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Two big drillers see 2017 as ‘transition year’

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Written by Collin Eaton

Click HERE to Read the Article by the Publisher.


Two large Houston drillers on Tuesday appeared ready to plow cash they’ve saved back into U.S. oil patches next year, a striking shift after two dismal years of industry cutbacks.

Still, executives stopped short of saying the industry is poised to rebound quickly, calling 2017 a “transition year” in which they’ll prepare for a stronger recovery the following year.

Occidental Petroleum Corp. CEO Vicki Hollub told investors that she doesn’t expect cash from operations to be enough to cover the company’s dividend, meaning it will have to rely on savings and other sources to maintain payments to investors. But the Houston company does plan to begin spending more on its oil fields next year.

Occidental executives said they’ve whittled oil-production costs to less than $28 a barrel this year, half the company’s break-even drilling price two years ago. If oil prices hold at current levels, the explorer could reinvest its savings by hiking its $3 billion budget up by as much as $800 million next year.

That could mean drilling 115 new wells in West Texas’ Permian Basin, where the company has already deployed two rigs in a bid to stabilize its sliding oil production. Hollub said the company aims to lift oil production in the region by as much as 8 percent next year.

Anadarko Petroleum Corp., in a separate conference call, also signaled more efficient drilling and oil production processes will allow it to reinvest savings next year. The Woodlands-based explorer plans to drill 90 more wells on its land in Colorado’s DJ Basin and bring 50 other previously drilled wells into production. It has also sent two rigs to its fields in West Texas and will likely erect a third soon.

“It is DUC season, or almost,” Anadarko CEO Al Walker told investors, referring to the drilled-but-uncompleted wells U.S. drillers are expected to gradually turn on when prices rise enough.

For the past two years, shale companies have drilled wells but left many of them dormant while crude prices remained too low to make a profit off them. If oil prices stay in the range of $50 to $60 a barrel, Anadarko would likely be able to increase production in the Delaware Basin in West Texas 10 percent to 12 percent.

Occidental and Anadarko both noted they have large sums of cash on hand, with Occidental carrying $3.2 billion and Anadarko, $2.5 billion.

Both companies reported third-quarter losses that narrowed sharply compared with the same period last year.

Anadarko lost $830 million in the July-September period, smaller than its $2.24 billion loss in the same period the year before. Occidental Petroleum reported a $241 million loss, well below its $2.6 billion loss in the third quarter of 2015.

Meanwhile, after the stock market closed, Houston-based Noble Energy posted a $144 million loss in the third quarter, even as its sales of oil rose and it turned on more oil wells in Colorado’s DJ Basin. It marked an improvement over its $283 million loss, or 67 cents a share, from the same time last year.

Noble’s revenue rose from $819 million to $910 million, and its oil and gas sales rose 12 percent to about 425,000 barrels of oil equivalent a day, with natural gas accounting for 57 percent of its production.

The company said it has deployed two additional drilling rigs in Texas, one in the Eagle Ford in South Texas, another in the Delaware Basin in West Texas.


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Written by Collin Eaton

Click HERE to Read the Article by the Publisher.

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