Tough Market Conditions Force Companies to Change Strategy

Houston-based EOG Resources has unveiled a new strategy intended to boost profitability by focusing only on wells that provide a desired level of return. By eliminating those production sites that are not very profitable with a depressed commodity price, the company is increasing productive efficiency, which will reap great benefits now and into the future.

As Bill Thomas, CEO of EOG Resources, said during a May 6 earnings call: “We expect well productivity to improve more than 50 percent in 2016.”

Maximizing oil wells’ potential during the current oil and gas market downturn will boost profits and increase the company’s competitive edge when the oil price begins to rise. Unfortunately, not all companies have devised ways to hold on to their less profitable assets, which has actually proved beneficial for one company that focuses on buying in a time of major sell-offs.  

Percussion Petroleum, based in Houston, is a newer company with an interesting strategy. According to the company’s website, Percussion Petroleum is focused on the “acquisition and exploitation opportunities” that arise in certain North American onshore basins. The company strives to find reasonably-priced conventional wells that have been drilled in the past.

Through the use of artificial lift upgrades and a number of other low-cost drilling procedures, the company hopes to exploit these wells at an economical price. Larger companies looking to streamline activity, or smaller organizations that are looking to sell assets to stay afloat, are perfect targets for Percussion Petroleum’s acquisition plans. Given the current economic conditions and the consequential availability of conventional assets, the strategy seems to be quite shrewd. In February of 2016 the company announced a partnership with Carnelian Energy Capital Management LP.

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