DALLAS—There are price takers and price makers in the oil and gas business, and effective planning and management will decide which is which. That was the message of BTU Analytics analyst Erika Coombs in a Jan. 13 luncheon presentation to the Petroleum Engineer’s Club of Dallas.

“The question is, which E&Ps will control their destiny in 2017?” Coombs said. “There is no $100 oil and it’s not likely anytime soon. The best of the best will lead the charge in U.S. energy growth.”

Managers often focus on the issues they cannot change—and there are multiple challenges of that nature, she added, including political instability in the Middle East with “wild cards like Libya,” and shifting market fundamentals.

“There is a fundamental shift away from oil. There is population growth with no great increase in oil demand. Things are stagnant outside Asia,” she noted, and all producers must contend with these macro trends.

More importantly, managers must focus on factors a firm can control, such as costs and efficiency. She mentioned several producers that have reported impressive cost cuts during the downturn--for example, Pioneer Natural Resources Co. (NYSE: PXD), which reported it had reduced lease operating expense from $6.82 per barrel of oil equivalent (boe) to $4.72/boe from third-quarter 2015 to third-quarter 2016.

Service sector rates are down sharply, but not all producers are making effective use of those cuts, she said.

However, lower costs don’t always indicate the best sound management, the analyst said, citing the Permian Basin as “an interesting example” where well costs haven’t declined in step with lower day rates and service sector charges.

Why? “They haven’t decreased that much because producers are drilling longer laterals” with higher IP rates, she said.

The effective use of longer laterals and better completion techniques offer producers the promise to convert marginal fields into profitable operations, she said, mentioning the Haynesville Shale in particular.

“But make sure you’re in the right area,” Coombs added, displaying maps of average IP rates in the Permian and Bakken, as plotted by BTU Analytics, explaining that while both plays are attractive, profitability can vary widely depending on location.

Buying and developing the best acreage can make an impressive difference as a result.

Planning ahead can have a major impact on profitability and can help turn a price taker into a price maker, she emphasized.

“Producers need to make decisions on how to market their oil and gas four and five years out,”.

Midstream infrastructure must be a major factor in such plans, and producers must work with midstream operators to assure capacity is there as drilling programs proceed. A lack of takeaway capacity is an ongoing problem in the Marcellus and Utica and could become an issue in the booming Permian, Coombs noted.

Right now, “the Permian has the opposite problem” as new pipeline capacity has come on recently in West Texas and New Mexico. “But moving forward, it could be become a negative and the Permian will be constrained again. There will need to be newbuilds or a slowdown” in drilling, she predicted.

Capital remains an issue for producers, and a reputation for effective management can help convince capital providers to fund new drilling. “As always, those least in need for cash can get it,” Coombs observed.

She said an effective hedging strategy can complement cost reduction, improved drilling and completion and acreage selection.

Success depends on executives continuing to ask themselves, “What can I do to stay ahead?” Coombs said.

Paul Hart can be reached at pdhart@hartenergy.com.