American Oil and Gas Reporter - April 2017 - 127

Producer hedging is likely to cap U.S.
crude oil prices around $55 a barrel this
year, suggests Vikas Dwivedi, global oil
and gas strategist for Macquarie Capital,
during the Texas Independent Producers
& Royalty Owners Association's annual
meeting, Feb. 27-March 1 in Austin, Tx.

Global crude oil inventories could
drop this year, but are expected to rise in
2018 with a combination of OPEC remaining stable and U.S. production growing, Dwivedi added.
Crude oil loadings from the Organization of Petroleum Exporting Countries
have declined in recent months in keeping
with cuts the cartel promised in order to
bolster global prices, but Saudi Arabia's
likely posture of holding the line could
be hindered by other cartel members
cheating on their quotas, Dwivedi said.
Anticipated U.S. oil production growth
and other market factors put Saudi Arabia
in what Dwivedi described as an "intractable jam," complicated by demands
from U.S. President Donald Trump that
the Saudis help pay for the U.S. naval
presence in the Persian Gulf.
Further complicating the picture is
conventional non-OPEC production that
has stabilized and offshore production
that is expected to eventually trend sharply
downward after longer-lead projects are
completed and companies hold off on
committing substantial additional capital
to offshore exploration, he said.
In the meantime, the Permian Basin is
expected to bolster daily production by 2.0
MMbbl/d by the end of 2019, although the
growth could be hindered if supplies overwhelm pipelines, gathering systems and
gas processing infrastructure, Dwivedi said.
He added that Macquarie was increasingly bullish on natural gas with production
growth flattening and the potential to increase exports of liquefied natural gas to
Europe and pipeline gas to Mexico.
Industry Panel
Oil and gas companies are forging
ahead with plans to exploit Texas' unconventional plays, and in some cases
are focused on holding conventional prop-

erties with greater upside for unconventional exploitation down the road, executives said during a panel discussion titled,
"Strategies & Opportunities for Texas'
Top Shale Plays."
After separating from downstream
segments in 2011, Marathon Oil Corporation is focusing on drilling in unconventional plays, said Mitch Little,
Marathon Oil's executive vice president
of operations.
In 2011, he said, 10 percent of the company's production flowed from unconventional plays, but the portion has since
climbed to 50 percent, and the company's
unconventional business is expected to
grow another 15-20 percent by the end of
2017 compared with fourth quarter 2016.
More than 90 percent of a $2.2 billion
capital budget is dedicated to unconventional plays in the Eagle Ford, Oklahoma,
and the Bakken Shale, Little said. Greater
efficiencies have driven down complete
well costs in the Eagle Ford from $10
million in 2012 to less than $4 million in
fourth quarter 2016, Little pointed out.
"We are drilling wells today in the
Eagle Ford twice as fast as we were four
years ago, on average, and the best wells
three times as fast," he said. "We also are
completing wells in a quarter of the time
it took in 2012."
Marathon Oil is ramping up completion
intensity this year, and expects to pump
35 percent more frac sand and 20 percent
more fluid down hole, Little said.
Tom Meneley, founder of Plantation
Petroleum Company, said his company
was focused on unconventional drilling
in the Permian's San Andres formation,

which can include attractive oil finds,
but also high water cuts.
Traditionally a conventional Permian
player, Plantation Petroleum started in
2001 and expanded through $1.2 billion
in acquisitions prior to embarking on its
San Andres program, Meneley said.
"We decided to target the San Andres
when we saw some of the horizontal
results there," he offered.
With one San Andres well in progress
in late February, Meneley said Plantation
was considering a full shift to unconventional drilling and selling some conventional assets.
EnerVest Operating Company operates
36,000 wells, including conventional production on legacy acreage, said President
and CEO Jud Walker.
"Many of our wells are older, conventional wells that hold rights for what we
think are oftentimes much more valuable
reservoirs below these conventional reservoirs," he told TIPRO members.
EnerVest entered the Austin Chalk
play in 2007 with acquisitions around
Giddings, Tx., east of Austin, and operates
1,600 wells there on 800,000 net acres,
Walker outlined. "It has been a tremendous
resource for us," he declared. "We keep
going back to it. We have had a lot of
success with multistage completions."
The company's production mix is about
70 percent natural gas, a position bolstered
by EnerVest's acquisition of EOG Resources's Barnett Shale production in Johnson County, southwest of Fort Worth,
where it operates 2,600 wells, Walker revealed. Among other holdings are 11,000
acres in the Karnes County portion of the

Mitch Little (left), executive vice president of operations for Marathon Oil, and Tom Meneley,
founder of Plantation Petroleum Company, discuss their companies' strategies for unconventional oil development in Texas during a panel discussion at TIPRO's annual meeting in
Austin, Tx.

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