Large Operators See Basin as Core Area Mella McEwen Midland Reporter-Telegram 10/24/2004 Oil companies large and small continue to view the Permian Basin as a core operational area offering many opportunities. Panels comprised of large operators and local independents addressed their plans for the Permian Basin at the Permian Basin Onshore Technology Conference held by the Permian Basin and Trans-Pecos sections of the Society of Petroleum Engineers. Representatives of the large companies told the audience that the Permian Basin's stable, long- lived reservoirs fit into their corporate strategies. The Permian Basin, said Tim Bradley, president of Kinder Morgan CO2, "has a long life ahead of it still." His company has a major stake in the SACROC Unit and last year acquired Marathon Oil's interest in the Yates Field of Pecos County. In the SACROC Unit, he said, the company is spending $300 million this year, operating four drilling rigs and 28 workover rigs and increasing gas processing capacity in the unit. In the Yates, he said the company has converted wells from nitrogen injection to CO2 injection and is drilling horizontal wells to improve the capture of oil reserves. "We're already seeing wells around the CO2 injectors beginning to increase production," he said. Keith Innes, manager of the Mid-Continent Oil Area for ChevronTexaco, began by assuring his audience that, although there was some consolidation of jobs when Chevron and Texaco merged in 2002, "ChevronTexaco sees the Permian basin as a core part of its business and has no plans to leave." The company's Permian Basin holdings, he said, are mature fields with shallow decline rates and strong remaining oil and gas in place. Plans are to leverage its large acreage position when it can and apply technology and planning to mature fields to improve production. He cited as an example the company's McElroy field in Crane County, where production had been declining for 10 years. ChevronTexaco's technical team devised a plan, focusing on high quality areas and low pressure areas and, through the use of recompletions, infill drilling and horizontal wells, turned that decline into a production increase. The company is expected to spend $125 million in the region in 2005, even with 2004 expenditures, drilling 150 new wells and keeping 30 drilling and workover rigs busy. Tom Menges, president of Oxy Permian, the largest producer in the Permian Basin and in Texas, said the company has invested capital to keep production level, with acquisitions in 2003 and 2004 providing a bump in the company's production. "You need a long-term view" of the Permian Basin, Menges said. "The benefits we're reaping today are from investments made several years ago." In 2005, Oxy Permian will spend about $200 million on development and exploitation drilling, implementing CO2 projects or expansions and selective property acquisition and consolidation. ConocoPhillips has had a presence in the Permian Basin since 1926, noted Greg Ashdown, Permian operations manager. Reorganization when the two companies merged last year resulted in some management and technical positions moving to Houston, "But we still have a good staff here," he said. The Permian Basin is still a core area, he said, and the focus in the region is on its existing production base and supporting the two development teams based in Houston. ConocoPhillips has 130 in its Odessa office, including a technical and support staff of 55. Cost control is key to continued viability in the Permian Basin, he said, and the company does that through stable, disciplined investment, commercial agreements and joint ventures and optimizing existing production and developing new production. Expenditures are set at about $65 million, but Ashdown noted that "the Permian Basin generally gets more fund at mid-year due to our superior performance." Anadarko Petroleum, said Steve Randolph, West Texas area manager, has three prime areas in the Permian Basin: Legacy oil production in Ector County, gas production in the Canyon Sand of Crockett County and an emerging play in Loving County. Future investment will be in natural gas development, he said, noting that the company will spend $200 million in the region this year. "The Permian Basin fits in our foundation platform of long-lived high margin properties," he said. "We see the ability to grow in the Permian Basin. We have significant field sizes, high working interest with good margins, we can optimize waterfloods, increase profits through downspacing and sustained oil prices over $20 has opened up 200 locations to drill. In the Crockett County gas play, we have excellent margins, profitable downspacing and sustained gas prices over $4 per Mcf has opened up over 400 drilling locations." In the emerging Loving County play, Anadarko has six rigs operating with highly variable results. A key to the company's success, he said, is the ability to transfer knowledge from other areas to its Permian Basin operations. Hiring is on the agenda for the large producers. ChevronTexaco looks to hire six to eight technical professionals for the Midland office next year and all said they are recruiting, including visiting college campuses to entice graduates to consider jobs with their companies.