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Recent E&P Thoughts: COP, Newfield, Hess


Earnings have been coming in, here are some quick E&P thoughts.

ConocoPhillips: COP had a few interesting discussions during their 3Q 2011 reports.  Besides some good data points like $6-$8MM well costs, 1,400 BOE 30-day IPs, 16,000′-19,000′ TMDs and 3,500′-5,800′ laterals, COP also discussed takeaway constraints and program ramp-up.  COP said there exists a lag of 10-15 Mboe/d of production they are unable to get out.  We have noticed a significant drop in 30-Day MaxIPs in the area that COP operates (we define Sugarkane as the area from Live Oak to Dewitt).  Sugarkane rates as a whole steadily increased through 2010.  MaxIPs averaged 940 Boe/d from Q2-Q4 of 2010.  Through the first two quarters of 2011, the average MaxIP is 804 Boe/D.  This is a 15% drop.  Below is the MaxIP chart for COP through time.  Their peak quarterly maxIP occured in Q2 at 1200 Boe/d.  Does takeaway capacity explain the drop in MaxIPs?  It may be part of the answer.

COP1-300x225Newfield:  NFX states they are only focusing their Eagle Ford efforts on 40k of their 335k Maverick Basin acreage.  I am not sure how the old TXCO assets were split, but it appears that Anadarko got the better end of that deal with regards to Eagle Ford potential.  NFX does have potential in other zones.  According to Drillinginfo data, they have drilled a few Pearsall and Georgetown wells.  As for the 40k of Eagle Ford acreage they are focusing on, we imagine it is on the southern portion of their acreage offset to the APC development.  Certain data supports this.    Another problem NFX sees in their acreage, very high service costs.  If in the future service costs lower, this may make more of their acreage viable.

Hess:  I am particularly intrigued by the Hess position.  They were quiet for over a year when ZaZa spoiled the silence.  ZaZa merged with Toreador Resources (Hess’ France partner) to form one E&P company.  It sounds a bit incestuous to me.  Anyway, a large chunk of the position is located in La Salle predominately in the condensate region.  Well costs are at $10MM (will drop after evaluation phase), frac stages number 15-20.  Hess made a good point that they will be applying applicable Bakken practices to their Eagle Ford.  60% of their production is liquids, this may increase once they can make an accurate call on NGL volumes.

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