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How Smaller Independents Can Outperform the Majors


Given the industry’s embrace of unconventional plays, well-capitalized operators are leasing large amounts of “no miss” acreage to take advantage of perceived good returns. As a result, smaller operators can’t get in and lease large areas of land their exploration geology indicates could provide good-to-excellent ROIs. Shallower sands, deeper reefal carbonates, expanded Tertiary sections; small operators now have to negotiate into all of these potential targets, either through farm-ins or top leasing.

But, I wonder if there’s a flip side to this “ain’t no acreage” coin? It could be that the very able and smaller independent community will start using today’s state-of-the-art technology to take a hard look at areas that haven’t seen behemoth unconventional resource acreage acquisition.

And, the rewards are out there.

For example, the Yegua trend in Texas RRC District 3 has returned an average of 195,000 BOE/well from 3,218 wells. Although found at deeper Total Vertical Depths (TVDs) than the Eagle Ford trend, these wells are usually vertical or directional, and have lower drilling and completion costs. Most likely pay is easy to discern from seismic attribute work. This helps clarify the risk-reward equation, which is much murkier in resource plays. And given the discrete, localized nature of these traps (I know, I know – BORING conventional petroleum system stuff), you don’t need to cozy up to big commercial banks for capital to get in the game. Bonus points here for not having to sink a ton of money into 50,000 acre commitments. And even higher bonus points if you can, like Cimarex, recover over 1,104,859 BO and 13+ BCF gas in 2.5 years, while reporting last month’s production at 220 BOPD, 5000+ MCFD. And, all of this on an almost flat decline!

The point is there’s a ton of creative and critical thinking out there in the smaller companies. The amount of permitting taking place in the Eastern shelf in Dist 7B proves that, like water, independents move along paths of least resistance. Don’t be surprised if they find plenty of diamonds in the rough!

Now it’s your turn. What do you think are the best areas the Majors are ignoring? Leave a comment below.

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