Anschutz: Powder River’s Winning Factor? Vast Potential

[Editor’s Note: This story is part of an ongoing series focused on the top private producers in the Lower 48, including Veteran, Newly Listed Private Producers on Top 100 Hungry for M&A and Right Risk, High Return: Aethon Jumps on Elevated NatGas Prices]

Operations in the Rockies are complex from both a regulatory and a takeaway standpoint. Regulations are tight. Terrain is tough. The weather, challenging. And access to takeaway can be inconsistent.

“But we're a private company, and it fits us better because we have a longer time frame and a longer view,” Anschutz Exploration CEO Joseph DeDominic told Hart Energy.

Indeed, those potential drawbacks were a key part of what made the Rockies a good focal point when the firm was streamlining its portfolio. DeDominic said the reason Anschutz chose the Rockies’ Powder River Basin region as its base of operations comes down to one word: competition.

Anschutz considered the Permian Basin, which has been white-hot for most of the oil and gas business’ history, but the competition there was a hassle, particularly from a price perspective.

“Our company's name is Anschutz Exploration, right? We're a front-end, technical-based company. We're a greenfield company. We want to do geological work. We want to identify the areas; we want to buy leases; and we have the patience to do that because we're private.”

And as shale runway tightens, inventory in plays like the Permian is growing scarce. Meanwhile, the Rockies has room to grow.

“Over time, I think you'll see the publics moving more into the Rockies. Or at least if nothing else, more investment from private equity, maybe first, then public companies after that,” he said.

Last year Occidental Petroleum sold its northern Powder River Basin assets to Anschutz, excluding land in Converse and Niobrara counties, amounting to about 200,000 acres according to public documents filed during the third quarter. The company came by the Powder assets with its blockbuster acquisition of Anadarko Petroleum in 2019 and had begun a divestiture campaign of non-core assets last year to reduce debt from its more recent $12 billion purchase of Permian Basin producer CrownRock.

“We saw early on that the southern part of the Powder River Basin was by far the most contiguous and the part that we felt like we could get the most value out of,” Oxy CEO Vicki Hollub said during the company’s third-quarter earnings call.

The company sold off the northern assets to Anschutz “because it’s in a better area for them to be able to develop,” she said.

As such, Anschutz is in the early stages of developing those assets, which are far less mature than those in the north, DeDominic said.

The long view

Anschutz maintains a five-year plan that refreshes with each passing year. From the start, DeDominic said, the team put in the time to invest in the technical work of identifying the best areas to buy prime leases, add critical infrastructure and develop surface assets.

“We have good wells, and we have a low-cost structure. Part of that is driven by being private; we’re a very lean organization,” he said. “We’re keeping our head down and staying focused on what matters for the company and how to make the best decisions.

“We're looking longer term. We're not like a public worrying about quarterlies or the one year by hitting those targets in the near term and having to go meet with investors or do roadshows. We're in the same building; we go upstairs two floors and meet with Mr. Anschutz.”

Moreover, its single-owner status affords certain flexibility that public companies cannot enjoy.

“The financial returns of the company are important, but from year-to-year, there's some investors who want an annual dividend or an annual return,” DeDominic said. “We can go a couple of years—not that we're doing that right now—but we could go a couple of years where we outspend or we buy some more assets, and we can live through that. We're a little bit different just due to our ownership.”

Since emerging from the pandemic, production growth has been in the low double digits, between 10% to 12% annually and will continue at that pace, which can “throw off quite a bit of free cash” for acquisitions or reinvestment in the company.

Current production is oil-focused, composing 63% of the resource mix, which is “a little bit outside the norm,” DeDominic said.

There are significant gas resources across the company’s footprint, and Anschutz is testing and appraising those sites.

“I believe, like a lot of folks, that natural gas prices will be higher in the future, and so the economics will look better to drill more gas wells in the next five to 10 years,” he said.

“In the long term, our five-year plan has this somewhere around 58% oil to 56%, rather than the 62% to 63% we are today. It’s not huge, we still have a lot of oil remaining in our assets, but we'll do more gas drilling and start to build that [gas] volume over time.”

Building the base

DeDominic joined Anschutz in 2014 as president and COO, succeeding William J. Miller when he moved to a senior vice president role with parent company Anschutz Corp.

DeDominic, a geologist, had previously worked in operations at firms including Santos U.S.A., Sanchez Energy and Occidental Petroleum, where he began his career. During the two decades he worked at Oxy, DeDominic deployed his expertise in Colombia, Libya and as president and general manager for the firm’s Williston Basin enterprise.

Meanwhile, Anschutz Exploration was beginning to streamline its footprint across the Lower 48. Between November 2010 and July 2011, the Denver-based producer divested more than $2.3 billion worth of Williston and Marcellus assets.

In December 2010, Oxy USA bought the Williston properties that Anschutz owned in Dunn County, North Dakota, for $1.4 billion, according to Hart Energy’s supplement to Oil and Gas Investor magazine, the 2012 North American Unconventional Yearbook.

The Dunn County divestiture was one of three M&A deals Anschutz made during that nine-month period, and it’s the one that brought DeDominic into the Anschutz orbit. He remained in touch with owner Phillip Anschutz and grew familiar with the firm’s guiding principles and business model. When the opportunity to join the private firm emerged in late 2013, DeDominic decided it would be a good step to take after years spent working at public companies which, he said, “worked out very well.”

Anschutz was focused on emerging shale oil plays, and in 2015, held leases on more than 1 million net acres, mostly in Texas, Montana, Colorado and New York. It was time again to restructure the footprint.

“At that time there was a dip in oil prices, and the company had a number of assets scattered around the Lower 48. We cleaned it up and completed a strategic deep dive on where we wanted to focus, and we decided to focus on the Northern Rockies,” he told Hart Energy.

Anschutz built out the technical and geoscience teams and narrowed its target to a number of different areas of interest. But the Powder River Basin was number one.

“That focus has allowed us—from doing that foundational work up front—to really grow the company successfully, not just from a well performance standpoint, but from a financial standpoint,” he said. “We're one of the top operators in Wyoming, and we have assets in Utah and Colorado as well.”

Reaching for the peak

In the Powder this year, Anschutz has charged ahead with 3-mile laterals in the oily stacked play of Wyoming. The firm has already grown production from its 2024 average of 48,000 boe/d to top its 2025 target of 60,000 boe/d net production.

“When you drill cubes or bigger pad developments, you get some ups and downs,” DeDominic said. “We do live within our cash flow as a company, so we are cash flow positive, even under these volatile times, and we'll continue to do so. We can do that and grow the company.”

Much has been said about “peak oil” this year, as “I do think personally we are at peak oil, or we are getting pretty close. If not now, it’s not too far away, I think there's a limit to how many stacked pay resources there are available in the Lower 48.

“The resource play has been going on for 15-plus years. It’s not going to last forever, there's only so much inventory, and it's starting to get consolidated.”

RELATED

VanLoh: Continued US Oil Growth at $63 is a ‘Dangerous Assumption’

Operators will be thoughtful on how they develop inventory with a goal of extending the life of the resource and growing their companies at their own pace, but there are limits. Mature basins in North Dakota, the Eagle Ford and elsewhere are “getting a little long in the tooth.”

“I know they still have a lot of recompletions and infill drilling and everything else, but that's not going to drive production higher; it’s going to keep it flat at best.

“I think the peak is going to be generally flattish,” DeDominic said. “There will be some decline, but I think it could easily extend five to 10 years without a big drop.”