Industry Execs Share Strategies To Win The 'New E&P Game'

As Pete Stark, senior advisor for IHS CERA puts it, “With the tremendous oil and gas reserves the industry has unlocked, we’re playing a new E&P game.”

Stark, who moderated two morning presentations at the Summer NAPE Business Conference on Aug. 22 in Houston, noted a new set of factors that are affecting E&P companies: Gas prices are lower and storage is higher. In addition, he said, there is an “increasing emphasis toward oil” as new technologies continue to expand into various plays.

He also cited what he calls a “tremendous increase in process improvement,” which has brought an upward slope in monthly oil production. This is helping to “transform America’s oil supplies, just like gas,” he added.

In keeping with the theme of a “new E&P game,” Stark introduced Stephen Herod, president of Halcón Resources, and Matt Fox, executive vice president of E&P for ConocoPhillips. Both men talked about what their companies are doing, as Fox says, “to win the game.”

Five Fundamentals For Halcón

Herod, former executive vice president of Petrohawk Energy Corp. until the company’s sale to BHP Billiton in 2011, outlined five keys to building a successful oil company.

• Follow a proven model: Herod leaned on his background at Petrohawk, which he is applying to Halcón’s businesses practices today. “A huge turning point at Petrohawk was when we began to step up drilling,” he said. With that experience at Petrohawk, Halcón has been able to quickly escalate its drilling program, he stated.

• Access to capital: At Petrohawk, Herod said that any land or asset that was “not in a growth area was subject to sale.” The reasoning: to generate more money to buy into plays with more upside. “If you don’t have enough capital, you’ll always be scrambling,” he said.

• Solid technical foundation: Herod advises acquiring high-quality concentrated assets through geology, geophysics and sound engineering analysis. By using such practices, Halcón, since its inception, has acquired properties in the Utica, Woodbine, Tuscaloosa Marine, Bakken, Mississippi Lime, Wilcox, and Midway/Navarro plays.

• Embrace new technology: “It’s been a great run in our industry for technical people,” Herod said, citing such game-altering technologies like long-reach horizontals and hydro-fracing techniques.

• Strong corporate governance: Herod says Halcón has an independent reserves committee on its board. “Not a lot of companies to this,” he said. The company, he said, has a regulatory manager on staff and maintains a strong focus on HSE (health, safety and the environment) management.

Herod summed it up this way, “Have talented people, make sure you have plenty of capital, do your homework, be proactive and decisive, and remember that everyone in the company has to work together.”

ConocoPhillips In North America

Fox talked about what he calls “the new ConocoPhillips.” Part of that “newness” is having evolved into the largest North America-based independent, Fox said.

ConocoPhillips has “massive land positions in the Big Three: Bakken, Permian, and Eagle Ford,” according to Fox, adding that, in total, the company has 21 million net acres in North America. Sixty percent of the company’s acreage is in North America, he said.

Regarding ConocoPhillips’ stature in the Eagle Ford, Fox did not mince words. “We have the best position in the best play in North America,” he said specifically. Speaking generally about the continent, he said, “North America is the place to be. We have began accessing and testing many high-quality, high-value and liquids-rich plays.”

While the Eagle Ford may be considered king, the Permian and Bakken are not being forgotten. ConocoPhillips plans to drill 300 wells in the Permian and 120 in the Bakken this year, Fox says.

Also underscoring the company’s commitment to developing North American resources, Fox said, is its plan to spend $15 billion annually on capex during the next five years.

But with all of the focus on North America, Fox says that ConocoPhillips has to be mindful about “winning the new game” on a global stage.

He gave some pointers about ending up in the winner’s circle:

• Be a “company of choice,” one that “governments and communities will want to work with.”

• Develop a high-quality, diverse portfolio.

• Have strong technical capabilities. “You can’t win the game without them.”

• Have financial discipline and flexibility.

Contact the author, Mike Madere, at mmadere@hartenergy.com.