After acquiring Chesapeake’s Utica assets in 2018, Encino Energy ascended to claim the titles of the largest oil producer in Appalachia, the most active driller in the region and the seventh largest private U.S. E&P company.

Founded in 2017, rapidly growing Encino Energy made waves in the oil and gas industry through its four-pillar investment thesis built upon leveraging market inefficiencies, long-term capital deployment, technological advancements and world class operations.

“[Back in 2016], companies were being forced to sell assets and it was difficult for us to see where the buyers for those were going to be, especially larger assets,” Encino Energy CTO Tim Parker told the audience at Hart Energy’s DUG Appalachia Conference & Expo on Nov. 7.

“Our argument was that we were going to be able to find better quality assets if we bought larger assets. That meant that we had to have access to a lot of capital,” Parker said.

The company’s ability to access large-scale capital enabled it to make strategic acquisitions when others could not, taking advantage of what Parker called a “major market inefficiency.”

The second pillar to Encino’s strategy was to adopt a patient capital model, allowing for disciplined investment that paid dividends in the long run. This allowed the company to combine technical work with operational efficiency to reduce risk and enhance returns, Parker said.

With the advent of new data technologies, the company was able to harness detailed geological and production data to refine its approach to drilling and production, outperforming expectations and competitors and unlock the Utica’s potential.

However, the most defining aspect of the company’s success was its fourth and final pillar: a commitment to operational standards to improve drilling efficiency, reduce costs and maximize production output, Parker said.

“The Utica looked to us to have all of the things that we were looking for and we thought it was grossly misunderstood,” Parker said. “The datasets that we had access to enabled us to see what needed to be done and to make us very confident that this was going to prove that it would deliver the kinds of returns that our investors expected.”

When the company acquired the Utica assets, it inherited an asset base with more than 700 producing wells across nearly 900,000 acres. Since the acquisition, the company has grown its acreage to approximately 1.1 million acres and now produces from more than 1,000 wells. Oil production has nearly tripled and the company has unlocked some of the most productive oil locations in the region. The company also has made major strides with its oil takeaway capacity.

“We are now routinely delivering wells with better than 1,500 bbl/d of initial production, and we’ve turned the play from being something that was uneconomic with zero inventory, into something where we have more than 10 years’ worth of inventory that we recognize today of high-quality oil locations,” Parker said.

By drilling more efficiently—32% faster than other operators—Encino was able to outperform competitors in well completions and lateral footage drilled per day.

The company has not only driven operational excellence but also established itself as a leader in sustainability.

With 87% of water used in operations being recycled, zero routine flaring and no spills, the company has made major steps in reducing its methane intensity, setting new standards in environmental stewardship.

“We have gotten distinctly better year after year after year, and that all translates into real economic returns,” Parker said.

“I’m sure that there are other people who argue that their economics are maybe a little better, but we really don’t care. The unescapable conclusion here is that the economics that we’re producing in the Utica are world class and we’re very proud that we have been able to do that.”

As the company’s production has ramped up, it has also expanded its reach into international markets. With a current output of 60,000 bbl/d, a portion of this oil is now being sold internationally under the brand name “Windy Ridge crude,” further diversifying the company’s revenue base.

Looking forward, Encino is projecting continued growth, with expectations to increase liquid production to 50% of its total output in the coming year.

The success of the Utica shale has far exceeded Encino’s initial projections, and its 10-year drilling inventory positions the company as a leader in the U.S. oil industry.

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