American Oil and Gas Reporter - January 2016 - 42

Outlook 2016

Resilient Operators Anticipate
Rebound And Recovery
By Bill Campbell
According to Webster's New World
College Dictionary, to be resilient means
having the capability to "recover strength,
spirits, good humor, etc., quickly."
Right next to the word is a picture of
an independent oil and gas producer.
Not really. But maybe there should be.
Despite enduring arguably the worst
year the industry has experienced since
1986, U.S. independents stand ready to
pick up the pace of their drilling activity
in 2016, according to The American Oil &
Gas Reporter's annual Survey of Independent Operators.
AOGR mails its Survey of Independent
Operators to producers nationwide select-

ed at random from the magazine's subscription list. No attempt is made to identify survey respondents, and AOGR staff
compile and analyze the data.
Respondents to the 2016 survey say
they anticipate increasing this year's
drilling activity by 6.4 percent compared
with 2015. More active drillers (category
2)-those who plan to drill six or more
wells this year-are most positive, projecting a 9.4 percent increase over 2015
(Figure 1). Less active drillers (category
1)-those who expect to drill 0-5 wells this
year-are less upbeat, predicting a 1.7
percent decline in total drilling.
Those who targeted crude oil on more
than half their wells in 2015 are more positive than those who directed at least half

FIGURE 1
Change in Operators' Planned 2016 Drilling
Compared with 2015 Actual Drilling
10
9.4

Percentage Change

8.3

6.4

0.6

-1.7

-2
ory

g
ate

ory

g
ate

ta
To

C
C
Category 1 respondents are those that plan to drill between zero and five wells in 2016.
Category 2 respondents will drill six or more wells in 2016. Respondents included in
the "oil" category targeted crude oil on more than 50 percent of their 2015 wells, while
"gas" drillers targeted natural gas on at least half of their 2015 wells.

42 THE AMERICAN OIL & GAS REPORTER

their 2015 wells toward natural gas. "Oil"
category drillers project an 8.3 percent increase in 2016 drilling, compared with a 0.6
percent increase by "gas" category drillers.
The Survey of Independent Operators does not account for dry holes, and
merely asks whether a well, when it is
spudded, is targeting primarily conventional crude oil, conventional natural gas, unconventional crude oil, unconventional dry
gas, or unconventional wet gas.
It should be noted that because its recipients are selected randomly, the Survey
of Independent Operators tends to be
weighted toward the preponderance of
small companies that comprise the majority of the U.S. independent oil and gas operator universe. The average respondent
drilled 5.6 wells in 2015. Of those, 68.9
percent were drilled to conventional formations, and 70.5 percent were traditional vertical wellbores.
At What Price?
The caveat to the Survey of Independent Operators is the $100 million
question facing the worldwide petroleum
industry: At what price?
AOGR's survey was conducted between Nov. 9 and Nov. 20, when crude oil
prices (West Texas Intermediate spot at
Cushing, Ok.) ranged between a high of
$44.23 and a low of $39.39 a barrel. The
Henry Hub natural gas futures price
moved between a high of $2.39 an Mcf
and a low of $2.15 an Mcf. Survey respondents based their 2016 drilling plans on the
expectation oil prices would recover to
$54.17 a barrel and gas prices would rise
to $2.86 an Mcf.
How reasonable that expectation is may
depend on whom one asks. Solidly in the
"lower for longer" camp is Moody's Investor's Service, which in a mid-December report, predicted WTI crude would average $40 a barrel this year, $45 a barrel
in 2017, and $50 in 2018. Moody's gas
price projections are $2.25 an MMBtu this

American Oil and Gas Reporter - January 2016

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