Capital Markets | Capital Expenditure | Drilling Program | Capital Expenditure - 2018

Permian Operator to Double 2018 CapEx, Grow Oil Production 20%

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Here is a quick read through of Earthstone's 2018 drilling and completion plans.

The table below shows that the company plan to grow its oil and equivalent production 20%, while doubling capex.  This is being achieved by doubling midland basin capital and wells. As you might remember, the company is focused on the midland basin where it most recently combined with PE-backed Bold Energy.   The combined company has 21,000 net acres in the central midland basin as shown by the map below.

The company's drilling plan calls for 1 rig in the permian basin, where it intends to drill 20 wells.  The company talked about the option to deploy another rig in 2H if we continue to see an upward movement of oil prices.

Earthstone Midland Basin Leasehold Map

Management Comments

Frank A. Lodzinski, President and Chief Executive Officer of Earthstone commented, “In 2017, we successfully completed our transition to a Midland Basin operator through the acquisition of nearly 21,000 operated acres and the streamlining of our non-core asset base through the divestiture of our non-operated Bakken assets and multiple other small assets. Our year-over-year production growth rate was 95% and we are currently forecasting production growth of over 50% for 2018, based on the mid-point of our guidance. With our transformation completed, we are now clearly focused on developing our Midland Basin assets and accretive expansion of our acreage and drilling inventory. In less than two years, we have assembled 27,000 net acres and established substantial production in the Midland Basin, while virtually eliminating our net debt.

Robert J. Anderson, Executive Vice President, Corporate Development and Engineering stated, “Our operations in the Midland Basin have generally gone as planned, enabling us to meet or exceed our operational goals for 2017 despite having reduced our capital expenditure guidance. The impact of 3.9 net wells brought online in December has given us a significant boost in production and allowed us to exit 2017 ahead of our guidance, with more than 10,700 Boepd. We also have 2.5 net wells coming online this month, which will give us a good start towards achieving our 2018 guidance. Current results demonstrate that well results continue to be at or above our expectations. Going forward, we will continue to focus our attention on growing our footprint in the Midland Basin through acreage trades, acquisitions, development drilling and M&A opportunities. Our strong balance sheet and liquidity has positioned us well to execute on growth opportunities to further build the Company and generate shareholder value.”

Mr. Anderson added, “Our current capital expenditure budget is based on a minimum one-rig program in the Midland Basin and limited Eagle Ford drilling, both of which could be expanded in 2018. While our plans can change based on acquisition success, commodity prices, availability of high-quality services, adequate infrastructure and other factors, we have initiated activities to bring on a second rig in the Midland Basin in the second half of 2018. We are excited about the possible expansion of our drilling and completion activities and our acquisition efforts and advise that we are aggressively pursuing our strategy, but that we will continue to maintain a strong balance sheet.”