reduction in costs over the past 4½ months,” said Hamm.
All three chief executives emphasized the importance of
efficiency, a common theme amongst producers during the
downturn. Hamm said drilled but uncompleted (DUC) wells
are paying off for Continental, as “60% of drilling is cost
completions.” The company also is seeing 16-20% recovery
Sheffield touted dramatically reduced drilling times in
PNR’s Wolfcamp B area of the Permian basin where the company is particularly optimistic. He said PNR essentially “was
perforating the wrong zones in Spraberry-Wolfcamp” during
At the beginning of 2015, PNR reported plans to cut horizontal drilling activity in the Spraberry-Wolfcamp and Eagle
Ford shale to 16 rigs by the end of February, down by half
from yearend 2014.
This included 6 rigs in the northern Spraberry-Wolfcamp,
4 rigs in the southern Wolfcamp joint-venture area, and 6
rigs in the Eagle Ford. Sheffield noted the Spraberry-Wolfcamp had 7% of the world’s rig count before the downturn.
“That’s where most of our 10 billion bbl of resource potential is, but it’s going to get 65% of the capex” for 2015, he
said in February during PNR’s fourth-quarter 2014 earnings
While Sheffield predicted that Permian production will
soon “go flat,” he believes PNR alone has the potential to
increase its production in the region to 1 million b/d in the
right price environment. He measured that total against a
study stating the Permian could potentially produce 5-6
million b/d overall.
All three executives said they intend to steer clear of layoffs as a measure in dealing with the depressed price environment. Hess said layoffs are problematic because you will
need trained personnel later on when prices are higher.
Hamm said, “I may not be drilling wells, but we’re not
laying anybody off,” explaining that he never got over letting
go 10% of his workforce following the 1998 downturn.
during oil-price downturn
Special Projects Editor*
ConocoPhillips Chairman and Chief Executive Officer Ryan
Lance told IHS CERAWeek that ConocoPhillips is prepared
for oil-price swings going forward, and it has positioned
itself to ramp up its core US unconventional investments
when it appears feasible.
“If $80-90/bbl oil is coming back, there is a good chance
Hamm lamented President Richard Nixon’s “failed cost
control measures of the ‘70s” that brought about current
laws that are a hindrance for producers. But he’s encouraged
that politicians have been listening, and believes the legis-
lative process to remove the export ban will move forward
Crude price impact
Hess said that lifting the export ban, thus opening up world
markets, would provide US shale producers much-needed
“Our crude oil is trapped here with no end in sight,” he
said, adding that producers make $7-15/bbl less than if they
were allowed to utilize exports to world markets. “The world
is going to need our shale oil in a couple years to sustain sup-
ply, so why not [supply it] now?”
With a decline curve of 70% for many new shale wells,
producers have to drill more wells to keep up with demand,
which is dependent on crude oil prices, Hess said.
“We cannot grow US supply at $60/bbl,” stated Scott
Sheffield, chief executive officer of Pioneer Natural Resources Co. The US can add $10/bbl to the oil price to reach $70/
bbl by 2016 by lifting the export ban, he said, adding that
US producers need $70-80/bbl to increase production by
Sheffield said at current WTI prices the US can’t be the
world’s “swing producer.” Hess described the Saudis as still
the “price-maker,” and the US as still the “price-taker.”
He stated that five requirements must be met—in terms
of geology, mineral rights, infrastructure, fiscal regime, and
a pragmatic regulatory system—within a region before shale
“We haven’t seen those stars align yet,” he said.
Cash, production efficiency critical
Hess Corp., a major producer in the Bakken shale, is seeing
cost reductions ahead of 15-30% in response to depressed
crude prices. The company has cut spud-to-spud times and
drilling costs in half, but Hess ultimately believes the “best
way to deal with [low prices] is to leave [oil] in the ground.”
The company also has numerous assets beyond US shale.
Hess sees US shale plateauing around 2020-25, so producers
like his company need to keep their options diverse, he said.
Continental Resources, meanwhile, is doing its best to conserve cash in the current climate. “We’ve seen about a 20-25%