HOUSTON -- Steve Hinchman, president and CEO of Highmount Exploration and Production LLC, said North America’s oil and natural gas industry is headed “back to the future” in technology and production cycles. He also detailed how his own company is weathering the sway — and taking advantage of it— as it positions itself in a “new landscape” that seems eerily reminiscent of ones before.

Unconventionals — in both plays and technologies—is the watchword in the United States, which has a 100-year supply of “affordable” natural gas, and which produces the largest amount of oil and natural gas “on an equivalent basis” worldwide, he said.

Hinchman noted that a “recent Mackenzie report on disruptive technology includes oil and gas exploration techniques, applied to unconventional resources, as one of the 12 technologies that can be a game-changer in the economy over the next ten years.”

He noted some of the already-tangible effects of the current unconventionals boom: “Over the last seven years, net imports have been reduced by over six million barrels a day, probably having the most significant effect on our import-export balance,” he said.

“And maybe, more importantly, it’s keeping around $200 billion a year in the U.S. economy,” said Hinchman, who spoke at the NAPE Winter Business Conference earlier this month.

For his own company, the unconventionals frenzy has been profitable, productive, and challenging — a positive challenge. Those companies “that cannot make the transition” to adapt to the unconventionals landscape “will have challenges” of the negative sort, he said.

Highmount is “late” to the unconventionals game, but is focused on horizontally drilling and fracing 600,000 net acres in the Permian and producing conventional natural gas in the area’s Leonard and Wolfcamp sections.

“To date we’ve drilled around 27 horizontal wells. We plan to move to development mode in the Wolfcamp B this year, and really continue to test and derisk additional horizontal targets,” he said.

He also detailed some of the company’s Midcontinent operations.

“We have 70,000 net acres with production and development potential in the (Mississippi) Lime and Woodford. We acquired that acreage back in 2011, and we’ve drilled 43 horizontal wells to date,” he said.

Better late than never, in Highmount’s case, to unconventionals. The company, Hinchman said, is focused on good returns.

“We focus on maintaining a reasonable balance in gas and liquids, such that we have the ability to deploy capital to the highest returns in what will continue to be cycles in prices on oil and gas. We’ll focus on being active in two, maybe three, basins to create some diversity in our investment opportunities without really diluting our know-how,” he said.

With new technologies — at whatever point in the energy cycle they are ‘new’ — Hinchman said that “the industry goes through these cycles of capturing opportunity and then doing the experimentation that’s required to make them commercial. And over time, it has to transition its focus to real development and increasing returns."

“Those companies that can make the transition will have opportunity and the potential for success,” he added.

Comments