Unpacking ConocoPhillips $23-billion merger with Marathon Oil

Dear Subscriber,

In this week's newsletter, we are thrilled to share our latest acquisition analysis: "ConocoPhillips – Marathon Merger". Discover how this $23-billion merger reshapes the landscape, from asset growth in the Permian to production rankings.

We are also excited to announce that Ted Cross will be speaking on "Midland Basin Performance and Remaining Inventory Analysis” at the SPE Permian Section. Discover the latest insights on well performance, emerging zones, and inventory forecasts using advanced machine learning models.

URTeC 2024 is just around the corner and we want to remind you that we are presenting 5 technical papers! Don't miss out on this; check our schedule.

We're also thrilled to share the abstract of another paper we'll present at URTeC this year, "Unpacking the Uinta Basin: The Next Great Oil Play?" coauthored with XCL.

Don't forget that next week, Ted Cross will be presenting on the SPE Oklahoma City June Luncheon!

Continuing our theme from previous newsletters, our VP of Product Management, Ted Cross, presents two must-reads: "The Oily Future of Gas" and "Oh, I Would Drill a Thousand Miles"

[Report] ConocoPhillips – Marathon Merger

ConocoPhillips' acquisition of Marathon Oil is set to shake up the industry with a $23-billion merger. Our latest report explores the creation of a Williston and Eagle Ford powerhouse, analyzing the impact on production rankings, asset base expansion, and market dynamics.

What challenges and opportunities lie ahead? Get the full scoop in our comprehensive report here.

[Event] SPE Permian Section

Join us for the SPE Permian Section Lunch and Learn, where our own Ted Cross, VP of Product Management, will be speaking on "Midland Basin Performance and Remaining Inventory Analysis"

Discover the latest insights on well performance, emerging zones, and inventory forecasts using advanced machine learning models.

Don’t miss this chance to gain valuable knowledge on June 27, 2024, from 11:00am to 1:00pm. See you there!

[Event] Next Week on URTeC 2024

We are just a few days away from URTeC 2024, the biggest gathering of energy professionals!

This year, we are presenting 5 papers, highlighting our dedication to cutting-edge research and innovation in the oil and gas industry.

Check our website for the abstracts. See you at booth #400!

[Paper] Unpacking the Uinta Basin: The Next Great Oil Play?

Ready to explore the next big oil play?

In this 2024 URTeC paper coauthored with XCL, we dive into the emerging Uinta Basin unconventional oil play, analyzing its potential against established giants like the Permian and Williston Basins.

Join us for the technical presentation on Wednesday, June 19th, 2024, as part of Theme 3: Emerging Plays and Challenges.

Can't make it to the presentation? Sign up for the waiting list to access the paper post-event.

[Event] SPE Oklahoma

Reminder! Next week, Ted Cross will be presenting at the SPE Oklahoma City June Luncheon!

Don't miss this opportunity to learn about the drivers of parent-child depletion using cutting-edge machine learning techniques.?

??? Date: Thursday, June 20

? Time: 11:30am - 1pm CDT

?? Location: Oklahoma City Golf & Country Club

See you there!

The Oily Future of Gas

Gas drilling in the US Lower 48 has dropped to a level not seen since before the Russian invasion of Ukraine, while oil drilling is holding steady. What does this mean for gas dynamics and supply?

The Lower 48 horizontal gas rig count has dropped below the symbolically meaningful 100, with 14 rigs lost since February. Operators in the Haynesville have dropped rigs faster than in Appalachia, which has been relatively resilient, reflecting lower breakevens there despite disadvantaged offtake.

In the context of Henry Hub prices below $2/mcf, this number actually doesn't look so bad -- gas rigs previously bottomed around 60 in previous cycles, suggesting that we (gulp) may have more room to drop from here.

Meanwhile, oil rig activity has held quite steady at around 455 rigs. To understand the implications of steady oil drilling and lower gas drilling activity, we ran a quick supply forecast keeping current activity levels constant.

Our model shows the Permian gas fraction rising from ~24% today over 31% within five years. When all the "oily" plays are considered together, their fraction will break 50% of unconventional gas supply within a few years. Of course, there are gassy parts of the Eagle Ford and oily parts of Appalachia, but that number still astounds.

Our supply model here is relatively simple and doesn't take into account complexities like Permian gas pipeline constraints. However, the increasing gas production fraction of oil wells is a critical dynamic for gas supply. We did a little back of the envelope math, and on average, and Midland Basin undrilled inventory can generate a 20% IRR all the way down to $-12/mcf (with oil at $80). Scary numbers!

It will be interesting to watch whether gas producers continue to lay down rigs from here. Sub-$2 brings a lot of pain in the industry....at least if gas is your primary product.

Oh, I Would Drill a Thousand Miles

Just how much have oil and gas operators been drilling? While the rig count gets most of the attention, lateral miles drilled is more directly related to production. Viewed this way, operators have been very active over the last few years!

In April 2023, Lower 48 operators put 2,144 lateral miles onto production, just short of the previous peaks found in 2018-2019. This is despite the rig count being ~25% lower in 2023, thanks to longer laterals and improved drilling efficiencies.

Zooming in, the Permian represented half of this total, putting on 1,088 miles in April 2023. For context, this is about as far as Midland is from Mexico City -- an incredible distance to drill in a month. The Permian has comprised over 50% of lateral miles drilled in Lower 48 in the post-COVID cycle.

The Uinta, Haynesville, and Powder River also had impressive runs during the latest cycle, peaking at fresh highs of 94, 141, and 293 miles, respectively. While much smaller than the Permian, those numbers do add up!

Looking forward, long laterals and drilling efficiencies will continue to be a major theme in Lower 48 development. With ExxonMobil planning 4-milers in the Permian and Appalachian operators breaking an average of 13,000' (!!), the longer lateral train shows no signs of stopping.

[Report] The State of AI Adoption in Reservoir Engineering

We've randomly selected a winner for our survey about AI adoption in Oil & Gas and the lucky recipient of a brand new YETI cooler is Sumeer Kalra

Thanks to everyone who participated - your feedback is invaluable! You can download the report here.

Ready to see what’s under the hood and how Novi Labs can help you get valuable insights?

Book your personalized demo with our team: https://novilabs.com/request-for-demo/