Wilmington field last year "exceeded expectations" for drilling of 135 wells. Oxy will increase that to 145 wells this year, she said. As with the Permian, "our horizontal drilling program was particularly strong, and horizontal wells will represent an event greater percentage of our wells in 2014."