While some oil and gas companies aren’t offering many public comments in wake of the free fall of oil prices this week, at least one headquartered in the Permian Basin admits it has put drilling on hold. And another has cut its drilling operations.
Ring Energy, Inc. based in Midland, Texas announced Tuesday it will cease any further drilling until pricing stabilizes. Kelly Hoffman, Chief Executive Officer said, “The recent drop in the price of oil has forced us, as well as other operators, to re-evaluate our current capital expenditure budget for 2020 and make changes accordingly that we believe are in the best interest of the company and its shareholders.”
Ring Energy had planned to drill 18 new horizontal wells on its Northwest Shelf asset in 2020. Four were drilled but the company stated that as of now, no further new drilling will take place “until we are comfortable that commodity pricing has stabilized.”
The company is monitoring what it calls “All-in” costs which is the firm’s cost for a barrel of oil and that is less than $25.
“We continue to have serious discussions related to the marketing of our Delaware Basin asset, and by curtailing any future new drilling, we are freeing up future cash flow which could be used for debt reduction,” said Hoffman. He also admitted that the previously announced CAPEX for 2020 is being reviewed.
Another Midland-based company, Diamondback Energy, Inc. said it was reducing rig activity, immediately going from nine completion crews to six. It also expected to drop two drilling rigs in April and a third later in the second quarter of the year.
Diamondback said it has already dropped one completion crew as part of its original 2020 plan but is now releasing two more crews because of the oil price weakness.
The company also said it will reduce its capital budget for the year
“As a result of current and expected oil price weakness, we have immediately reduced development activity and expect lower activity levels to continue until we see clear signs of commodity price recovery,” said Travis Stice, Chief Executive Officer.
” We have made these decisions before and they are driven by the goal of protecting shareholder returns over the long term. We believe that while this is clearly a challenging time for our industry, these are the conditions that Diamondback is prepared for.”