INDEPENDENTS BENEFIT FROM OIL PERFORMANCE

Higher crude oil prices and production are giving a boost to upstream financial results. Here are two examples disclosed last week in Dallas and Houston: Oryx Energy Co. predicted improved performance during fourth quarter 1990 and in 1991. In addition, Oryx expects to replace 300% of production during 1990 at an average finding cost of $4.35/bbl. If so, it will be the sixth consecutive year it has improved production replacement rate and per barrel finding cost.

Oct. 22, 1990

4 min read

Higher crude oil prices and production are giving a boost to upstream financial results.

Here are two examples disclosed last week in Dallas and Houston:

Oryx Energy Co. predicted improved performance during fourth quarter 1990 and in 1991. In addition, Oryx expects to replace 300% of production during 1990 at an average finding cost of $4.35/bbl. If so, it will be the sixth consecutive year it has improved production replacement rate and per barrel finding cost.
Anadarko Petroleum Corp. expects sharply increased third quarter 1990 earnings. A 20% increase in oil production during second quarter 1990, along with 25% higher prices, more than offset the effects of weak natural gas markets. Traditionally, 91% of Anadarko's reserves and 75-85% of its revenues are in natural gas.

ORYX PERFORMANCE

If prices for West Texas intermediate average $30/bbl during the rest of 1990, Oryx expects to generate operating cash flow of $291 million during the fourth quarter.

After adding expected net divestment proceeds of $200 million and subtracting $166 million for capital investment and dividends, Oryx estimates fourth quarter debt repayment of about $325 million, reducing total debt to less than $2.9 billion by yearend.

During 1991, with an average WTI price of $27/bbl, Oryx estimates it will generate cash flow of $914 million, cutting debt by yearend to $2 billion. A WTI price of $23/bbl would result in a cash flow of $784 million and a yearend debt of $2.1 billion.

While fundamentally bullish on oil prices, Oryx has begun using option puts to protect itself against a slump in crude oil prices.

Earlier this month Oryx hedged 12 million bbl of production for first half 1991, using a net realized price of $23/bbl. A put option allows Oryx to participate in price increases, while establishing a floor price in the event of price decreases.

The company's estimated 1990 replacement rate includes reserves outside the U.S., purchased in January from British Petroleum Co. plc (OGJ, Jan. 8, p. 25). Excluding international assets, production replacement is expected to be about 100%.

Excluding reserves and costs associated with the purchase from BP, Oryx estimates its finding costs during 1990 will be $4.60/bbl.

Oryx this month disclosed substantial production increases from Cretaceous Austin chalk wells in the Pearsall area of South Texas (OGJ, Oct. 15, p. 37).

ANADARKO OPERATIONS

Anadarko's oil production gains stemmed from completion of a development drilling program in High Island Block 376 field in the Gulf of Mexico and from the Etzold waterflood project in Shuck field of Seward County, southwestern Kansas.

Production increases during the third and fourth quarters could lead to a 10% gain in Anadarko's total liquids production during 1990, compared with 1989. At the present rate, it will have produced 4.5 million bbl of oil during 1990.

Anadarko's crude oil prices increased to $24/bbl from $18/bbl during third quarter 1990. Its oil prices last month were 70% higher than those in September 1989.

Last month eight wells in Etzold waterflood's north unit and four in its south unit produced 3,800 b/d from Mississippian lower Chester at a depth of about 6,400 ft. Before Anadarko began the waterflood there in April 1989, production has slumped to about 70 b/d. The waterflood program injects treated sewage effluent from nearby Liberal, Kan., through three wells in the south unit and six in the north unit.

Anadarko began developing Etzold field in 1976, and holds a 100% working interest in the south unit. It has a 66% interest in the north unit, where Maxus Energy Corp., Dallas, owns the remaining 34%.

In High Island Block 376, about 150 miles off Texas, Anadarko and partners drilled four more oil wells from a 24 slot platform installed in 1983, increasing total producing wells to 20.

As a result of the drilling, production from Pleistocene sands at depths of 3,300-4,700 ft rose to 3,000 b/d of oil from 1,400 b/d and to 40 MMcfd of gas from 10 MMcfd. Operator Anadarko owns 33.8% interest in the Block 376 project.