Permian drillers seek ways to reduce costs

Keeping production growing an objective

HOBBS — With oil prices hovering in the mid-$40 range, producers are looking for ways to minimize costs while still ramping up production in the Permian Basin.

Regional executives from Concho Resources, Chevron and OXY spoke during a panel discussion at the Economic Development Corporations of Lea County’s EnergyPlex Conference this week in Hobbs.

“We expect price volatility,” said Clay Bateman, vice president of Concho Resources New Mexico.

Bateman said sustained $40-a-barrel prices would cause the company to “turn the boat” and re-evaluate its future financial plans.

In the meantime, each company emphasized plans to cut down on production costs. All are working to develop and refine more of a “manufactured” model, in which several wells are drilled simultaneously on one pad, to streamline operations and reduce costs.

Jeff Bennett, president and general manager of OXY’s Permian resources in the Delaware Basin, said the company began constructing a logistical hub in the Great Sand Dunes, an area Bennett said has been a main focus of his. The hub includes a three-unit train loop and sand storage.

“This will essentially give us a large logistical hub to support our Greater Sand Dunes development over the next several years,” Bennett said.

The hub is expected to be completed next year.

The companies are also hoping to see a rebound for service companies in the basin, which were hard-hit during the most recent downturn in the industry and are critical for oil and gas producers.

Bateman said Concho’s service providers in the area have adopted substantial rate increases during the first half of 2017.

“Hopefully they’re beginning to gain some traction,” he said.

Collectively, the companies employ hundreds of New Mexicans. As production ticks upward, they’re predicting a need for more.