Upstream operators stay afloat with tactical deals

With upstream operators facing continued challenges in a down market, our analysts are examining the strategic decisions driving companies as they meet the challenges of staying head-above-water.  We use our Well Analysis Tool to look deeper into a recent wellbore partnership announced by Whiting Petroleum, and how it's keeping finances balanced and increasing production.

As 2016 marches toward its halfway point, many upstream operators continue to employ a range of survival tactics as they adapt to ongoing challenges from the market downturn. On top of capex cuts, equity issuance, and M&A activity, the industry is also seeing more partnerships forming to decrease financial burden and keep business moving.

On 14 April, Whiting Petroleum announced that it has entered into a wellbore participation agreement with an unnamed, privately owned partner in the Williston basin. The terms of the agreement state that this partner will pay 65% of drilling and completion costs in exchange for a 50% working interest in 44 Williston basin wells, and also includes US$30.7 million in cash for 14 wells already in progress.

Whiting Petroleum wells likely to be included in well participation agreement

Whiting Petroleum Map

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The deal keeps Whiting's capital budget neutral for 2016 while allowing it to increase production and proved reserves across its Bakken acreage. The company has revised its production forecast for 2016 upward from 131,400 barrels of oil equivalent per day (boe/d) to 136,900 boe/d and plans to add a completion crew for the remainder of the year.

While the deal illustrates the type of nimble thinking required to keep production going in the low-price oil market, enhanced completion methods are also helping to keep companies afloat. Whiting recently completed two wells in the Three Forks play with 40 fracture stages and 6.8 million pounds of proppant, along with the use of diverting agents, which allowed them to isolate fractures. Sixty-day production rates for those wells are 1,501 boe/d and 904 boe/d, and the relatively low price of completion enhancements make lower breakeven thresholds, bringing cash-flow neutrality closer and potentially attracting investors.

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