In Basin Observations | DEP Podcast

Welcome to the latest episode of Daniel Energy Partners in basin observations podcast. I’m your host, Bill Austin. Today, Jeff Jay and I have Ted Cross from NOVI Labs as our guest. Ted is the VP of product management at Novi Labs, and he frequently writes on upstream oil and gas innovation using Novi Labs’ proprietary data and analytics. Ted recently released a post on LinkedIn, which highlights the impressive performance of unconventional wells in twenty twenty four.

Since production and efficiency have been top of mind for many of our friends in the industry, we thought it would be a good podcast topic. We’ll discuss the factors driving unconventional well performance and where he sees the rest of the year playing out.

For more on Novi Labs, be sure to visit Novi Labs dot com or find Ted on LinkedIn. As usual, send along anyone you think might find this episode interesting and reach out if you’d like to join us in the future. Let’s get started. I’m Bill Austin, and, I’ve got Jeff Jay from DEP with me. And with us today is Ted Cross from Novi Labs. Ted, why don’t you just tell us a little bit about yourself and about your firm?

Yeah. Well, thanks, Bill. Thanks, Jeff, for having me on. Very excited to be on here today, and I think we have some great topics to cover.

Novilabs is a data analytics company focused on unconventional oil and gas. So we build software for forecasting unconventional developments, valuing assets, and then we do a lot on the data space in collecting data from state agencies, minerals companies, and operators, and publishing that as a standalone subscription to do things like monitor activity or see what’s going on with with the Permian or other things like that. And myself, personally, I’m the VP of product at Novi Labs. I so that means that I work on things like what are we actually working on these days.

I design our different applications.

And prior to that, was a geologist at ConocoPhillips. So kinda gotten to see the industry from the operator side and now from the technology side, which has been a lot of fun.

Oh, cool. And so Novi Labs, how long have you guys been around? And, you know, it sounds like you’ve probably grown a little bit from your from your beginnings. Tell us a little bit about that too.

Oh, yeah. We’ve we’ve been around now for, I think, eight or nine years. So pretty pretty actually healthy length of time for for the business, and we’ve grown like gangbusters, especially over the last few years. Initially, we were only a software company, so we were only providing software that operators use to forecast their developments. And that was a nice little business. But a couple years ago, we decided to get into the data side of things both because we thought that our operator customers would benefit from having an integrated data into analytics solution and also because we thought that between our data science expertise and relationships with top operators and access to proprietary data sources that we really had something unique to offer in the data space that some of the legacy providers weren’t able to do.

Yeah. So, like, you hit on that a little bit. What what do you guys kinda do differently than the Inverices of the world or some of the other, you know, oil and gas, both data and analytics providers out there?

Yeah. So a big differentiator for us and what we really pride ourselves on is we have proprietary data that we publish straight through to our database from operators and minerals companies. So thanks to our relationships that we have on the analytics side of things, we’re able to ask companies and get permission to do things like publish their well level production data in Texas or publish completions data that’s not available publicly, like stage counts or cluster counts.

And that really gives us an advantage on things like the accuracy of our production data.

And then we also just have a laser focus on improving the quality and the completeness and the timeliness of our data. So because we do things on the forecasting side, it’s really important to have high quality data that goes into our machine learning models. So we spend a lot of time making sure that our our data quality is is high, and having access to all this data from operators is really helpful in that because it gives us essentially an answer key where if we’re trying to figure out which state forms are more reliable or what transformations that we have to do to get the data into a reasonable shape, we already know what it needs to look like coming out the other end. So the other side of things that we do is we layer in bits of our intellectual property from the machine learning models for doing things like forecasting well production or calculating spacing that give our clients a little bit more accurate or sophisticated view of future production.

Excellent. I was gonna ask a little more about the AI machine learning process. What exactly are you doing with that? I guess I’m I’m trying to understand exactly how that fits into your process.

Yeah. Great question. So at our core is data science and is machine learning as a business, and we use that in several different ways across the business. And different products will have you know, require sometimes maybe you need to bring a bazooka and other times you just need a hammer.

You know? It’s it’s kinda we try to use whatever is fit for purpose. But, our core algorithms, one of them is used for forecasting wells before they’re drilled, so a predrill forecasting algorithm, and another is used to forecast wells after they’ve started producing, so a PDP forecasting algorithm. And those take in things like the geology and the completions design, spacing, and parent child relationships.

And out the other end, you will get forecasted production. And then alongside that, we will also publish things like measurements of rock quality and estimates of how the different factors like the completions design or the parent child relationships impact the production because explainability of these AI models is extremely important.

Excellent.

Cool. So alright. So one of the reasons we asked you to do this podcast and and you post a lot, Ted, you post a lot on LinkedIn and which has been great for I think that was how both Jeff and I kinda found you with some of some of your posts that some of the other people that we know liked.

And, you know, you did a post I don’t even know if it’s was probably not even two or three weeks ago, you know, on shale productivity in twenty twenty four. And that’s really been a pretty hot top not a hot topic, but it’s been a topic that a lot of our clients have been talking about.

And that’s why we reached out. We’re like, hey. Ted, clearly and NOVI Labs know a lot about this. So why don’t we just have him on and, like, let’s talk about this, you know, shale productivity and, you know, tell us a little bit about the just about the piece because I think we’re gonna talk about it, but, like, and why you ended up, you know, kinda wanting to write it too.

Yeah. Well, we always try and pay attention to different trends that are occurring out there. And I think in particular for this piece, there is a bit of a narrative out there that shale productivity is collapsing. The sky is falling.

The Permian is dead. You know? Yada yada yada. And I think that a lot of that pessimism is more grounded in, I don’t know, hope for high oil prices than actually what’s happening on the ground.

And if you actually look at the data, I think a very different picture emerges. And, yeah, I mean, it’s it’s actually the the wells so far this year have been so good. It’s, frankly, it surprised surprised me and surprised our team over at over at NOBY.

Well, maybe to to kind of follow-up on that. I mean, you know, obviously, you’re talking about the just general performance of unconventional wells.

You know, what is going on with that? And and, you know, just give us a general overview of what you what that performance has been, and and I don’t know how granular you wanna get, but would love to hear about it.

Yeah. So at a at a top level, the the first quarter of twenty twenty four, which is about what we have full data for. You know, some states are a little bit slower reporting than others, but we have mostly complete data for the first quarter, and it’s gonna be around the most productive on a per well basis quarter in the history of shale. And that’s not something that you would have probably expected to hear based on, you know, what’s floating out there and, you know, online or probably even in cats at the bars in Houston or in Midland.

And just to just to give you, like, a little bit of numbers on that, the production for this quarter, the average well is producing in the first quarter that is is producing sixteen percent more than it was in the first quarter of twenty twenty three. So over over ten percent improvement since twenty twenty three, coming up to around a tie with q four of of twenty twenty, which was the previous the previous high quarter for average well productivity. So pretty pretty impressive improvement there.

So that’s just per well. That’s not normalized to, like, lateral foot or anything?

Yeah. Exactly. So lateral on on a lateral foot basis, it is down a little bit of, compared to a couple years ago when we had the best per foot productivity in kinda twenty twenty, twenty one, and into twenty two.

But we have actually seen a couple quarters where that per foot productivity has increased. So that’s the other side of things that’s also a little counter narrative because, you know, ladder longer laterals has been, I’d say, over the history of shale, probably the biggest factor for improved performance alongside more intense completions, but operators haven’t been changing their completions designs that dramatically over the last four or five years, whereas the lateral lengths have just kinda kept getting longer and longer. And you would expect that per foot productivity to be decreasing, but to see that go up a little bit for a couple quarters here is also quite notable because it’s also counter narrative, especially when the lateral lengths haven’t increased over those same period.

And why do you think that is? I mean, is there is there a high grading by the operators? Is there something else you guys have noticed that would cause that?

Yeah. So when we’ve been looking at it, I think there are a few factors that are contributing to that on the whole.

Number one is that operators are are hydrating their inventory to the best locations.

They’re also doing things like widening the inner well spacing between their wells.

And I think there have been some small improvements in things like completions design that are are giving a little bit of an improvement. And, you know, if you’re improving things one or two percent, that’s definitely notable across the whole portfolio of wells that are being drilled out there today.

So lots of lots of it’s a bit of a combination of factors, but a lot of different things going on there to improve that productivity.

Excellent. That’s helpful. So one of the other things we do you you talked about a little bit in there is, like, kinda some geographical trends, and you touched on it a little bit. You know?

Okay. You’re mostly looking, you know, at Permian or or mostly people wanna talk about Permian. But Yep. You know, what are you seeing in some of this, you know, in in the other geographical regions?

What other basins have you guys even looked at? Is that, you know, all over all over the country or or talk a little bit more about that?

Yeah. So we we keep our eye on every basin in in lower forty eight for any emerging trends. Definitely, we have we’re, like, a little bit deeper into our analysis of the Permian, but there are a few different other areas that we’re really paying attention to. And I think an underrated part of the improvement in the well productivity recently has been that some of these emerging plays are looking as good or even better than the Permian, which is also, I think, surprising in counter narrative.

Yeah.

So two two big ones that I’ll call out there would be the Utica and the Uinta.

And I I think the numbers are something like the the average well in twenty twenty three for the Utica in the oil window was seven percent better than the average Permian well. And for the Uinta, it was, I think, fifteen or sixteen percent. So Wow. I mean, just crazy numbers there for just how good those wells are performing. And I think the interesting thing there is that you might expect traditionally, you would expect that as the industry, you know, drills the good stuff and moves on to the new plays, the new plays aren’t gonna be as good as the plays that were discovered first or brought on to production first. But I think the surprise has been that operators have found well performance that’s on par with, you know, the Permian or core parts of the Eagle Ford or the Bakken and just competes really well at least on a a per well basis. So even though those plays aren’t as big, they have really outstanding well performance to offer.

And I think the right way to think about that is, like, neither of those is gonna be a new Permian. Right? But it’s like, imagine if you just discovered, like, oh, we forgot about this Midland County in in in or forgot about Lee County. And Lee County is probably a bad example because it’s just so big. But it’s like, you know, if you just discovered another Martin County or another Midland County, just like a really top performing, area in the Permian and just kind of showed up one day, you know, that would be really kind of bullish for the future outlook, for for a kind of unconventional running room.

Yeah. And so are there other, you know, kind of other regions that you guys are looking at in, you know, kind of in the hopper or and or are you just, like, kind of always looking at this type of stuff?

Well, we try to maintain a a close view on it at all times. But a couple things that we have in our that we’ve been looking at in a little bit more detail, and this is another one which surprises folks, but it’s emerging plays within the Permian. So let’s take the Midland Basin here as our our example. The Midland Basin is a little bit more mature than the Delaware Basin.

Know, when we run our numbers, it’s something like fifty percent drilled compared to the Delaware Basin, which is more like only one third drilled or something like that.

So in the Midland Basin, the main zones are the lower Spraberry Shale, the Wolfcamp A, and the Wolfcamp B, and those have been historically most of what’s been drilled. But operators have discovered that new zones like the Middle Spraberry or the Joe Mill can perform really well.

And when we run our numbers, the in remaining inventory in those zones is actually the best looking in the rest of the basin. And if you look over the past few years, those new zones perform better than the lower Spraberry Shale than the Wolfcamp a, the Wolfcamp b. So that’s also the surprise that even within a single basin, the emerging plays can be that strong performers. And it’s not just a question of, like, operators are delineating these secondary targets that are kinda kinda crummy, they can actually compete and even outcompete the primary zones.

To give you another example, the Dean wells up in Dawson County, some of those are literally the best drilled in the Permian. You know? And it’s it’s at least for the horizontal wells, like, over the last twenty years. You know?

We sometimes we forget the Permian has, a hundred year history, and, you know, there’s vertical wells out there that you know, vertical wells that would run circles around us. But as far as these these unconventional plays with a horizontal well and a and a a sizable sizable frac, you know, some of those Dean wells in Dawson County are the best ever drilled. So that’s that’s, I think, the other things that are surprising us. And then if you look deeper in the in the, in the basin, zones like the Wolfcamp d, you know, it’s not as good as those other zones, but there are places where it works, and it’s just accretive inventory.

And then even Barnett, Woodford, those are looking pretty good so far. You know? So it’s it’s, it’s really the gift that keeps on giving.

And just because of the scale of the Permian, if you add in a new zone that’s perspective over a couple counties, you know, and you can drill four, six wells per section, that’s that’s a really material addition to the inventory.

Definitely. So, Ted, I know you guys and I think the first encounter I had with Novi Labs was when you published the sort of the price breakeven locations that were left in the Midland Basin. And I’m kind of curious if you have a view, not you know, obviously, you have a view of the Midland, but even a broader view of, you know, low price breakeven locations. And I guess, you know, the the secondary question to me is, you know, how concentrated are those? Like, in the Permian, I guess my hunch would be that given the consolidation we’ve seen that, you know, a lot of the low breakeven inventory that’s left is probably in just a handful of portfolios.

But just curious your thoughts there.

Yeah. In in the Midland Basin, it’s very consolidated, and I think that reflects just the amount of m and a that’s happened in the basin. And especially after after Exxon bought Pioneer and with Endeavor’s acquisition by Diamondback, you know, as you were looking at it before, there were, you know, six or seven top operators there with a lot of inventory, and that just got reduced to to, you know, by two operators. So it’s, it really is a small set of of operators who have the majority of that inventory. Not that there aren’t, you know, other smaller players out there that are putting together nice little positions, but I think it’s something like over eighty percent of the the high quality inventory is is held by those top top four, top five operators. I think that’s a little bit you know, other than the DJ, that’s probably the most concentration. Delaware is a little less concentrated.

Williston is concentrating and consolidating as we speak.

Right.

Every every week you turn on, there’s a a new a new deal over there. Yep. But, you know, I think on the whole, a lot of that is actually healthy. And, you know, to take a little step back, we we did an analysis of the DJ Basin, which is one of the more consolidated.

As I mentioned, you’ve got Chevron, Oxy, and Civitas are operating almost all the basin. And we’ve seen actually the per well perfume performance has been increasing quite a bit in the DJ compared to other basins. And I think it’s because they’re doing things like super long laterals. They’re being smart about their completions designs.

They’re spacing their wells a little bit wider, and they have that kind of long term perspective on on really improving the return of their locations. So I think that’s that’s gonna play a bigger part as we see the other basins start to mature and consolidate.

So I guess in light of that, I mean, I guess, you know, obviously, activity levels have been, you know, I I guess, muted to say the least. You know? But when you say, you know, these wells are are gaining in productivity and you see sort of the activity levels that are out there, what do you think that means for overall US oil production? I just you know, wonder if we’re gonna have another year where productivity sort of just, you know, I guess surprises to the upside. And so if there’s an expectation that US oil production grows by, call it, three hundred thousand barrels a day, that actually the real number is five hundred based on what you’re seeing.

Yeah. Yeah. It’s a great question. I mean, I would say that this the improvement in the well productivity should be kind of a balancing act against the drop in activity levels.

And Yeah. You’ll see and if you’ve been paying attention to the recent earnings calls that’s come up, like, on the the Diamondback call, you know, they’re dropping dropping drilling drilling rigs, dropping a frac crew, but they’re expecting to keep their actual well delivery at the same pace. So, you know, that’s a reflection of both their wells are looking good, but also they’re getting synergies on the operational side in terms of their in terms of their deliveries. So, you know, personally, we’re not personally, but our perspective, we’re not we’re not seeing growth this year in lower forty eight.

We’re seeing a a small drop, but I think I think that’s moderated a little bit by those improvements in in productivity. And I think the bigger ramification, though, is for the breakevens for what these operators are able to succeed at. And, you know, if they’re able to get their wells to be five, ten percent productive, that’s gonna drop their breakevens, which I think will just kinda help maintain that activity and put a little bit more of a floor on on on, where it could go because they can still profitably drill at a at a slightly lower price.

K. And then, I guess, lastly, and this is maybe especially in the Permian, but I’d be curious what you’re seeing overall. I mean, there’s a lot of there’s a I mean, obviously, GORs in the Permian have been going up. You know? And I think there’s a a suspicion that as people go deeper into the, say, you know, Barnett Woodford, the g o GORs are gonna go up, you know, considerably. Are you seeing that? And and, I guess, even sort of, you know, nationwide, are GORs and and you know, are they increasing as you as you’re looking at these things?

Yeah. So I think it’s really important to make a distinction between the basin’s aggregate GOR and what the individual wells are producing because, you know, every well just naturally for one of these unconventional wells just because of the reservoir properties, they will produce quite a bit more gas when they’re an older well than when they’re a younger well. And so, you know, all these basins every year that goes by, the average the average age of the well, goes up every year that goes by. Right?

So I think, you know, if you’re looking at a basin like the Permian or the Williston or the Eagle Ford, you definitely see that the average GOR of just the total production in the basin goes up over time. But I think surprisingly, the per well GOR, at least in the Permian, hasn’t been changing, very much, if at all. So, like, a well from twenty twenty three has basically the same GOR profile as a well from twenty nineteen, and those are up a little bit compared to, you know, twenty fifteen, twenty sixteen. But on the whole, they’re not changing that much.

So when we’ve looked at this in more detail, we have seen that certain certain areas or certain operators will see an increase in gas oil ratio, but that’s kind of being balanced out over the whole basin. And I think in part that’s because you you’re right that these deeper zones should be gassier than the shallower zones, but there’s been so much activity in the Bone Spring and in the Spraberry and the Joe Mill lately that those tend to be lower GOR, that I think that’s kind of balanced out what’s happening deeper in the deeper in the play.

Got it.

Well, so to to switch it up just a little bit, so you you highlight in the post, you know, this the average inner well spacing that that’s increasing.

And so which which in the past, the it’s kind of been the inverse. Right? But Yeah. What are the implications of this trend, you know, for some of the long term planning that you’re that you’re seeing out there and and for production? Like, Jeff has kind of been we’ve been talking around this, but, like, you know, keep going on that.

Yeah. It’s definitely has a big impact on production. And just to put some numbers at it, the average well in twenty twenty one had a had a distance to its neighbor of six hundred feet, and the average well in twenty twenty four, so far, it’s, six hundred ninety six feet. So it’s it’s a notable increase there.

And I think what we’re seeing is that operators are widening that out in order to increase their per well productivity and lower their breakevens. And the classic model, which I think is mostly right, is within a single zone or flow unit or a tank, if you put more wells in there, it’ll help you get the oil out faster and maybe increase your total recovery, but you’re gonna decrease your recovery for each individual well. And and that and so that’s kind of a way if you’re trying to maximize the value of the whole unit and you have access to cheap capital and prices are high, yeah, I mean, drill a lot of wells.

But if, you know, you don’t have great access to capital or your cost of capital is going up and if you, can’t you know, are are kind of marginally near where you can make money, it makes a lot of sense to drop a well or drop two wells or drop three wells from your development plan. So I think that’s that’s that’s having a nice impact on the productivity here. And I think the other the other thing that we have been seeing is that operators are tending to drill fewer wells in individual zones but add in more zones to each development. So in other words, they’re spreading their density out vertically more than they are laterally these days, and that’s minimizing the interference that you’re getting between different different wells in the same zone while still allowing the operator to deliver, like, a larger number of wells and keep that inventory high.

Got it. So, I mean Yeah. I guess to synthesize all that together, right, by moving them further apart, you increase the productivity per well. You drill fewer wells per zone, but you’re also drilling out more zones. And so all of that kind of leads to you know, I and I guess, again, with the with the design optimization and the efficiency gains, fewer rigs, fewer crews, drill more wells that are more productive. And so that’s basically sort of all things being equal is kind of, you know, is what’s kind of held holding production flat to growing slightly in, you know, around the country, if I’m understanding exactly what you’re saying.

Yeah. That’s a that’s a great synthesis, Jeff. Nails it nails it pretty well. And I think that’s, you know, frankly, kind of the miracle of of shales that operators are continuously innovating here and and finding new ways to to do more with less and continue to compete in the international markets.

Do you spend a lot of time with investors? I mean, we talk to investors, and I’m just kinda curious as you you know, if if you have talked to a number of investors, if if a lot of these things we’re talking about have have changed anyone’s minds or how they’ve affected people’s perception of energy companies as investments.

Yeah. We we do we do talk with investors both on the equity side for public companies and the equity equity side for private companies.

And I would say the on the whole, the investors are kinda happy with the duration of the inventory that these operators have been able to prove in part thanks to these improvements in in productivity, longer laterals, etcetera.

We’ll see what it’ll take to actually get to a long term rerating of the multiples of the sector, let’s say. I think that that’s know, we’re probably gonna have to have a change in price regime for something like that. But I think a lot of the generalists are starting to get a little bit more interested in the sector just due to the amount of cash that’s being flowed out there.

Right. And I’d say, you know, the other thing here, and we haven’t really touched on this too much, but I think I think it’s also what the investors have been demanding for the companies is driving a lot of the what we’ve been talking about today where companies wanna where where the investors wanna see capital efficiency improvements. They wanna see cost go down. They wanna see per well productivity increase rather than seeing, you know, total production increase. And they wanna see stability and duration of inventory rather than, you know, acceleration of production. So I think that’s actually, in large part, been one of the big drivers for these changes in operator behavior.

That makes sense.

Yeah. The only thing that does think about this whole thing is for our oilfield services friends who, you know, are are doing a lot of this work for these guys and becoming more and more efficient. They’re not necessarily being able to increase prices because of, Ted, like you you said, you know, being more efficient, reducing costs, reducing breakevens.

A lot of that kinda gets squeezed on those guys.

Yeah. Definitely. It’s, I forget. Somebody must have posted this on Twitter. I saw it somewhere, but it’s, you know, OFS is in the business of putting themselves out of business. You know?

It’s it’s it’s I don’t like we don’t like hearing that.

You know?

Yeah.

That’s you could delete that part if you want.

But yeah. But, I mean, but that’s it’s but all of these things that you talk about. Right? Like, I mean, be just being better, know, not necessarily that someone has to get squeezed here. That’s that’s not, like, kinda what you wanna insinuate. But it’s just when you’re getting better at all this stuff, it’s good to see for the industry and it brings investment back in. You just want everyone to be healthy.

Yeah. For sure. And I think the optimistic side of everything that’s been happening here is, you know, if you wind back the clock to twenty nineteen, you know, we took a look at the Bakken there right before COVID hit, and the core of the Bakken was, like, ninety percent drilled up. And, frankly, we were a little pessimistic about the future of the play.

But, operators over there figured out the right recipe. You know, even as they’re going into tier two or tier three stuff, they’ve widened out their well spacing. They’ve drilled longer laterals. They’ve figured out the right completions design, right artificial lift strategy, etcetera.

And the play is still chugging along, you know, however many years now until, since since it started.

Even though it’s the oldest unconventional play, it’s still adding production, and the productivity still looks better than ever. So I think that’s that’s actually been required in order to keep the play active and healthy. And, otherwise, you know, those those rigs would have disappeared or, you know, moved on to other places.

Absolutely.

I guess that that, you know, kinda, to me, begs the question of you know, I think there’s a perception, and I probably have it too, that, you know, as we go through sort of core inventory, tier one inventory, even really good tier two inventory that, you know, the service intensity will have to go up in order to grow production or to keep production flat.

And that, you know, in all likelihood, right, the cost of development will go up, which is, I guess, kind of embedded in, you know, the sort of, you know, breakeven cost by location that you guys published. But then I wonder, right, as we get more efficient as as guys figure different things out, I guess if you were to look back at twenty nineteen and you were sort of pessimistic and then you look and see kind of what the development costs are for the remaining locations, I mean, have you been surprised that they brought the cost down that much? And I guess as you go forward, is it your expectation that maybe it won’t be as service intensive or won’t be as high cost as maybe we think today based on kind of what we know today?

Well, I think, you know, if you take the recipe of longer laterals, more intense completions, and, you know, in the Bakken, maybe a focus on the zones that are actually competing, you know, operators kind of threw it in some locations that have thrown in the towel on the Three Forks that are just drilled middle Bakken wells, which if you’re in if you’re kinda getting into the fringes, if the zone doesn’t break even, you know, you should drop it. So I I do think that that probably speaks to an increasing of a service intensity per well, although in aggregate, that might not be the case. You know, in other words, like, the total services delivered under this strategy might slightly decrease even as they’re increasing on a per well basis because operators with longer laterals and wider spacing are just draining reservoir more reservoir with fewer fewer wells, fewer surface holes.

Gotcha. That makes sense.

Yeah. So the I mean, this kind of leads us to, you know, you know, what do you what should we be expecting kinda going forward and and and, you know, wanna get your crystal ball out. Do you have any predictions for the remainder of twenty four and beyond? I also Jeff, I’m gonna use one of Sean’s questions later, or you can use it too.

But we we’ll we’ll we’ll save that one for Ted in a in a minute.

Okay.

I can’t I can’t wait for that one. But Yeah. Yeah. Yeah. I mean, I think one thing that I would just like to say is that it’s it’s worth considering that when prices are rising that the productivity decreases because operators are adding rigs, getting more product getting getting more activity going in the basin and drilling stuff that wasn’t breaking even at a lower price.

And when prices are falling like we’ve seen, you know, since the big Russia Ukraine war spike, you see activity levels drop, productivity increases, operators learn to get leaner and meaner and and make this the breakevens drop. So I think that’s that, like, relationship is underrated here. And I personally I I you know, who knows? Like, we got a war hanging over the Middle East.

We might have a recession. We might not have a recession. I don’t know any of that macro stuff, but, the price levels will obviously drive how those things go. But I think I’ll I’ll try and give you guys some predictions here that’ll be at least a little bit of fun or maybe we can work with a little bit.

I think twenty twenty four will be around or possibly even the best year ever in terms of per well productivity in US shale.

I think that’s that’ll be likely to happen. We’ll see.

And then the second thing is I feel like we’re due for, you know, one to three new kind of big new play announcements.

So I I we’ve just been impressed by the level of exploration and delineation that’s been going out there in the industry. And I’ll just I’ll throw out one here for you guys that we just kinda checked in on last week internally, and this is hot off the presses. Daniel Energy Partners will be the first ones getting this one here. But, the there’s some great wells that Anschutz drilled in the Mancus out in the, Uinta Pionce Basin.

They look fantastic. Great liquids production, great gas production, not a play that you hear a lot about, kind of a forgotten, forsaken play that everybody takes a look at every couple of years, but the wells look really great. You know? And so it’s just there’s a lot of mancas out there across all these different Rocky Mountains basins, and, you know, it’s it’s developed a little bit here or there, San Juan.

You know, people poke around it every now and then, but great great looking wells, and it’s something that we’re probably gonna take a little bit of a closer look at and something worth watching.

That’s good to know. I’d heard a little bit about that just anecdotally, but it’s good to hear that the data supports it.

Yeah. I mean, the wells are great.

Cool.

Alright. So so alright. So we did this, and and I I’m you know, Sean Mitchell loves asking these questions. We do it at a lot of our conferences. But since we’re talking about this, you know, production and growth, and one of the things he always asks is he kinda loves these over unders on a couple of things.

And so the three that he was asking and this again, I like I like this one was the, you know, we’re four hundred thousand barrels a day year over year. Do you think that you’ll that that you will be in twenty twenty four the over or the under on that? Jeff, I I I phrased that right. Correct?

Yeah. That’s I think that’s fair. I mean, basically, over under on on on, you know, US production growing more than four hundred thousand barrels a day.

Yeah. I’ll I’ll take the under.

Okay. Okay? And then and then on gas, the over under of four dollars by the end of the year. Sorry.

Oh, man. Clear. That’s great. Under.

Under. And then a then crude, same thing. By the end of the year, eighty bucks.

I’m gonna take the over on crude.

K. K. Cool. Yeah. So we we just like I mean, it’s it’s always fun to ask around that to see where people are.

And, you know, one of the other things is, you know, we always look at the rig count. And and, again, this is really I think this hits well with this conversation, Jeff. It’s like, you know, the the Baker Hughes North America rig count, kind of a general question of do you think we’re at do you think that we’re at kind of a bottom here? Oh, and and are we ever gonna see, like, those, you know, thousand rigs, you know, into the future, or are we just gonna continue to do, like you said, you know, more with less for, you know, kind of into the future?

Well, I think if we stay kind of range bound in prices like we have been over the past couple of you know, since since since the Ukraine war spike ended, I I think we’re probably gonna stay around the current drilling levels, maybe drop a hair. If we did see let’s you know, god forbid, but if we did see a major war in the Middle East and price spiked to, you know, one forty or something like that, I I think we’d go back to a thousand rigs. Like but I it’s it really is just about the price, I think.

Yeah.

Well well, Ted, thank you very much for doing this with us. Is there any where where can people find you, you know, to to look out for you in Novi Labs and all that kind of stuff?

Yeah. So you can go to Novi Labs dot com. You can find more information about us there. We also have a newsletter that you can sign up for where we send out a lot of useful stuff every week.

You can find me on LinkedIn. Just search for Ted Cross or on Twitter. My handle is at Ted Cross. So pretty simple.

Cool. Yeah. And and Jeff and I don’t have Twitter handles that we like to give out. We just like to lurk over there.

It’s probably for the best.

Yeah. Sometimes I think that is for yeah. It makes me feel better just not to say anything over there. But there is a lot of really good information.

Oh, yeah. Definitely.

Alright. Well, I’m gonna let you go, Ted, and thank you very much.

Thanks, Bill. Thanks, Jeff. Enjoyed the time today. Yeah. Thank you.

If you’ve made it this far, thanks for listening, and we hope the episode This has been another episode of in basin observations. I’m Bill Austin. Special thanks to Jeff Jay for cohosting this week and to Ted Cross for joining us. If you’re interested in joining us in the future, feel free to reach out to me at bill at daniel e p dot com or any of us on the team. And be sure to visit the Daniel Energy Partners website at w w w dot daniel e p dot com or find us on LinkedIn. Thanks again.