Anschutz Exploration Shares Secret to Powder River Basin Success

DENVER—If investors are worried about the potential for production and profit in the Powder River Basin, all they need to do is talk to Anschutz Exploration Corp.’s president and CEO, Joe DeDominic.

Indeed, having worked in the Powder River for some 50 years, the private, independent oil and gas company has mastered—or at least, largely prevailed upon—many of the greatest challenges involved with developing the play: cost, drilling times, inconsistent well results and takeaway capacity.

Based in Denver, Anschutz currently owns leases on 475,000 net acres in the Powder River Basin with interests in 486 gross wells, four active drilling rigs and 26,000 net boe/d (75% oil). The company rounds out the top five Powder River Basin players for activity, acreage and production with four public companies: Continental Resources Inc., EOG Resources Inc., Occidental Petroleum Corp. and Devon Energy Corp.

DeDominc said Anschutz currently has three of the basin’s top 10 wells.

“However, early 2022 well results indicate Anschutz is most likely to see three to four additional wells in the top 10 by year-end,” he told the crowd gathered on June 29 for Hart Energy’s DUG Bakken and Rockies Conference and Exhibition.

“Early 2022 well results indicate Anschutz is most likely to see three to four additional [Powder River] wells in the top 10 by year-end.”—Joe DeDominic, president and CEO, Anschutz Exploration Corp.

Anschutz drillings times are declining as a result of the transition from appraisal to full-scale development and the company’s increased focus on “repeatable results,” he said. A composite of the best well in Anschutz’s arsenal improved from 11.8 days in 2020 to 7.8 days in early 2022.

As for cost, the company’s gas reduced its cash operating expense by 55% since 2019, driving down total well cost per lateral foot by some 40% during the same period. Debundling, process optimization and supply chain alignment changes appear sustainable and help keep inflation capped in the Powder River Basin, DeDominic said.

Moreover, he added the Powder River Basin has continued to maintain reliable netbacks on oil and gas because infrastructure capacity is largely balanced—contrary to other busy shale plays in the U.S.

Prior development periods put into place necessary pipelines, electrical services and water lines that assist the Powder River Basin producers on the midstream side. And strong gas realizations and liquids yields make the midstream competitive in the area, another benefit to bottom-line expenses, he said.

Contrary to regulatory action in other parts of the Lower 48, federal regulations are largely working in favor of increased development. According to DeDominic, the current average for a federal lease approval is four months.

“A planning program with an 18- to 24-month time frame to secure drillable federal permits will allow operators to facilitate increased development pace is warranted,” he said.

Anschutz is a private firm and has no debt. Its core position and its repeatable, positive cost structure allow the Powder River asset to generate significant cash flow with limited capital deployment. And, the asset is cash flow positive with sustained development with WTI oil priced in the low $50s/bbl.

The company’s inventory may provide upside opportunity for more than 20 years as a rig pace of 2.5, DeDominic said. That pace beginning in 2023 may generate high single-digit production growth using 70% of cash flow.

The firm intends to close out 2022 with production between 26,000-28,000 boe/d (73% oil, 86% liquids); for next year, the plan is production between 38,000-42,000 boe/d (62% oil, 83% liquids)— a growth pace on the high end of the year-over-year forecast of more than 40%.