Oil and Gas Investor editor-in-chief Deon Daugherty spoke to Earthstone Energy CEO Robert Anderson about the company's growth and transformation throughout the years in Hart Energy LIVE's first installment of The OGInterview. Click here to read Anderson's full Oil and Gas Investor cover story interview.
Deon Daugherty: So Robert, Earthstone has gone through a tremendous transformation in the last two years at, you know, from 60 employees two years ago to more than 200 now, correct?
Robert Anderson: That's right.
DD: What's that been like?
RA: It's been a lot of work starting out, and it's been a lot of fun. We started out at 15,000 boe/d towards the end of COVID, and here we are two years later at about 100,000 boe/d. We've done seven acquisitions and grown our asset base even into New Mexico, where we got started a year ago doing after we did a transaction. So it's been rewarding that we have a culture that people wanna come work here.
We have people in the field. We have people in the office who worked for us through multiple companies for the last 20 years or more. And now we're attracting younger talent and new talent that have come out of other companies or in some cases, maybe other industries. And we must be doing something right because we haven't merged companies together and inherited a bunch of employees. We've actually gone out and hired them.
DD: So you're adding new people, you need to add some more for all this acreage, you've bought all this corporate assets that you've got now. This inventory, if you will - tell us about the challenges that you're finding as far as operating in the Permian. Some companies, several companies, in fact, have talked about inventory challenges and, and you know, keeping them up at night doesn't seem to be the case with you though. How do you manage it?
RA: Yeah, we've done a great job acquiring assets over the last two years and some of those assets, we didn't pay for any inventory. It kind of came along with the deal 'cause we bought it at the right time or in depressed prices. And in other cases we actually looked at the deal and said, oh, we love the inventory. New Mexico is definitely high quality inventory. But we also see in the Midland Basin where yes, not all rock is created equal, but we've drilled wells on the eastern edge of the southern Midland Basin with great results, wells that come in at 1,000 bbl of oil per day, and they decline, they make more gas, they cost a little less to drill, but the economics are very good especially when gas is $9, right? Today it's a little less. So we will allocate capital to, you know, the areas that make sense. And we're drilling in Central Reagan County right now, and we like the results we see there.
It's been a learning curve of how you attack areas that maybe don't have Midland County rock or Martin County rock. And one of those things is you space it a little bit wider and you figure out how to be more efficient in the way you drill. So you drill 15,000 ft laterals and that helps drive the cost down on a per foot basis and increases your economics.
DD: Right, so you don't have to be in the core of the core with double premium everything to turn a profit?
RA: Some of our acreage isn't in the core, so our challenge or our job for our investors is figure out how to make it work. And we've done that quite nicely over the years, and we'll continue to expand on that acreage footprint if we can to where we'll make that inventory look for us.
DD: And as we've been talking, there's a lot of things to be excited about, a few things to be nervous about when you look at the industry over the next few years. What what are you expecting and, and what do you think the exciting challenges, if you will, would be?
RA: Yeah, I think that's short term there's gonna be a lot of bumps in the road. I mean, there's fears of recession and more inflation and all those things create challenges for the commodity and we've seen it vacillate around a lot. But what I'm really excited about is that the discipline in the industry today has helped us get to where investors are starting to come back - the generalists for sure - and at the same time, we've got, I think, a path to higher prices for longer, especially on the oil side as underinvestment has taken place over the last several years. So it sets us up for continued strong pricing and good economics and the ability to create a lot of value for shareholders.
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