Thursday, January 16, 2014

BMO Capital Conference - Goodrich Interview

TMS Summary from Rob Turnham's interview:
-spreading wells out to delineate to determine variability in results; consistent frac designs have produced consistent results
-two rigs now, scaling to five rigs by the 3rd quarter
-we know the oil is in place
-now have wells producing for up to two years, attractive decline curves; hyperbolic curve
-not seeing the sloughing issues during drilling as seen in the original wells; drilling high pressure and naturally fractured rock
-completions: wells frac easily; struggling with drilling out plugs due to high pressure and that the reservoir wants to flow on you due to natural fractures; have made changes that will have a material difference on the completion side
-rates of return are compelling at current costs; close to the Eagle Ford and opportunity to improve rates of return; still very early in this play; making great progress
-2014 drilling: budget for 20+ wells; drilling to date has been in northern portion; have completion recipe nailed down;subtle differences in the rock; gradually will work east and west with locations; gradually work south; 60% on former Devon acreage, 40% in Mississippi
-Acreage: will hold 20,000 net acres by end of year; 241,000 net acres have continuous drilling and extension options; $34M of capital over 3.5-4 years; great lease terms; concentrate in core and work way out; 
-Weyerhaeuser 51H-1: frac this week; landed lateral below the rubble zone; all of the conventional core indicate subtle geological differences across the play; the Crosby had the highest clay percentage; has produced 155,000 BOE in 10.5 months; the resource is clearly there; low expandable clay percentage; nothing concerning about the clay; Weyerhaeuser area has the highest quartz, lowest clay, and highest TOC compared to other conventional cores; ranks at top of the list; Frac: 23 stages over 6250'; can stimulate the zone landing above or below the rubble zone; wells that landed below have been the better wells; more quartz; 51H-1 landed in similar zone as Crosby 12H-1; slickwater creates fracture complexity; narrow frac intervals for better stimulation; 
-Huff: 17 stages; flowing the well back, similar pressures and fluid rates; event occurred indicative of a frac plug plugging off; tracing each frac stage at the surface; each stage has it's own signature; after the event only a couple of stages were producing; we knew right where the plug-off occurred; used dissolvable balls to go with the plugs; may have started flow back too early; need to let it sit and make sure the balls are fully liquified; likely created a sand plug behind it; rig on location cleaning the well out; expect to be completed soon and will start flowback; timing will align with the Weyerhaeuser 51H-1; results will be forthcoming in early February press release; 
-Costs/Economics: current $13M; getting LLS minus $2 at the well; lower royalty burdens 18.5%; no severance tax until payout; frac costs $20k/stage cheaper in 2014; equates to $1M savings; service costs declining with increased activity; 40-60 wells potentially drilled in 2014 by all operators; hitting most wells between mid to high EUR curve; returns double when dropping from $13M to $10M. Each day saved of drilling is $100,000. Pad drilling will be beneficial. Have seen these expense decreases in the Eagle Ford.
-JV with Sinopec; they have expressed an interest in the original Goodrich acreage; will have further discussions; need to get more wells completed before discussions continue; at $5000/acre that's $200M net to our interest; not interested in anything less than $5000/acre; to hold 300,000 net acres, at 1000 acres per well, that's 3 billion in capital to hold the acreage; will bring in additional capital or a partner; not urgent in 2014; we'll never be able to drill out 300,000 acres, that's probably in the hands of somebody much better capitalized sometime in the future


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