Richard Zeits over at Seeking Alpha on cost control:
The reporting season for U.S. E&P operators is about to shift
into high gear next week. One of the most prominent themes this quarter
will be record reductions in well costs achieved since the beginning of
this year that management teams will showcase as the sector's key
response to the change in the macro environment.
I expect that the average cost reduction already achieved
and reflected in the leading-edge AFEs, for resource plays, will be in
the 20%-25% range from the respective costs in 2014. Moreover, I expect
operators to guide for additional well cost reductions of 5%-10% for the
remainder of the year.
While the decline in well costs is the
U.S. resource plays is of course nothing new, this earnings season will
likely surprise with the magnitude of the reductions and the speed with
which these reductions have been achieved. For many operators, well cost
reductions will likely materially exceed guidance provided earlier this
year.
For example:
Triangle Petroleum reported
last week that it reduced its average gross well costs to $10.2 million
on average in its fiscal Q1 2015 (three months ended January 31, 2015).
This represented a ~14% year-on-year reduction. Triangle also reported
that its most recent AFEs were coming in under $8 million and already
exceeding the top end of the company's 10%-20% well cost reduction
target for the current fiscal year.
It should be noted that
Triangle's well cost remains on the high end among its peer group, but
may be in part explained by Triangle's "integrated" business model
whereby Triangle's wells are completed by RockPile, a sister company
specializing in pressure pumping and completion logistics which is 100%
owned by Triangle.
The article will be archived at the source.
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