Grasping the Importance of Spacing and Parent-Child Well Relationships Emerging as Make-or-Break Distinction in Today’s Free Cash Flow Era

Austin, TX (September 24, 2019) – Enverus, the leading oil and gas SaaS and data analytics company, has released a new report in its FundamentalEdge series highlighting the importance of well spacing utilizing more than 300 comprehensive attributes in its calculations. Decisions on optimal well spacing are multidimensional and are a function of numerous geological, engineering, operational, and economic variables.

“Well spacing is complex and incredibly important in today’s current free cash flow era,” said Sarp Ozkan, Energy Analysis Director at Enverus. “As documented in this report and the case studies supporting it, understanding well spacing is like peeling back an onion. It is far more complex than something that can be understood by a single distance measurement. An inaccurate, simple spacing metric has ripple effects across all parts of the industry,” he said.

The report addresses some of the biggest challenges for U.S. onshore field development and points to various case studies indicating how proper spacing may result in less drilling, but more hydrocarbon production. Also, at the forefront of the industry, is the impact of parent-child well development and well interactions, raising questions about neighboring wells interacting with each other, potential degrading well performance, and offset well interference from newly drilled infill wells.

Key Takeaways from the Report:

  • Spacing is a complex problem. Solving it leads to optimal spacing within a drilling unit. Additionally, it is key to proper development of a particular formation in an area to get the highest per well returns and minimize productivity degradation and handle parent/child interactions.
  • Figuring out how to optimize well spacing to maximize productivity is an incredibly complex challenge. This changes from basin to basin, formation to formation, sometimes even section to section.
  • Understanding parent-child relationships and optimized spacing at a basin level is important to understand trends. It’s essential to get more granular and dive deeper to get the full picture and this requires a reliable, robust, and engineered dataset.
  • Enverus’ Well Spacing Solutions give the user the ability to dive through the most comprehensive Well Spacing dataset available. By combining geology, completion, production, M&A, and well placement and timing data sets rather than looking at well spacing metrics in a vacuum, Enverus reveals the important factors that impact operations and productivity.
  • The parent/child interactions, future field developments and inventory studies, cost savings through spacing pilot, and formation delineation programs must be mastered to facilitate operations excellence as well as deliver growth, cash flow, and returns for shareholders. Enverus’ Well Spacing Solutions is a comprehensive and technically robust well-spacing solution that can help companies navigate through all these challenges and drive value.

Members of the media can download the full 18-page Well Spacing & Case Studies or contact Jon Haubert to schedule an interview with one of Enverus’ expert market analysts.

Members of the media may also request individual operator reports from Enverus’ recently released Operator Intelligence Suite. Please indicate the name(s) of the company or companies you are requesting.

Drillinginfo Announces Name Change to Enverus

Austin, TX (August 22, 2019) – Drillinginfo, the leading energy SaaS and data analytics company, announced today that it has changed its corporate name to Enverus. Marking both the company’s 20th anniversary and surpassing $300 million in Annual Recurring Revenue (ARR), the new name and brand better reflects the company’s identity as a leading data, analytics, and efficiency partner across the energy sector.

“Our company’s purpose is to create the future of the energy industry together in collaboration with our customers and partners. This is a larger mission than we began with and represents our evolution to becoming Enverus,” said Allen Gilmer, co-founder and visionary of the company. “I am so proud of our tremendous growth over the past two decades. We’ve never been better positioned to partner with our customers across the energy spectrum to help define its future. Now more than ever, we can deliver the most cutting-edge innovations to serve and fuel our industry’s leading innovators.”

“This business was started by ‘oilpatch kids’ in 1999 when the industry was on the cusp of both a massive digital revolution and a once-in-a-lifetime disruption from unconventional oil and gas. Over time, that team built a recognizable and iconic organization throughout the upstream oil and gas businesses. Together we achieved unprecedented energy production in the U.S. and across the globe. From the beginning, we have fueled ourselves by the power of our phenomenal people, and those people are now building the most important, integrated problem-solving platform across the world’s largest, most significant, and impactful industry ever – energy,” Gilmer said.

During the last three years, the company has grown tremendously through product innovation, market expansion, and acquisitions. Enverus will now be comprised of three business units – Enverus Drillinginfo, Enverus Trading & Risk, and Enverus Business Automation – all of which are highly complementary to one another and together create value for customers that could never be achieved otherwise.

Jeff Hughes, CEO and President, added to Gilmer’s remarks noting that, “The vision was always to build a company that created uniquely valuable data through active connections between businesses in the energy industry. We now operate the largest such system of active networks that has ever existed, and it is growing rapidly. The data analytics that result from this historically unique graph of energy industry participants are unprecedented, and it will create value for our customers that could never be provided any other way. This is an example of how our capabilities have expanded so much since our founding and we came to believe that our name no longer reflected our reach, so it was time to modernize the brand.”

The name Enverus is comprised of three elements that when combined, reflect the company’s past, present, future, and overall philosophy. EN: the energy industry; VER: clarity and truth; and US: partnership, collaboration, people, and humanity.

Jeff Hughes concluded by saying, “Energy is the largest industry in the world with unique regulatory, geopolitical, technological, demographic, and environmental complexities. Enverus will continue leading the industry in tackling these complexities with offerings that include irreplaceable efficiency tools and analytics that enable better, faster decisions. More powerfully, each of these capabilities connect our customers in ways which create value like no other business in the world.”

Permian Continues to Test the Limits of America’s Existing Midstream and Downstream Infrastructure

Austin, TX (August 7, 2019) – Drillinginfo, the leading energy SaaS and data analytics company, has released Permian to Gulf Coast Midstream, the latest installment of their FundamentalEdge series, which presents an overview of oil, gas, and natural gas liquids (NGL) infrastructure currently proposed between the Permian basin and Gulf Coast export terminal locations.

Underscoring the lack of adequate takeaway capacity in 2018-2019, plus the expected importance of coastal oil, natural gas, and NGL exports, in this report Drillinginfo highlights the expected impact of upcoming long-haul takeaway capacity projects and the price differentials they’ll create.

“The Permian basin has experienced unprecedented production growth and remains the world’s focus, from producer to private equity, to service and supply companies,” said Bernadette Johnson, Vice President of Strategic Analytics at Drillinginfo. “But the Permian continues to be challenged by existing pipeline constraints and the inability to efficiently and effectively move oil, natural gas, and NGLs to the market. All hydrocarbons are tied at the drill bit and one affects the other. Although many players in the Permian are targeting crude oil primarily, natural gas processing and pipeline bottlenecks can have a negative impact on that crude oil production. However, a light at the end of the tunnel may soon be visible – at least for those that can hang in there through 2020,” said Johnson.

In Permian to Gulf Coast Midstream, Drillinginfo analyzes numerous planned pipeline projects and the bottlenecks they expect will be cleared providing relief to America’s most prolific, but congested basin.

Key Takeaways from the Report:

  • Production growth in the Permian basin is testing the limits of existing midstream and downstream infrastructure, requiring further capital investment in long-haul pipelines, gas processing plants, NGL fractionators, and coastal export terminals.
    • Crude oil production continues to rise in the Permian basin despite economic headwinds resulting from sub-$60/bbl WTI prices. Nevertheless, the pace of growth is at risk of slowing significantly if the low flat-price environment persists. With additional long-haul pipeline capacity coming online in the second half of 2019, noncommitted shippers will likely find themselves squeezed out as spot arbs shut. As volumes are further increased to the Gulf Coast (and away from Cushing), additional export capacity will be required, and there is an acute need for new export facilities capable of fully loading VLCCs. A race to the finish has begun, with numerous onshore and at least seven offshore terminals currently proposed or in development.
    • Although natural gas production is mostly a by-product of drilling for crude in the Permian basin, flaring is just not a long-term option. In DI’s high case scenario, dry gas production could increase by 50% (~5 Bcf/d) over the next five years.
    • Market participants are also facing weak regional pricing, with Waha basis trading at levels more than $1.00/MMBtu under Henry Hub. Hence, at least five projects are currently proposed to alleviate this constraint. All projects will be transporting the gas east toward South Texas and Louisiana to feed LNG exports as well as growing power and industrial demand.
    • NGL production out of the Permian is expected to continue to grow, with most of the production destined for the Gulf Coast. To allow for the extra production, a number of pipeline projects are under construction or in planning to transport the NGLs. As NGLs arrive at the Gulf Coast, they are then fractionated. Fractionation capacity has been running tight since mid-2018, resulting in numerous fractionation projects along the coast. The fractionation bottleneck was relieved slightly in early 2019, when two projects hit the market. However, with most projects scheduled to come online in early 2020 and after, it is possible the bottleneck will reappear in late 2019 and early 2020.

Members of the media can download a shortened preview of the overall 20-page Permian to Gulf Midstream or contact Jon Haubert to schedule an interview with one of Drillinginfo’s expert market analysts.

Drillinginfo Report Highlights Impact on Pricing in Hyper Geopolitical Environment

Austin, TX (July 23, 2019) – Drillinginfo, the leading energy SaaS and data analytics company, has released Pricing in Politics, the 3Q2019 installment of its FundamentalEdge series. This market outlook service presents the company’s current view of the oil, natural gas, and NGL markets, and where they are headed over the next five years.

Pricing in Politics explores energy trends and pricing in a market highly affected by geopolitics and the continued impacts of sanctions and tariffs. “The story for 2019,” the report reads, “has been one of dashed hopes for those bullish market participants that believed a redoubling of efforts by OPEC+ would solve the oversupply conditions.”

“The trade tensions between the U.S. and China are creating a global economic activity slowdown and we’re continuing to see the effects politics has in crude oil pricing,” said Bernadette Johnson, Vice President of Strategic Analytics at Drillinginfo. “Even if OPEC keeps production constant and the U.S. and China agree to no further escalation in tariffs, non-OPEC production growth will remain in excess of global incremental demand.”

“While the price crash at the end of 2018 caused a drop in U.S. rig count in America’s shale plays, prices have recovered and the new mantra of free cash flow, return to shareholders, and ‘do more with less’ has caused operators to rethink their drilling and completion schedules and strategies,” said Johnson.

“With more than 1,000 wells drilled, but sitting uncompleted in the Permian, means there is a lot of crude oil production that could come on line quickly, but is not currently accounted for in the storage numbers or balances. U.S. basins continue to prove they hold great economics that result in continued growth expectations for production,” said Johnson.

Key Takeaways from the Report:

  • Efforts by OPEC+ and declines from Venezuela and Iran have eased excess supply; however, escalating trade tensions between China and the U.S. and their effects on global economic health and demand growth have been keeping a lid on prices. Heightened geopolitical tensions between Iran and the U.S. provide some support for prices, but ultimately demand needs to increase for fundamentals to support a balanced market and prices. The OPEC meeting and news around U.S.–China trade tensions will set the tune for next quarter.
  • Natural gas prices for Henry Hub have plummeted recently, trading under $2.30/MMBtu. Only a month ago, prices were above $2.60/MMBtu, and during the first quarter of the year, prices reached $3.00/MMBtu. Despite record-high LNG export levels, underwhelming early summer power demand along with strong production growth have pushed inventory levels up. Looking ahead, natural gas prices of $2.60-$2.75/MMBtu will balance the market, allowing production to increase at a rate to meet the expected demand growth.
  • NGL prices have taken a downturn in the first half of 2019. Production and stocks are at or near record levels for propane and butanes, causing downward pressure on prices. Additionally, prices have been impacted by slowing global economic demand as well as the trade war between the U.S. and China, as LPG exports to China have become nonexistent.
  • The E&P mantra remains focused on capital efficiency, living within cash flow, and returning cash to shareholders. These themes are here to stay. Q1’19 earnings reports show little change to E&P guidance for 2019. Chevron and Occidental spiced up the earnings season with the bidding war on Anadarko. Despite that, Q1 yielded 10-year lows in the upstream deal market. Expect Q2’19 reports to continue to explore how operators are handling price volatility and discussions on efficiencies, Permian gas bottlenecks, and M&A.

Members of the media can download the 19-page preview of Pricing in Politics or contact Jon Haubert to schedule an interview with one of Drillinginfo’s market analysts.

Wall Street Funding Slowdown for Energy Continues with Q2 Capital Raised Via Public Equity & Debt Issues Off 36% YOY

Austin, TX (July 17, 2019) – Drillinginfo, the energy industry’s leading SaaS and data analytics company, released its Q2 2019 Capital Markets review revealing $16.9 billion in aggregate funds raised via energy industry public equity and debt offerings. The amount is down 36 percent from the same quarter a year ago, and down 23 percent from funds raised in Q1 2019.

“These numbers understate how weak capital markets were for parts of the industry,” said Drillinginfo analyst Andrew Dittmar. “In a particularly poor showing, the upstream and oilfield service sectors combined to raise only $300 million from fresh equity, and $2.5 billion from bond issuances,” said Dittmar.

On a bright note, the industry supported two initial public offerings that raised a combined $1.025 billion in Q2, almost double Q1’s $505 million. However, a once-probable IPO issue in midstream’s dynamic water management sub-sector was taken off the table when the Permian Basin-focused candidate withdrew its registration statement during the quarter, opting instead to fund privately with banks and an overseas sovereign fund.

The data was compiled by Drillinginfo’s Capitalize platform, which tracks securities and credit activity of energy companies that file with the U.S. Securities and Exchange Commission, as well as private investment activity.

Equity Markets Up Sequentially, Down YOY

↑ The industry raised $3.4 billion from public stock offerings during Q2, up 189% sequentially but off 19% YOY.

↓ Upstream sold $261 million in public equity in Q2 through a sole offering, the IPO of Brigham Minerals, and was down by half sequentially and 75% YOY. It was upstream’s second-worst equity raising quarter since 2010.

↑ The midstream sector issued $1.6 billion of equity, up 400% from Q1 and 17% YOY. IPO Rattler Midstream Partners’ $765 million raise accounted for almost half the total.

↓ There were no public equity offerings in the oilfield services sector in Q2, a first since 4Q15. The sector had raised $312 million in Q1 and $1.7 billion in 2Q18. Additionally, downstream had no fresh public equity offerings.

“Wall Street emphatically closed the door on fresh external capital for upstream companies, especially from equity raises. That is consistent with calls for E&Ps to live within cash flow,” added Dittmar. “The sole equity success story was Brigham’s IPO and its business of owning minerals and collecting royalties isn’t exactly representative of the broader industry. Similarly, it was tough sledding for oilfield service companies, which are being crimped by cutbacks in upstream spending,” he said.

“The only continued momentum for capital raises came from midstream companies and integrated utilities, which combined to account for 95 percent of energy sector stock issuances and 85 percent of bond sales, including the spinout of Rattler by Diamondback. Unsurprisingly, midstream asset sales are also where E&P companies are looking to raise capital,” added Dittmar.

Capitalize tracked a total $3.4 billion in industry-wide equity issuances through six offerings in Q2. This compares with $4.2 billion in 18 equity offerings in 2Q18 and $1.16 billion across five offerings in Q1, which marked the industry’s lowest output of total equity deals this decade.

Private equity groups also continued their affinity for midstream deals in Q2, making nine new commitments with a disclosed total of $6 billion. Upstream came in second on commitment count with six during the quarter, Capitalize reported. The Permian is unsurprisingly the main target for upstream private capital while midstream investments are geographically diverse.

Bond Issues Fell 39 Percent YOY and 36 Percent from Q1

Capitalize tracked the issuance of $13.5 billion principal amount across 24 bond floats industry wide in Q2, compared with $21 billion through 30 deals in Q1 and $22 billion through 34 deals YOY. Average principal amount in Q2 of $561 million was off 19 percent sequentially and 13 percent YOY. Investment-grade issuers accounted for two-thirds of the debt floated during Q2, down from 75 percent in the previous quarter. Generally, the trend over the last year has been a focus on a better credit quality of issuer for underwritten bond offers. Midstream represented 57 percent of debt raised and 50 percent of activity.

Bond Floats by Sector

↓ Upstream issuers sold $1.96 billion in notes through five floats, off 57 percent from the $4.58 billion raised via six deals in the previous quarter and 66 percent down from the $5.71 billion in debt raised across 12 issuances YOY.

↓ Midstream raised $7.7 billion in debt across 12 deals, 22 percent below Q1’s $9.9 billion through 13 issuance and 38 percent lower than $12.48 billion in debt raised via 17 deals in 2Q18.

↓ Oilfield services raised $0.53 billion in debt through one offering in Q2 compared with $0.61 billion from five bonds in Q1 and $1.6 billion sold via two offerings in 2Q18.

↑ Integrated companies (in this case integrated utilities) issued $3.8 billion in bonds during Q2 compared with $4.0 billion in Q1 and $3.0 billion in 2Q18.

Full copies of the report are available upon request.