Foothills Exploration Inc. has entered into an agreement to acquire a number of natural gas and oil wells in the Midcontinent region in an effort to capitalize on the enduring strength of fossil fuel demand.
The Los Angeles-based exploration and production (E&P) company said on Monday it has acquired 21 shallow oil and gas wells, all located in Comanche County, OK.
The stripper wells, located on four leases, have an average depth of 1,200 feet and come primarily from the Granite Wash Formation, the company said. Foothills has not disclosed any financial details.
The company said its return-to-property program, scheduled to begin this week, will consist of cleaning existing wells, facility maintenance, electrical work and streamline repairs. All wells should deliver production rates of 20-25 b/d.
Foothills predicted the new production would hit online next week.
Based on baseline projections and oil prices around $75 a barrel, the company expects to generate $432,000 in revenue, after royalties but before field expenses, from its properties over the next 12 months. WHZ Oil & Gas LLC, an indirect subsidiary of Foothills, will operate the wells.
Benchmark West Texas Intermediate crude prices surpassed $80 a barrel in Monday’s trading and remained flat for much of early 2023.
US E&Ps boosted domestic crude oil production to its highest level in the pandemic era earlier this year, the US Energy Information Administration (EIA) said.
US producers generated 12.3 million barrels a day for the week ending Feb. 3, up 100,000 barrels a day from the previous week, data from the EIA’s latest Weekly Petroleum Status Report showed. The press marked a 100,000 bpd increase from its January average and set the highest level since early 2020, before widespread coronavirus outbreaks.
Natural gas production hovered around 101 Bcf/d on Monday, falling short of record levels just above 102 Bcf/d in 2022, according to Bloomberg estimates. This has been driven in part by strong production levels of associated gas which is produced alongside oil.
Benchmark Henry Hub natural gas prices are off to a weak start in 2023 due to relatively mild winter weather. Short-month New York Mercantile Exchange gas futures traded around $2,500/MMBtu in February, less than half as much as they did in late 2022, when winter weather was at its harshest.
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However, demand proved strong throughout 2022, pushing prices to a 14-year high last summer.
Demand for gas, including US LNG exports, is expected to prove robust for several years to come due to the global supply shortage that has been exacerbated by Russia’s war in Ukraine.
European countries have severed diplomatic and trade ties with Russia in protest of the conflict, minimizing access to Kremlin-backed energy and spurring calls for American supplies of liquefied natural gas. US exports of super-cooled fuel hit record highs ahead of winter as Europe scrambled to stock up on gas for the peak heating season.
Against this backdrop, Foothills said Monday it also entered into two additional deals for certain asset acquisitions in Kansas and Oklahoma, which will “significantly increase” to its total well inventory and reserves.
Additionally, the company said it “is currently evaluating several additional oil-weighted properties in the area for potential bolt-on acquisitions.”