Early planning, strong Q4 pays off for WPX in Permian, Bakken

By Luke Geiver | February 28, 2017

The unveiling of a plan late last year by Tulsa-based WPX Energy for multi-year future production growth is paying off already. As many operators are faced with service cost fluctuations, increases and availability as activity continues to ramp across North America, WPX recently told investors that it was able to work with some service firms in 2016 and Q1 2017 to secure both services and prices.

Through 2017, roughly 70 percent of its drilling and completion costs for planned drilling and completion projects have been contracted. Clay Gaspar, chief operating officer, said the company also began dealing with sand mines, chemical vendors and other service providers directly in 2016. “We are certainly not bulletproof and we will be exposed to market forces,” Gaspar said regarding service cost inflations from previous years.

2016 wasn’t only about securing future rates or services, according Gaspar. WPX has now joined the best-of-club for Bakken producers, he said. In 2016, the E&P was the No. 1 producer in the Williston Basin for the categories of cumulative oil basis for 90 and 180 days. To end the year, WPX brought on 6 middle Bakken wells and 8 from the Three Forks formation. For the full year, WPX completed a total of 19 drilled but uncompleted wells. Roughly half of the wells were drilled with three-mile laterals with the other wells reaching two-mile laterals. The three-mile wells averaged 1,900 barrels of oil equivalent per day. The two-mile wells averaged 2,600 boe/d. With two rigs currently deployed, WPX intends to spend $240 to $260 million in the Williston Basin this year to complete 38 to 42 wells.

In the Delaware Basin, the area Gaspar calls WPX’s future and crown jewel, WPX will spend $480 to $510 million this year to run five rigs, drill 1.5- to 2-mile laterals and complete 85 to 100 wells. “We have an internal competition for capital amongst our three plays,” Gaspar said, noting that WPX will also spend $150 to $170 million in the San Juan Basin.

Muncrief also said WPX has commenced the formation of a joint-venture on a midstream gathering effort in the Permian. Details of the JV were not disclosed. For the full year, WPX could produce 103 to 113 mboe/d, of which roughly 56 mbbl/d will be oil. The oil volumes will be 30 higher than those of 2016.

From its 120,000 net acres in Texas, WPX will produce a commodity mix of 54 percent oil, 30 percent natural gas and 16 percent natural gas liquids. Production trends in Texas will significantly ramp up in Q2 and will remain at similar levels in Q3 before rising again in Q4.

The 85,000 net acres WPX operates in the Williston Basin will produce a commodity mix of 83 percent oil, 9 percent natural gas and 8 percent natural gas liquids. Production will remain steady for the rest of the year with approximately 10 to 12 wells moving to first sales in each quarter.

After bringing zero wells onto first sales in the San Juan Basin during Q1, WPX will work its 235,000 net acres throughout the remainder of the year to average 10 to 14 wells on first sales per quarter. In the oil window of its acreage, oil makes up 47 percent of its commodity mix with NGLs coming in at 22 percent and 31 percent. WPX also has a gas window in the San Juan. For the gas window, 99 percent of the commodity mix is natural gas with the remaining 1 percent as NGL.