Postcard from the AADE 2020 Operators Forum

On February 13, the American Association of Drilling Engineers (AADE) hosted its annual Operators Forum at the Pittsburgh Airport Marriott, with speakers from Ascent Resources, Cabot, EQT, JKLM, Laurel Mountain Energy, Penn Energy, Range Resources Rockdale Resources/Tilden Marcellus and Seneca Resources on hand to discuss their current operations as well as drilling plans for 2020.

While each presenter delivered an individualized message, a few common themes emerged. All the speakers, for instance, commented on the difficulty of producing in the current depressed price environment, noting that they didn’t anticipate the situation to improve in the near term as prices are expected to remain low. They also indicated that their concentration at the moment is on maximizing return on capital and generating free cash flow.

Here’s a summary of what each representative had to say:

Ascent Resources (Stan Cherry, Lead Drilling Superintendent). Ascent operates approximately 460 wells and have been producing since 2014. During 2019, they drilled 38 wells with an average lateral length of approximately 16,000 feet and averaged 17.7 days of spuds-to-rig release. In 2020, Ascent plans to spud 60-70 wells with an average of three wells per pad. Laterals are expected to average 14,000 feet. To complete the plan, they expect to operate four rigs and two fracture crews throughout the year. The Company has entered into a five-point strategic plan to meet their 2020 goals:

  1. Maximize near-term cash flow and liquidity
  2. Allocate capital to lowest risk
  3. Maximize capital efficiency
  4. Take an integrated approach to managing financial and operational constraints
  5. Employ comprehensive hedging

Cabot (George Stark, Director of External Affairs). Cabot currently maintains approximately 200,000 net acres and operates out of 3,450 locations. During 2019, the company experienced production growth of 18% and operated on a capital expenditure budget of $800 million. Projected budget for 2020 is expected to be reduced to $575 million, with Cabot operating two rigs throughout the year. More specific comments were unavailable until after the company’s earnings call, scheduled for February 21.

Laurel Mountain Energy (Matt Weinreich, Senior Vice President). Laurel Mountain has drilled six wells since 2018 and completed two new pads in Clarion County. They plan on completing an eight-well program on the two pads and expect an average lateral length of 7,000 feet. In 2017, they started a midstream company, Stonehenge Laurel Gathering, to transport NGL-rich natural gas production from Clarion County to the Energy Transfer System in Butler County.

PennEnergy (Tommy Thompson, Vice President Drilling and Completions). PennEnergy holds 212,000 gross acres/176,000 net acres, of which 87% is held by production. As of 2019, they operated 380 wells with an average lateral length of approximately 7,500 feet and held total proved reserves of 6.9 Tcfe. During the year, the company operated one top-hole rig, one horizontal rig and one fracture spread. In that time, they drilled 40 verticals, 36 horizontals and fractured 36 wells with an average lateral of 6,850 feet. In 2020, they plan to drill 12 wells and fracture 18 others. They also plan to reenter existing pads that currently have 3-4 wells and drill an additional 2-4 to maximize capital expenditure.

EQT (Steve Chesher, Vice President, Drilling). In 2019, EQT operated two top-hole rigs and three horizontal rigs with a focus on drilling in Washington and Greene Counties in Pennsylvania, as well as limited drilling in West Virginia and Ohio. They averaged 12,000-foot laterals and completed 4-5 wells per pad. In 2020, they anticipate adding another top-hole rig and maintaining their horizontal rig count. The plan is to keep pads closer together and increase laterals to maximize efficiency.

Seneca Resources (Bryan Bauer, Drilling Engineer). Seneca exercised capital expenditures of $492 million in 2019 and generated 211.8 Bcfe. In 2020, they’ve budgeted $375 million for expenditures and anticipate production of 235 Bcfe.

JKLM (Tyler Ragan, Drilling Engineer). JKLM currently operates 42 wells with 45 wells drilled. They ran one top-hole rig and one horizontal rig during 2019 and completed four wells with laterals ranging between 3,000-10,000 feet. The company drilled a total of 13 wells in 2019, one of which was unsuccessful. Plans for 2020 are to complete 4-6 wells, including those that were top-holed in 2019.

Range Resources (Pat Quinn, Drilling Engineer). During 2019, Range operated two top-hole rigs and two horizontal rigs, averaging 10,500 feet of lateral length in 59 completed wells. In 2020, they plan to utilize one top-hole rig and 2-3 horizontal rigs, expecting to increase average lateral length to 12,200 feet.

Rockdale Resources/Tilden Marcellus (Jarrett Toms, Drilling Manager). During 2019, Rockdale top-holed one well and completed five others while Tilden completed four DUCs. In 2020, the company expects to complete the DUCs drilled in 2019 and has no new wells planned. Emphasis will be on extending the laterals of the DUCs drilled in 2019.

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