While the COVID-19 pandemic forced many U.S. shale producers to batten down the hatches and cut back drilling, Rockcliff Energy LLC has not had to lay down a single rig so far during the current downturn.
In fact, Rockcliff still runs the same number of rigs on its Haynesville Shale position located in East Texas since acquiring the assets in 2017, according to CEO Alan Smith.
In this interview with Hart Energy’s Jessica Morales, Smith explained Rockcliff’s strategy and how maintaining its four-rig model creates the most value still for the privately held producer.
“The big thing that you have to look at is ... we are sitting here at $1.70 gas price, does that make sense to still run that many rigs?” he said. “Well, with the cost reductions that we have had [and] with the continued performance that we continue to experience, we are still seeing quite robust returns right around 50% IRRs on the current strip and that really drove the decision to continue to run these four rigs.”
“We also are blessed with a fairly significant hedge book,” he continued. “We can’t control the commodity price. We know we’re not good at that. So, when we buy an asset and as we see our drilling program, we always like to hedge into that and we’ve hedged a significant amount of our volumes this year, 2021 and 2022.”
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U.S. energy firms cut the number of oil and gas rigs over the past week to a record low for a 14th week even as higher oil prices prompt some producers to start drilling again.
The move comes as the November presidential election looms and the Trump administration aims to complete several more deregulatory actions on the spring Unifed Agenda, a list of its policy priorities.
The U.S. oil and gas rig count fell by four to an all-time low of 247 in the week to Aug. 7, according to data from energy services firm Baker Hughes Co.