Roan Resources LLC executives said their new pure-play exploration and production (E&P) company plans to deploy an eighth rig in Oklahoma’s stacked plays by the end of the year, with a goal of more than doubling production by the end of 2019.
Executives also touted well economics and the leasehold’s proximity to the Cushing, OK, crude oil terminal among reasons to invest in the Oklahoma City-based E&P during a call with investors Tuesday. It was held one week before Linn Energy Inc., which will own half of the equity interest, separates into two standalone companies.
“Roan has a best-case scenario of being in an area with an optimal hydrocarbon phase, excellent reservoir properties, and at a depth where we capitalize on cost savings through operational efficiencies,” said Roan’s Greg Condray, executive vice president for geoscience and business development.
Roan plans to ramp up production from a rate of 45,000 boe/d (54% liquids) in 2Q2018 to 61,000 boe/d (61% liquids) by year’s end. It plans to boost production even further into 2019, exiting at a rate of 94,000 boe/d (62% liquids). By comparison, production history by Roan predecessors companies Linn and Tulsa-based Citizen Energy II LLC was 20,100 boe/d in 2Q2017.
Roan holds 154,000 net acres in central Oklahoma, about 65 miles southwest of Cushing. Its position includes portions of the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties, aka the STACK, and the South Central Oklahoma Oil Province, aka the SCOOP. Sandwiched between them both is the Merge prospect, a legacy area with several zones Roan intends to target.
While operators deployed in the SCOOP and STACK plays are targeting the Woodford trend of the Anadarko Basin and the Meramec formation, respectively, Roan plans to focus on oil targets in the Merge including the Woodford and four drillable benches within the Mayes formation, a zone measuring 40-250 feet in thickness.
“The Merge is a relatively new play, but has been essentially de-risked due to the long history of vertical production in the area, in addition to the horizontal activity which is now more than 100 wells,” Condray said. “Even though our core operational area is significantly more shallow than other operators, we still see pore pressure gradients that are slightly or significantly over pressured.”
Condray said pore pressure gradients in Roan’s core area in the Merge ranges from 0.45-0.52 psi/foot and most of the acreage has a total drilling depth of less than 10,000 feet.
According to the company, the rate of return for the Merge wells is about 74%, assuming a West Texas Intermediate price of $55/bbl and a Henry Hub price of $3/MMBtu.
Last week, Linn’s board unanimously approved plans to split Roan into a separate company by Aug. 7. Under the separation plans, Houston-based Linn would own a 50% equity interest, while Roan Holdings LLC, the successor to Citizen, would hold the remaining 50% stake.
Linn’s board also approved spinning off Riviera Resources LLC, an upstream and midstream outfit with assets in several unconventional regions that initially include Blue Mountain Midstream LLC, Linn’s midstream subsidiary. Linn stockholders on Friday (Aug. 3) are to receive one share of Riviera. Both companies would be traded over-the-counter (OTC) — Riviera under the RVRA ticker and Linn, which is currently traded OTC, under LNGG.
Linn is working with Roan Holdings “on definitive documentation to consolidate 100% of Roan’s equity interest under LNGG,” according to executives. Once the consolidation occurs, Linn intends to uplist its common stock to Nasdaq or the New York Stock Exchange this year and change the ticker to “ROAN.”
Linn had initially proposed separating into three standalone companies as Roan, Blue Mountain and a third entity dubbed “NewCo,” but it revised its plans in April. Linn CEO Mark Ellis and the management team also plans to retire once the spinoff is completed.
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