Just over eight months since Baytex Energy Corp. completed its acquisition of Ranger Oil Corporation, the company reported in its Q4 2023 results call-in that the asset has added quality scale in the Eagle Ford, and made Baytex a more resilient and sustainable business, said president and CEO Eric Greager.
Operationally, Ranger’s integration has progressed well, with nine operated wells brought onstream in Q4, and is delivering strong results across the black oil, volatile oil, and condensate thermal maturity windows.
The total operated wells in production since Baytex’s closing Ranger is 22, with no new wells brought onstream from non-operated acreage during the fourth quarter.
“The nine wells brought onstream during the fourth quarter generated an average 30-day initial production rate of approximately 1,600 boe per day, 80 per cent of which is oil and NGLs, per well,” Greager told analysts.
“When we compare these results to a [public] data set of over 1,000 Eagle Ford wells, our second-half performance ranks in the top quartile of all 2023 wells drilled in the Eagle Ford. And because of longer laterals, on a production per lateral foot basis, we’re in the top of the second quartile. I'm very pleased with our performance.”
Greager said Baytex continues to optimize base-performance and remain focused on strong drilling and completions performance in 2024 and is targeting an eight per cent improvement in operated drilling and completion cost per lateral foot over 2023.
With respect to reserves, Baytex’s year-end report reflects a meaningful increase in high-value light oil production along the U.S. Gulf Coast, thanks to Ranger.
CEO: Greater effort, cost to reach Karnes Trough’s high-quality resource
Asked about higher well costs in the Eagle Ford, Greager used Baytex’s Karnes Trough, discovered in the mid- to late-2000s, as an example of how the company needed to work harder to punch at the same level. More effort meant more capital, with the result being an expectation of an eight per cent to 10 per cent improvement in 2024 over 2023.
“[Karnes Trough] is, I think, objectively some of the very highest-quality unconventional resource in North America,” said Greager.
“A very, very high-quality resource, long in its development, as we have recognized with our non-operated Karnes Trough assets.
“As you move up to the north and east, into the concentrated contiguous block of our Ranger lands, the reservoir quality is good, but not as good as the Karnes Trough. There's exceptional resource quality, the best in North America, that's the Karnes, and then there's one step down. I would call it Tier 2-plus or Tier B-plus — a very high-quality resource, but in order to get the results to punch at the same level, you've got to work harder.
“You've got to spend more energy intensity, hydraulic intensity, kinetic energy, to shatter the resource in the reservoir and generate the fracture surface area necessary to liberate, a slightly lower-quality resource. And it's this fracture surface area that generates the well performance that we're seeing, but it takes more effort, and it takes more capital.”
As a consequence of that, Greager said, Baytex is now seeing very strong well performance.
“But we've got to work harder, and we've got to spend a bit more capital. These are also longer laterals… and so we're building efficiency… by drilling longer laterals and getting strong performance out of those longer laterals.”
He also credited embedded improvements made in 2023 in areas such as design, drilling efficiencies, and multi-blade polycrystal and diamond bit innovations.
“The way the cutters are designed, the way the bits are designed, the way the BHA [bottom hole assembly] is designed, affects the penetration rate, hole cleaning,” Greager said.
“The way we stay in zone is a very energy and intellectually intensive effort to stay in the best rock, but it results in active geo-steering to stay in the best rock and results in better ultimate performance.
“You want to get faster, but you also want to stay in the highest quality resource, and it's always a balance between getting faster, pushing down costs, while also staying in the highest-quality resource and getting the biggest bang for the effort. That's the balance.”
Downward pressure on capital expenditures
Baytex’s aim, he concluded, was to continue to put a lot of downward pressure on capital numbers, “but only to the extent that we continue to drive maximum performance out of the reservoir, because you kind of get one shot out of unconventional stimulation.”
When asked by an analyst if there was any interest in selling the company’s non-operated Eagle Ford position, Greager rejected the idea.
“We really like our Eagle Ford position, all of it. The non-op Eagle Ford, the operated Eagle Ford, the team in place today is getting the best out of both and putting them together in ways that elevate the combination,” he said.
“We're going to continue to realize both operational efficiencies and improvements, and performance efficiencies and improvements over time. We're just six months in, and we put two back-to-back top quartile quarters in place.”
In terms of the competitive and leasing landscape around the Eagle Ford, Greager said there are a lot of small opportunities in the form of tuck-ins and working interest acquisitions because they're very efficient.