E&P Earning Season Ends with DUCs, Bankruptcy, & Divesting Themes

E&P Earning Season Ends with DUCs, Bankruptcy, & Divesting Themes

Taking a look back at the first quarter we will review some updates from operators around the country and how they have held up into 2016 and are preparing for the rest of the year. Many have increase production guidance showing that they can still produce with declining capital budgets and others are looking to asset sales to gain liquidity. Below are some highlights from the quarter.

Devon Energy Increases Production Guidance

During the first quarter Devon Energy (NYSE: DVN) spent $363 million in E&P capital while raising the production guidance of their core assets by 3% to 531 to 555 MBoepd. Devon’s partner in DeWitt county has decided to delay completion activity until mid year which will increase the number of drilled but uncompleted wells to 90 by the end of the second quarter. In April, Devon announced the sale of its non-core Mississippian assets for $200 million.

Continental Resources Continues to Increase DUC Count

Continental Resources (NYSE: CLR) continues to increase its DUC inventory expecting to end the year with 245 wells with 195 being in the Bakken and the remainder being in Oklahoma. CLR has also increased its production guidance to 205,000 to 215,000 Boepd. The company is expecting to run 19 rigs during the year with 2.5 completion crews in the South and about 1 in the Bakken. We highlighted Continental Resources activity earlier this year.

CLR Proppant Loading

Range Resources Using Asset Sales to Gain Liquidity

Range Resources (NYSE: RRC) agreed to sell 9,2000 acres in the STACK for $77 million during the quarter aligning with their strategy by using cash flow and asset sales to preserve liquidity. Shortly after the first quarter results were presented Range Resources and Memorial Resources Development announced they would be merging in an all stock transaction. This deal adds to the acreage RRC has in the Marcellus and Utica plays in the Northeast as well as Northern Louisiana.

Laredo Petroleum Increases Not Only Production Guidance but Capital Budget

In a rare occurrence Laredo Petroleum (NYSE: LPI) increased the company’s capital budget and production guidance for 2016. Laredo will increase its budget from $345 million to $420 million while increasing production to 16.1 to 16.4 MBoe. The company anticipates to operate three horizontal rig for 2016 drilling 45 to 49 gross horizontal wells.

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EP Energy Waiting for Second Half of the Year for Increased Activity

Through the first quarter EP Energy (NYSE: EPE) has completed 23 wells with 16 being in the Eagle Ford, 5 in Wolfcamp and 2 in Altamont spending $132 million out of the company’s $500 to $900 million budget. The company is back-end loaded for its capital and completion activity expecting to one third to be in the first have of the year and the other two-thirds being in the second half. EP Energy did not run any rigs in Wolfcamp during the quarter only completing wells for their DUC inventory. You can read a previous article on EP Energy.

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Chesapeake Energy Divesting in Oklahoma

Chesapeake Energy (NYSE: CHK) is on track to reduce capital spending by 50% from 2015 and focusing 2016 CAPEX on reducing their DUC inventory. The company has been divesting in non-core and non-operated assets during the year most recently selling a potion of their acreage in the STACK to Newfield Exploration for about $470 million. Chesapeake reduced it drilled uncompleted (DUC) well inventory in Haynesville.

SM Energy Restarts Permian Drilling Program

SM Energy (NYSE: SM) has restarted their Permian drilling program during the quarter moving a rig from the Eagle Ford and has reduced drilling costs by utilizing pad drilling. During the quarter they completed 10 net operated wells while drilling 21 net operated wells and ended the quarter with 167 DUCs.

Anadarko Focused in the DJ Basin

In the first quarter Anadarko (NYSE: APC) held the inventory of DUCs at 230 which are mostly located in the DJ Basin, Eagle Ford, and Delaware Basin. In the DJ Basin Anadarko operated an average of 2 rigs and drilled 26 wells, a decrease of 49 wells from Q4’15. The company also completed 46 wells in the basin. Anadarko also drilled its longest Wolfcamp lateral at almost 11,000 feet. Anadarko was highlighted in a Delaware Basin article featuring Reeves county drilling activity.

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Who has fallen into Bankruptcy after the first quarter?

After the first quarter came to an end a wave of bankruptcies hit the public E&P sector first with Goodrich Petroleum (NYSE: GDP) in mid April, then 6 others followed:

  • Sandridge Energy (NYSE: SD)
  • Linn Energy (NYSE: LINE)
  • Berry Petroleum
  • Ultra Petroleum (NYSE: UPL)
  • Midstates Petroleum (NYSE: MPO)
  • Penn Virginia Corporation (NYSE: PVA)


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