Saturday, March 31, 2018

Is QEP Ready To Exit The Bakken? Focus On The Permian? QEP With Successful Re-Frack Program In The Bakken -- March 31, 2018

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Note: in a long note like this, there will be factual and typographical errors. Comments and opinions may be interspersed with factual notes. 

Earnings Call: QEP

From the earnings call, 4Q17, QEP, over at SeekingAlpha:
  • earnings:
    • 4Q17: $195 million
    • 3Q17: $193 million
    • 4Q16: $175 million
  • production:
    • 4Q17: 12 million boe (decrease primarily due to the Pinedale divestiture in 3Q17
    • 3Q17: 14 million boe (Pinedale: contributed 3 million boe)
Excerpts and data points from the earnings call follow.

  • Williston oil volumes were up about 334,000 barrels due to our refrac program
  • in the Williston Basin, we began our refrack program using a design which was closely patterned after the successful methodology that we are utilizing in our Haynesville wells. As a reminder, because of well spacing in the Williston, we have to shut in offset wells during these refracs and also obviously during new well completions, which has a negative impact on production volumes. While we're still fine-tuning our re-frack design, we're very encouraged by the early results, and we look forward to continuing the program in 2018. 
  • see this post for random look at jump in production suggesting re-frack
  • On a per unit basis, lease operating expenses were $6.58 per boe, which is up $1.19 per boe from the third quarter due to higher workover and repair expenses, primarily in the Williston Basin
  • capital expenditures on an accrual basis for E&P activities in the fourth quarter were $372 million, an increase of about $45 million from third quarter
  • CapEx in the Permian Basin was $215 million which included $18.9 million from midstream infrastructure
  • CapEx in the Williston Basin was about $88 million
  • CapEx in Haynesville was about $58 million.
Conversion from natural gas to liquids:
Through a series of acquisitions and two world-class oil provinces, first, in the Williston Basin, and then in the Permian, and through divesture of non-core gas-weighted assets in the Midcontinent and the Rockies, we successfully increased liquids from less than 15% of total production in 2011 to almost 50% last year.
Comment: this has been quite a ride watching this company. I remember when it entered the Bakken -- acquiring the "holy Grail/Helis Grail" and wondering how a "natural gas company" would do in an oily play. To say the least: I am more than impressed.
If there was one disappointment for the company: the failure to unitize the Grail oil field. I think royalty owners did themselves and QEP a "disservice" (if that's the best word) when they voted against unitization.
Exiting the Bakken:
  • we plan to return cash to shareholders through a significant share repurchase program
So, how are we doing it? We outlined a couple of strategic initiatives. First, we've engaged financial advisors to assist us in the divesture of our Williston and Uinta Basin assets.
And when I say Williston assets, obviously there's two assets: there's a South Antelope asset and the Fort Berthold asset. We'll present those as two separate packages, but obviously, we'll allow bidders to make offers on the one or both of those assets. And we also will have an advisor engaged to divest at our Uinta Basin assets. 
Focus on the Permian:
We also announced a number of financial initiatives. First, we plan to use the proceeds from asset sales to fund development of our Permian properties until the program reaches operating cash flow neutrality, which we expect to occur in 2019. 
Frack spreads:
  • on the 95 Permian completions in 2018, how many frac crews do you need to operate that plan?
  • We'll average two. We may pick up an occasional third crew, but our frack efficiency is quite good.
Tank-style development of the Permian
  • look at the slides below and read the conference call notes describing these slides
  • go to the QEP website
  • go to "slides" (I assume this presentation will disappear over time)
  • slides 11 - 13 are the core of the "tank-style" development discussion

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