Texas oil players continue finding productivity gains

U.S. oil producers are delivering productivity gains across Texas, unlocking more output, bringing down costs, and helping navigate ongoing market uncertainties.

Several producers, such as EOG Resources, Inc., Diamondback Energy, Inc. and Devon Energy Corporation, raised output forecasts during the third quarter, resulting from higher well productivity than expected.

Efficiency and productivity gains are being driven through improved cycle times, new technology and greater collaboration, the companies reported.

EOG Resources

EOG Resources is one of several companies to report up to 20 per cent increases in well productivity in the Delaware Basin of the Permian from new wells.

Source: EOG Resources Q3 Results Investor Presentation. For more on Evaluate Energy Documents, watch a short video here or click here for more information.

“Well productivity improvement is the primary reason we were able to increase the full-year oil guidance by 1,500 bbls/d,” said Billy Helms, EOG’s president and chief operating office, on the firm’s third quarter results call.

Total third quarter oil production of 483,300 bbls/d was above the high end of the company’s guidance range and up one per cent from the second quarter.

NGL production was also above the high end of the guidance range, and up seven per cent from the second quarter.

One of the largest Eagle Ford producers, Helms said completed lateral feet per day in this basin had increased by 19 per cent, year on year.

Completions efficiencies also reduced the time to bring wells to sales, he noted.

“Our teams are optimizing both production and cost through our many technology applications that allow for real-time decisions to maximize production and reduce interruptions of third-party downtime,” he said.

Leveraging both in-field technology and digital technology to improve well productivity and efficiencies, EOG has increased production 33 per cent over the past five years, while per unit operating costs have fallen 17 per cent.

Devon Energy

Devon Energy has similarly achieved success at its South Texas Eagle Ford play, including through its refrac program.

“The rock is incredibly forgiving in the sense of down-spacing refracs,” said Clay Gaspar, executive vice-president and COO, in a third quarter update.

“We continue to find and uncover new ways to extract more and more of that oil in place, so we’re very encouraged with that.”

The company has set a baseline oil production of around 315,000 bbls/d, with overall gas and liquids output forecast to be around 650,000 boe/d in the fourth quarter.

Next year, Devon Energy expects to see the same or similar production but on 10 per cent less capital expenditure, with a primary focus on the Permian Delaware. The company anticipates 2024 capital investment of $3.3 billion to $3.6 billion.

Source: Devon Energy Q3 Results Investor Presentation. For more on Evaluate Energy Documents, watch a short video here or click here for more information.

A highlight in the Delaware Basin during the third quarter was the Bora Bora project, developing the upper Wolfcamp at Devon’s Todd area, with IP30s averaging 4,600 boe/d, and 60 per cent oil, with costs coming in under budget.

At its CBR 17 development in Texas, IP30s rates averaged 4,100 boe/d, at 49 per cent oil.

Average well productivity (IP30s) in the Delaware stood at 3,010 boe/d in the third quarter, up from 2,470 boe/d during the first half of 2023.

Rick Muncrief, president and chief executive officer, said Devon had sharpened its capital allocation and pushed service costs lower to deliver “a step change improvement in well productivity and efficiency.”

The company cited infrastructure improvements that support optimized development plans, reduced appraisal requirements on the Wolfcamp-focused program, and a higher allocation towards the core of the play in New Mexico, as reasons behind the productivity boost.

In 2024, well productivity in the Delaware is expected to improve again by up to 10 per cent, the company added.

Diamondback Energy

At Diamondback Energy, driving down costs and raising the productivity bar has become integral to navigating the maturity of shale basins.

“If we retain our cost structure and our ability to drill wells $1 million, or $1.5 million, or $2 million cheaper, well, as the shale cost curve goes up, we continue to stay at the low end of that cost curve,” said Kaes Van’t Hof, president and chief financial officer, in a third quarter results update. “It’s been kind of our mantra for 10 years now.”

In the third quarter, the company’s full year 2023 oil production guidance crept up to around 263,000 bbls/d, up from 260,000–262,000 bbls/d.

Source: Diamondback Energy November 2023 Investor Presentation. For more on Evaluate Energy Documents, watch a short video here or click here for more information.

Average per well productivity in the Midland Basin continued to improve in 2023, up two per cent on 2022, which the company credited to the shift to co-development of all primary targets, a move that began in 2019.

Large-scale development across the Midland has also brought with it time and cost savings, with teams drilling wells up to four days faster than two years ago.

“On the frac side is where we save the most money from a capital perspective, because we’re doing, in some cases, two Simul-Frac crews on the same site at the same time,” said Van’t Hof. “So you’re saving essentially $250,000–$300,000 a well from Simul-Frac.”

He said two fleets also run off lean gas, which saves a further $200,000–$250,000.

This focus on large-scale development has aided in planning and created more predictability, and ties into the longer-cycle nature of the energy business, helping to dampen the effects of market volatility, he added.

“We don’t want to change the plan every move in oil price,” said Van’t Hof.

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