What's Upton? Growth outside Midland County

Good afternoon, everyone, and thanks for joining us today. My name is Holly Baird, and I'm a customer success adviser here at Novi Labs. And I'll be moderating today and introducing our speak speaker. So today, we're gonna be looking at what's driving growth in Upton County. A quick housekeeping, everyone is muted. Put your questions in the q and a panel at any time, and then we'll cover them at the end. We're recording, and we'll send this out to the participants after the session. So presenting today is Ben Davis. Ben is a customer success adviser here at Novi Labs and has been working with Novi for the last three and a half years. He's spent ten years of his career as a reservoir engineer working at Exxon, Novi, other operators. So he's really great at reading the data the same way a lot of your subsurface teams do. And Ben's gonna be using Novi Insights to walk through the permit, operator development, and production data behind Upton County's growth there in the Permian and compare it against Midland County and the wider basin. So he'll show you how to work through, the Novi Insights app, and how you can apply it to your area of interest too. So with that, I'll give it to you, Ben. Great. Thank you, Holly. As Holly said, so we'll go ahead and flip over here so that you can see my screen. Great. Like Holly was saying, I'm a CS rep here at Novi. My primary task here at Novi is building machine learning models. But as a consequence of that, I need good data. So it's very helpful to be part of Novi because we have access to such good data. Today, we're gonna take a look at some of that data and see kinda what we can tease out from it. So why Upton County? It's by no means the largest producing county in, you know, the Midland, let alone the Permian or the Lower 48. But a little bit of history. This had originally been planned as a live demo that we're gonna do at ERTAC. There were some scheduling difficulties, and we couldn't do it. So we're we're we're doing it now. One of the consequences of that is that the the landscape has changed a little bit, but I wanna give a little bit of information about how, like, I got started here. So one of the things that I did to decide on Upton County was I sicked Claude on Novi's data, and I wanna start out with that by writing a prompt. So, basically, what I'm doing here is I'm gonna copy this here, and we will go over here, and we'll do a live demo. That's always dangerous. But, basically, I'm gonna drop this into a cloud code prompt and let it sort of wear away in the background. But what I'm asking it to do is take a look at some NOVI data, parse through it, look at Midland, and I wanted to give me an idea about counties with accelerating permit activity. And then we'll just let that wear away in the background as we're going along. And we'll come back to that in a minute. It's actually we'll hopefully pop up a little graphic on the screen when we get when it gets done about permit ex permit activity and permit activity velocity. So we'll get there. But that's what got this started is I did this exercise prior to ERTEC, and Upton County was one of the highest accelerating counties in Midland. It has since tapered off a little bit. It's not on the downslope, but it has maybe plateaued. But let's go ahead and get started looking at the actual data. This is Novi Insights. This is our public data platform, so it's our GUI. It works in the web. So let's go ahead and filter this down to the Midland, and this will show us the whole of the Midland, including verticals. We'll go ahead and turn those off for the purposes of today, but we do index those. We'll turn on horizontals and U turns. And then we'll pop over here to our well status tab, and we can kinda see the activity going on in the basin. And we actually see on the whole, decreasing permit activity. This is currently permit submitted. We can also look at permits approved. So there is there is some decline. A lot of that's coming from kinda your big hitters, your Martin County, your Midland County, among some others. Howard County has dropped off noticeably and kinda see it in this really, really dull green here. And then we've got our Upton County right here in the middle, and we can kinda see twenty twenty three, 287 permits approved, 401 in 2024, 355 in 2025, and 327 in 2026. We'll go ahead and and zoom a little bit closer down in on these counties. Hopton County so that we can see a little bit more about what's going on in these. There is a little bit of a downward trend year over year, but we're looking a little bit closer month over month. And we were seeing kinda think about this in terms of quarters. We were seeing increasing activity, a lot of it around these this is permit approved. But as you can see, things have fallen off in the last three months. There's still some some interesting things to look at. Another interesting thing is to look at permit submitted versus permit approved, and we can kind of see those trends there. But needless to say, there is increasing activity or interest here in Upton County, and the question of revolves around or the question that kind of comes to mind is why. So one of the things that we can do is we can zoom back out and Or, actually, you probably want to look here. It helps if I take a look at my notes. We can look at what they've done over the last, oh, twenty four months or so, and we can look at the operators that are involved. And what we can see, the the bulk of the ownership here is Exxon, Diamondback or sorry, Exxon, Apache, and Conoco. Exxon with this kind of Northwest or Northeast corner here with these this large contiguous acreage set sort of wrapping around Apache. There's our permit velocity map. We'll come back to that in a minute. We can see that here. So it's it's interesting to see, you know, so so much Exxon activities. That's where a lot of this is coming from, especially if we pop back over here to our yearly, where we can aggregate these things. We see that there there is increasing Exxon, permit activity. So 2424 to 2025. 2026 is still a little bit lower, but probably gonna do just about as well because we still got three months left in the year. So we'll probably be sort of flat year over year going into 2026. We can see a couple of other folks. One of the interesting examples here and one of the drivers for this this increased velocity in in Upton County is Apache coming back in after a pause in 2025. So nothing submitted in 2025, but '76 so far in in 2026. I can actually toggle over and see if the permit approved is any different. It's about the same. Okay. So let's let's let's pick Exxon. Let's pick on them for a bit. So we'll go over here to the side of our screen, and we'll grab Exxon. And I think one interesting thing or what we wanna see if we toggle back out of our basin, One of the benefits of looking at ExxonMobil is that they're avail or is that they're active in all of these basins. So we will zoom. Current operator. County. Ah, server. County. We can pop over here to our productivity tab. Subbasin tab. And what we're looking for here is what's injury or what is what is changing here? So is there something obvious about why we would be doing development in Upton County? And one of the things that we can do, we can zoom over here to more recent history, and we can see that we've got Andrew's is sort sort of unhelpfully off the chart. We can normalize by our lateral lengths. And what we can see is that we've got Upton County. You can see it right there in that pale blue. It's not really knocking anything out of the charts. There's there's not it's it's doesn't appear like it's doing way, way better than than anything else is doing. We can actually look at it also down here on our VIALIN charts, normalized bilateral length, and then we'll break this out by county. And what we can see is that Upton County is not worse, but it's also not better. So that's that's interesting. So we're not we're we're definitely not down here for increased production, or I don't wanna say definitely. But but kinda looking at the results, we don't see significantly increased production down here. So that's interesting. One of the other things that that kind of immediately comes to mind and and we can actually we'll go ahead and pull off our operator filter, and we will filter down to wells that have just been producing in the last few years just to make sure we don't have something that's that's wonky coming around on that. But when we go and we look, we we don't see Upton County as, like, a standout in terms of this. It's sort of the middle towards maybe the bottom middle. It's still producing pretty well. It's certainly not the bottom of the pack. You know, looking at you, Borden and and Crockett Counties. Now so it's about middle of the road. Another question is, is it worse? Is it gassier? So we can actually figure that out by putting our we'll go back to just looking at Exxon, and then we'll pop over here to our production tab. And we can look at GOR over time. We'll pop that over to GOR. And for the purposes of this, we'll just go ahead and look at let's just look at our twenty twenty five wells. And, again, what we're gonna find is that Upton County is not significantly worse or better than average. It's pretty well in line. If actually, if you look at this this little dash line as the average of GOR across all of these play or all of these counties, it is almost in line with the exact average of this data. So that's really interesting. So we're we're not producing more. We're kind of in line on GOR. So one one question that comes to mind, is the rock quality different? One of the benefits that we have here at ExxonMobil or not ExxonMobil. I I'm a former Exxon employee. But one of the benefits we have here at Novi is Novi intelligence. So we have some analysts who go in and use Novi data and Novi machine learning to analyze the basins. This is Novi Basin Intelligence, and we're gonna really quickly we'll filter to sub basin Midland, and then we'll go down to Upton County. And, actually, we'll pick another sort of fringier. We'll grab turn that off so we can see everything. And then we're gonna filter this down to only looking at the base case inventory. So this is gonna be what we see as the potential remaining inventory. And we can put our county filter back on here. We're gonna take a look at Upton and Andrews. So Andrews actually is is one of the higher producing counties. We can go over here, and one of the things that intelligence does for us is that they break things up by rock quality tier. So throw everything in the machine learning model, and we find what the machine learning or what the model is telling us about the rock quality in a given area, so taking into account all of the geology inputs. If we pause back over here and we take off our operator because Exxon is not doesn't have a ton going in Andrews. We can see Andrews is below average. So I'll pick one that's below that's above average, so Reagan County. So what we want get to, county average. Reagan County is a little bit above average. Are there are there any differences in rock quality tier that we're seeing? So if we toggle over here and we just look at Reagan County and we look at the tiering of the remaining inventory, we actually see it skewing towards towards worse. And if we go over to Upton County, this will toggle us back over here. What we find is that there's more middle of the road production here in in Upton County. I think this is maybe happening because of my production tier my production year. So I recall looking at this earlier, and just filtering down to these guys. Danger is looking at things live. Yeah. So we do actually see and when we pull that that off, we do do see Andrew's yeah. We see Andrew's doing a little bit better than Upton County, which is what I had originally wanted to look at. So what's remaining in Upton County is not the best rock. It's not the worst rock. But if we go over here to Andrews, what we find is that the remaining rock up here is actually really heavily skewed towards towards better better quality rock. So we can kinda see that most of the remaining inventory or 2,000 about 50% of the remaining inventory is that higher quality rocks. That's not happening in Upton County. So what is? We can toggle this over, and I think that there's a couple of things going on. One thing specifically, we get our selections off here. We can toggle this or yeah. Yeah. We can toggle this over, and we can look at parent count. So, basically, this is how many wells are in our well or in our radius of investigation for how many wells are in our radius investigation for the well of interest. So how many parents does a does a well have on average? And what we can see is that our while our mainline basins are going up, so more apparent, so drilling in more and more depleted rock, we can see that that Upton County, because there's a lot of green space down here still, are there's a lot more opportunities for undepleted development. Another thing kind of in that same vein is we can take a look at the closest x y distance, And we'll go and zoom over here. Obviously, those numbers were really big back in the past. And in this case, again, you can kinda see our our mainline basins as well as our our our mainline basins are all getting a little bit more or or staying about the same in terms of of development density. But because there's more room for greenfield development down here in Upton and Andrews County. So that's why we see a little bit so despite not having as good a rock, we can space the wells further apart, so we're less subject to depletion. So none of these things are necessarily silver bullets as to what's going on down there. I think that there's one other interesting thing that we could go take a look at. If we filter down to Upton County again and we pop over here to well status again, we can go and let's break this out by formation. We can see kinda the big hitters, Wolfcamp b, Wolfcamp a. These are kinda consistent producers. There's a couple in here that are relatively new. We've got Sub Woodford and then Woodford Wells. And there's actually quite a few of them. So about 36 of the wells that were permitted in 2026 are we're calling these Sub Woodford because of some issues with our gritting, but these are Woodford Wells. But the the there's not a ton of ducks. Just really quickly over here on man, technical difficulties are are rough. We can see frat or drill rigs going down over time as we're starting to draw down that the what's what what inventory has been there, but we see frat crews going up, and that's drawing down the ducts that we're seeing, which we see over here. We can kinda see we had a a dearth of them over in in in June, but we've been kinda plotting along a little bit down only about 19. There's not a ton of old ducts here. There's one pad over here somewhere that's a diamond pack Diamondback pad that's that's been a duct for a while. It may be abandoned. It's been there for about a year. But but by and large, we are fracking them just about as fast as we're drilling them. So we're not attempting to this is not a a play to the activity in Upton County is not a play to build up inventory or optionality, that sort of thing. Okay. And while we were wearing along or while we were doing all of that, Claude built this handy chart of permit activity. So, again, I didn't I wasn't messing with it or or interacting with it. It did this all on its own. NovyData is is is really well structured for this sort of thing where you can download a bulk file of all of this data that we've been looking at and sort of piecing together, and you can sort of point clot at it. Let's ignore this stuff over here. But you can see Upton County in this sort of green line. You see this upward trend here. It's sort of fallen off. We sort of expected it to continue going up. But you've also got some upward trends in Midland as well as Andrews, those sorts of things. The you know, Midland is not as interesting for this sort of thing because, you know, unless you're Axon or Conoco, you can't afford to buy in Midland. So these other places like Andrews, Regan, and Upton Counties are a little bit more interesting. And then we can also pop over here to the Claude prompt. It went through, looked at all of the permits in the dataset, calculated all of these interesting stat all of these statistics. Obviously, you have to go through and manually check you know, spot check some of this to make sure that it's not making anything up. But generally speaking, when Claude is interpreting a dataset, especially doing statistics, it's actually pretty good. So in this case, we can kinda see that Upton County is right here. They're looking at about 34% year over year permit growth. There's some other places that are bigger. But one thing that's interesting about Upton County is it has the largest uptick in permit activity and the largest share of production sharing. One of the difficulties that we have in in Texas is allocation where we get production from the state at the least level, but we don't get it at the well level, which is what we would prefer. At Novi, one of the things that we have available to us is Novi Data Network. So for a fraction of the wells, pretty decent fraction in the case of Upton County. So there's about 4,200 wells in the county, and we have about 1,500 of them in production sharing. So what does that mean? We have production sharing So we get it, in this case, directly from Apache. They send us a production sheet with well level production. So this is very important if you decide to go ahead and start looking at specific areas and you wanna get a good view on what that production data is doing. This is as good as you're going to get outside of of getting data directly from the operator. Okay. Just to sort of sum up, Upton County continues to grow. It's not better or worse in terms of production than its contemporaries. It's got pretty similar GOR responses, at least in the last couple of years compared to its competitors. There's a pretty good runway of remaining inventory, at least in Novi's eyes. And most of that inventory is sort of middle of the road in terms of rock quality, but there's a lot more greenfield available, undepleted rock, and the capacity to space well is a little bit wider. So that's that along with increasing interest in the Woodford or deeper formations, if you will, I think is probably driving a lot of the the interest that we're seeing down there. And with that, we can kinda kick it over to questions, assuming that you guys can still hear me. Yes. We can. Thanks so much, Ben. That was wonderful. Appreciate the time, and sorry everybody for the technical difficult difficulties. Thanks for sticking with us. So we'll leave it up for questions. In the question and answer box, it should be at the bottom, panel and Zoom. So if anybody has any questions, they can go ahead and submit questions. Looks like we may have lost you while we you were talking about the sub Woodford. I didn't know if you wanted to elaborate on on that. Yeah. So let's let's go back. Yeah. So one of the interesting things about or what one of the the things, I guess, about off kind of main main formation development is that the folks that are doing that development are usually trying to keep it quiet. So if we go and we pick Upton County again, and we grab our well status as permit approved. This will zoom us in, and we can take a look at some of these. So these are are currently approved wells. And so we've got a 136 approvals that are out across all of these formations. We've got these tagged as Sub Woodford. We actually have a couple that are tagged as Woodford, but this is down to our grids. The TBDs on these permits come in below the bottoms of our grids, So that's why they're called Sub Woodford, but these are all all of these Sub Woodford wells are Woodford. And you can also tell this is what I was talking about probably when I dropped off. The state reported formation is unknown. So there's not there's not a formation or an intelligible formation listed on the permits. And what you'll find is that people do this when they don't want people to know what they're doing. It's hard to to do this because you have to tell people where you're gonna put the well for collision and things like that, but they still try. There's a couple of things like this in the Woodford and the Barnett, kind of the deeper formations across the form across the Permian where they do this this sort of thing. If we go back to our status tab, which is actually where we're at, and we go to permit submitted and toggle back over to we'll get rid of these statuses. We'll get rid of the formation. Stay in the Upton County, and we'll go to horizontal and U-turn wells. You can see the formation toggle here. Yeah. So what we're looking at probably just looking back here in September or in July. Maybe June is probably the last full full month reported, but you can see there's there's 18 wells submitted in the Woodford in June, and then July, another eight. And it's just doesn't really exist back here. There's not a ton of submissions for it unless we're we're getting it tagged as as other things. There's yeah. There's four of them in in March. If we toggle over here to yearly, you can see that this sort of comes out of nowhere too. So 36 wells in the Wood versus this I think we've got a couple tags, so it didn't actually in the Woodford. So here's eight of them, but there's maybe one or two or so back in 2024. So we see an increasing interest in that. So that's part of what's going on in terms of of of increased interest. But then the other piece of that is that Apache jumped back in after taking a year off. So the 76 permits from Apache alone drive a lot of the growth this year. And then, actually, might be interesting for us to take a look at who's submitting these. They probably won't appreciate it. But Yeah. That was, Henry. And then John Thomas is asking Woodford initial production rates versus the Wolf Camp. Yeah. No. That's interesting. Seems like a pretty good split in terms of who's doing this, by the way. So Chevron, Apache, Mewbourne, Discovery. But, yeah, that's relatively straightforward to do. Let's just look at the bee, and we'll look at wells that started producing in 2025. Let me go over here to our production tab, toggle over to formation, We'll look at oil rate. A little bit of a different trend that we see, but oh, we're not normalized. Let's normalize bilateral links. Peak rates, they're not too far off. It looks like there's a little bit of difference. We're our sub Woodford wells are not coming through, so maybe we don't have a ton that are online. If we're gonna compare this one well to our Wolfcamp B, it's it's, similar peaks, but, let's go back to '24. Or what do we got in '26? See if we have any of those online. We've got a few. 5 Woodford. Looks like the Sub Woodford wells are not coming in, so it may be that we're going through and recategorizing them. So they're coming so this in this particular case, they're coming on a little lower. So think five fifty versus seven fifty in terms of a peak. But the declines on at least these five wells are are dramatically smaller. It's probably something that's worth taking a little bit of a closer look into, but it's pretty straightforward to do in the platform, without a time time constraint. Any other questions? Let's see. Wider spacing and lower parent counts as a key advantage in Upten. At what point does infill catch up and erase that edge? Do you believe there's a one way estimate? That's a great question. It really depends on how much capital there is to deploy. Right? So if and, you know, the the the story here is sort of being written right now by Exxon because they have the largest contiguous acreage position, and they have the capital to deploy to take advantage of this. But your Firebirds, your Summit, maybe Oventive to a lesser extent, maybe don't have the cap capital to do big cube development to take advantage of those things. So the smaller guys are gonna have to develop one pad and then develop a pad next to it, and they're gonna have to take those hits. So I think it's probably gonna be sort of a bifurcated story, assuming that there is not additional consolidation. And maybe there's a there there's there's an opportunity for that. But the the the resource is open for those sorts of developments to to do to do cube developments to make sure that you take advantage of this while it is undepleted. I suspect that some fraction, let's say, at least a quarter of these these operators are probably gonna have to do more nuanced development or more staged development because they just won't be able to develop it all at once. And then last question. Does our Woodford include Barnett Wells? Talking about comparing Woodford and Upton It does. And Ector. It it does. We're working we we we need to work on the tops that are associated with this to better better deal with this. Right now, we're going through and and manually correcting these back to the formations that they're supposed to be in because they're just they're not you know, like, the the formation identification is you can't rely on what's reported to the state. You have to figure it out from from tops off of a grid. Right now, most of that stuff is coming in as sub Woodford. There's a few places where we're properly identifying it as Woodford or Barnett. But in a lot of cases, those are gonna go below our our our grids just because of the the time frame in which they were originally created was was well before we were there there was a ton of interest in these deeper formations. So that's the thing that we're gonna be working on as time goes on to try and improve that stuff. There's also parallel efforts going on in the intelligence groups here at Novi to do that by hand because people want to see if they're like, what the inventory outlooks look like. We're a little, constrained there because the it's still such early days on those deeper, targets that it's it's hard to have a really confident view on what that looks like. But I imagine in kind of the next turn on our base and intelligence, reports, we will have some, company line opinion on those. Cool. Then we have one more question Sure. Before we close out. Any insight on if Woodford Barnett is economically viable with the higher CapEx and not so great gas differentials at the moment? You don't so I don't know. I'm not an operator. I I I don't I don't have any rigs. But that said, I don't see I don't see Exxon drill going after these things. The I the the folks that I do see looking at them are a little bit more on the margins. So I think that you need the the efficiencies that come along with that to to to make this work. So I don't know that, like, big that's all a way of hedging to say, I think that you need to reduce the CapEx in order to make these economic. People are gonna drill them because we're we're not running out of inventory, but we're running out of new things to go and develop. We're getting close. We're we've I mean, we've been getting close to the middle to to 50% of development, on the Permian for, I don't know, five years now, and it keeps getting shifted out. But there is a desire to go and find stuff elsewhere, and we are also starting to find that maybe there's a little bit more capacity for gassier things. And being able to put that gas away maybe locally with behind the meter stuff. So maybe there's some there maybe there's some synergies there that can make these things a little bit more economically viable. But I think it's tough if you're just drilling normally with those increased costs and selling just, you know, to Henry Hub or or wherever. I think it's tough to make those things work. I think you need an integrated decision or an integrated system that's gonna be able to get the most out of what's being delivered there. But it is enticing because it's new and relatively cheap. Yeah. Alright. And I think that's it. So thank you guys so much for joining us today. We hope to see you get back again soon. Thanks, everybody.