Enverus Permian Scout, December 4, 2019
ConocoPhillips’s approach to US unconventionals is meant to bring each asset to an “optimal plateau, generate strong returns and free cash flow, keep learning, find upside and increase value,” Lower 48 president Dominic Macklon said at the company’s Nov. 19 analyst day. The company is in the plateau stage in the Bakken and will reach that stage in the Eagle Ford over the next few years. The company’s Permian assets, which are comprised of 90,000 net Delaware Basin acres, 20,000 net Northwest Shelf acres and 60,000 net Midland Basin acres, are in the early stages of development, but will become the largest producer of the company’s “Big 3” resource plays over the next decade, generating ~$4 billion in projected free cash flow from 2020 through 2029.
Conoco is taking a very methodical approach to its Permian development and still assessing well spacing and stacking. The company is running two to three rigs in the Delaware but will eventually have 10 Permian rigs active—six in the Delaware by 2024, and four split between the Midland and NWS after 2025. This will be in the plateau stage when an estimated 400,000 boe/d will be produced. Conoco’s current output in the basin is around 50,000 boe/d. Of course, the timeline and figures are just projections, and Macklon emphasized that the company will make decisions based on capital efficiency, returns and free cash flow rather than production targets.
The company already has great confidence in a number of zones. It projects that 90% of its Delaware production over the next decade will be derived from the Wolfcamp A and C in the China Draw area, at the northern end of Texas’ CulbersonReeves county line, and the Wolfcamp A and Second Bone Spring at Zia Hills, at the southern end of New Mexico’s Eddy-Lea county line. Thus far, Conoco’s results support 12-16 wells per section, but the company is still working to find what is optimal.
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