The stock price drops.
11 replies (most recent on top)
@2z9 You are right on. There is no way that smaller fracs on more closely spaced wells is going to pay off. There are these things called fractures that allow communication and when two wells are plumbed to the same set there is competition for the contents. I suspect planning ran this round of economic follies.
BB the Mega Frac Champion has entered the chat
I’m skeptical that tighter spacing with smaller fracs is the winning formula. Sure, lower well costs help the math, but every extra well still comes with casing, lift, facilities, and operating costs that don’t go away. Tighter spacing also raises the risk of frac hits and interference that cannibalize nearby wells, while stress shadowing makes inner fractures less effective. The data shows there’s a limit where added density delivers little to no incremental recovery, even if the upfront economics look better. Unless APA can back this up with real diagnostics, paired pilots, and long-term results, it feels more like spin than substance. Given APA’s track record of overpromising and underdelivering, they better hope this time they’ve actually got it right.
@19t
"either APA was smarter than every other operator in the Permian,"
Gigachadyes.jpg
At the end of the day if basically the entire industry is developing their acreage one way and APA was doing something very different (that also was buying through land positions quickly), either APA was smarter than every other operator in the Permian, or they were not and believed in their own hubris so much they couldn’t admit their mistake. One thing is pretty definite, the market was not at all impressed with APAs development strategy, and honestly that was reason enough to pivot to the industry norm.
Well costs are down ~30% vs EUR degradation of ~10%. Easy to see how that would improve returns discounted (PI) or un-discounted (F&D). Nothing novel about this, it’s literally what the rest of the basin has done for a while.
Pretty arrogant to think only 2-3 REs at APA were good enough to do the engineering that the whole industry is doing. Even more arrogant to think their outlier development strategy has to be superior to the collective wisdom of 1000s of other wells drilled by 10s of other operators in the basin…
They’re spending less per well but drilling more wells. It’s hard to believe that saves millions. Maybe they were actually wasting that much on megafracs.
They claim the new spacing improves recoveries. Seems that they’ve determined this pretty quickly. I guess planning calculates this since most of the qualified REs are gone. Stay in your lane.
@vp There have been legitimate capital reductions in the Permian basin (specifically D&C with F starting to improve also). Increase well density has extended the amount of inventory in Permian (you can argue about more spacing and mega fracs were better, but the market wasn’t buying it). The $250 million of capital savings in USON for 2025 is a real number. Not sure if it’s too little too late, but those are real and should be long term changes.
@m2 what has fundamentally changed?
Don’t forget it’s putting money in our pockets.
If only share price appreciation were that easy…
Here’s to hoping the recent outperformance has staying power and is the result of something more fundamental.