Many operators have been forced to rethink their strategies in the wake of the 2016 market downturn, in some cases relinquishing opportunity for the sake of a more balanced budget. In the last week of March, Vanguard National Resources moved to sell its only recently acquired position in the SCOOP and STACK plays as a means of paying down debt at a time when the area presents upside to other operators. We use our North America Well Analysis Tool to analyse the assets and their economics.
As an eventful 2015 has rolled into an uncertain 2016, adaptability remains key for many operators struggling to find financial balance. A recent notable example is Vanguard National Resources, which moved to sell its SCOOP and STACK assets — a significant relinquishment at a time when the area presents an attractive growth opportunity.
Vanguard sold its position in the SCOOP and STACK to Dallas-based Titanium Exploration Partners for $280 million. Despite having traditionally maintained a PDP (proved developed reserves) decline target of 14%, Vanguard ventured considerably higher after its 2015 purchase of Eagle Rock Operating — a deal that gained it an active 20,000 net acres in SCOOP and STACK.
In this marked attempt to stabilise and right-size its decline profile, the upstream MLP will pay down its credit facilities with proceeds from selling off those assets. Our North America Well Analysis Tool shows PDP declines in the SCOOP and STACK at 36% and 43%, respectively, but also shows growth potential within the plays.
Using the tool's economics functions, we can see why this area could draw attention from a growth-focused company with a clean balance sheet. Across the SCOOP and STACK position, average WTI breakevens come to $45.06 per barrel (bbl) and $49/bbl, with some acreage in the SCOOP Core breaking even below $35/bbl, putting the package in the top quartile of Lower 48 assets. The area has also seen relatively resilient permitting activity throughout the recent market downturn, suggesting that capital will remain employed.
You can purchase our full US Upstream Week In Brief on demand to read this week's top stories in the North America Upstream sector, including Parsley's latest acquisitions in the Midland and Delaware Basins; implications for the upstream industry stemming from the Department of Justice challenging the Halliburton/Baker Hughes deal; and whether the latest oil and gas–related job losses in Texas and across the US are indicators of an impending global recession.
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