Newfield is one of the earliest public oil and gas companies to report their quarterly earnings and operations. This week they provided their reports and conducted the earnings call for the 2Q 2011. Newfield spent most of the time discussing their Uinta Basin acreage which sounds mighty impressive. They threw out numbers such as BTRORs of greater than 100% and decades of inventory. They described that acreage as their crown jewel oil play. That being said, this is an Eagle Ford blog. I will provide some of my Eagle Ford E&P notes from their past two earnings calls and then analyze the program using Drillinginfo data.
– Hunting season caused a major interruption of their Maverick Basin program from Oct.-Feb. I am not sure of the extent of the interruption, but being from Austin, I know full well that people around here and south of here LOVE their hunting
– Newfield is drilling and casing their EF wells in under 10 days
– The focus is the lower Eagle Ford. Newfield spoke to the bitumen issue a while back stating it was only in a certain section of their Eagle Ford, maybe it was the upper not the lower, pure speculation there
– As of 1Q 2011, the costs were $6.5-$7MM per well. Newfield indicated this week that those costs are only rising. They described the rising service costs as “margin desctruction” which is one reason why they are redirecting CAPEX to the Uinta Basin.
– Reasons why they are spending more CAPEX in the Uinta Basin than EF: lower completion costs, established infrastructure and crew, EF acreage only takes 1-2 rigs to maintain leasehold
– Newfield is taking their time digesting the science of the EF. They mentioned the question of toe up, or toe down as something they are studying. As is shown below, Newfield is conducting significant seismic operations in central Dimmit County
– 2Q 2011 report says average EF IPs are 400-1400 BOE/D. The south acreage (downdip) is where they are focusing their current effort, IPs of 600-700 BOE/D average in this area
Now, I’d like to show some of the analysis that DI-ESP provides to their clients. This only scratches the surface so I figure it’s okay to show.
A breakdown of the acreage based on intelligence and data. In this case, I break Newfield’s acreage into two sections, Updip and Downdip. This is based a demarcation of well performance and Newfield statements in the earnings call. Of note is the increase in well productivity as you traverse to the South.
Next, some type curves. It is still very early as is suggested by the noise in the well level chart but a trend does exist. Downdip wells perform better, whether it is due to infrastructure buildout or geology or learning curve requires deeper analysis. Expect these curves to improve as Newfield develops a greater understanding of how to drill and compete these wells.
Some permit activity. What stands out here is the seismic program in central Dimmit County. This seismic is being run around their highest producing lease so far and suggests future CAPEX will be directed here.
Newfield has high quality neighbors such as Anadarko, Shell, and SM Energy to the South. They got their acreage relatively cheap from the TXCO deal a couple years ago. Newfield consistently drills high quality wells in all their unconventional programs across the US. If it is possible to drill good wells on their acreage, I suspect they will get it done. The Maverick Basin is still early in development compared to other areas of the Eagle Ford like Hawkville and Sugarkane. We have a team here in Austin dissecting all the key players of all the key unconventional plays so keep checking back.
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