Posted on 12/11/2014 5:06:13 AM PST by thackney
In the latest sign that falling oil prices are pinching shale producers, Goodrich Petroleum Corp. announced Wednesday that it will dramatically trim its budget next year and consider selling off its Eagle Ford assets.
The Houston-based exploration and production company is among the smaller publicly traded drillers in the Eagle Ford, operating about 30,000 net acres in the South Texas play, according to third quarter data compiled by Bloomberg Intelligence.
In the first half of next year, Goodrich will explore “strategic alternatives” for all or a portion of its Eagle Ford acreage to give the company greater flexibility to expand development under better market conditions, the company said in a release Wednesday.
The company also plans to pare back its capital expenditures, trimming spending to $150 to $200 million in 2015, or about half the $375 million it projected to spend in 2014, according to their annual report. The announcement comes after several large oil companies, including ConocoPhillips, Apache Corp. and Continental Resources, revealed plans to trim their spending budgets next year.
About 95 percent of Goodrich’s 2015 budget will be earmarked for drilling in the Tuscaloosa Marine Shale in Louisiana and southern Mississippi. Some analysts have cautioned that the economics of that shale play have become far less attractive amid falling oil prices, warning that the region requires a much-higher crude price for drilling to remain profitable there.
The Tuscaloosa Marine Shale was the least economic of the basins studied by Tudor Pickering Holt, requiring a West Texas Intermediate price between $70 and $90 per barrel. In the oil-rich core of the Eagle Ford, the domestic benchmark price would have to plunge as low as $30 to $40 before companies no longer found it economically feasible to drill there, the report found.
West Texas Intermediate, which has fallen 40 percent since June, was trading around $61 per barrel on Wednesday.
Still, Goodrich remains bullish about the Tuscaloosa Marine Shale. Costs in the region continue to fall while production results improve. Among the region’s “inherent advantages,” the shale play offers a lower average royalty burden and drillers can fetch premium prices for oil extracted there, the company said.
South Louisiana Light Sweet oil was selling for $58.75 per barrel on Tuesday, according to the price bulletin compiled by Plains Marketing LP. That’s $4.75 per barrel higher than the posted price of South Texas Light and $11.31 per barrel higher than the posted price for Williston Basin Sweet pumped from North Dakota.
Despite the cuts, Goodrich still plans to grow its oil production next year, boosting its output by 30 to 42 percent to reach 6,100 to 6,700 barrels per day. Natural gas volumes will decrease as Goodrich presses forward with the previously announced sale of its East Texas Cotton Valley Field, expected to close later this month.
Goodrich shares fell 56 cents to $3.53 in morning trading on the New York Stock Exchange.
Deep pocket and very low leveraged eandps are going to make out like bandits as these high leveraged companies shed assets at bargain prices to avoid going BK. In essence, it is cheaper to find oil on wall street than in the field.
IMO.
Yep, we could as easily write the same article from the perspective of those that are buying the assets, instead of from those selling.
But doom & gloom attracts more attention in the headline.
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