Q&A: Hilcorp’s Brian Wilbanks talks about the San Juan Basin’s future
Energy Magazine Editor John R. Moses posed some questions recently to the management of Houston-based Hilcorp Energy Company about their plans for our region.
Here are our questions, and their responses from Senior Vice President Lower 48 West Brian Wilbanks:
Q: What is the extent of your holdings in our region? How many people do you employ full- and part-time?
Hilcorp operates over 1 billion cubic feet per day of natural gas production from approximately 14,000 wells spread over nearly 1.5 million net acres of leasehold. Right now, we have over 380 full-time employees in the Four Corners Region dedicated to upstream oil and gas production operations. Hilcorp also staffs an additional 100 people on a full-time contract basis.
Q: Does Hilcorp have plans to open up wells, or has the gist of your work been exploratory in preparation of higher natural gas prices?
Hilcorp is a company founded on the principles of innovation and entrepreneurism. We continuously seek new ways to create value regardless of commodity price cycles. These value creation techniques can be as simple as re-activating a shut-in well or as complicated as unlocking a whole new exploration play.
Specific to the San Juan Basin, in just over a year, Hilcorp has reactivated production on several hundred idle wells, upgraded and optimized surface production equipment, added new producing intervals to approximately 100 existing wells, drilled 5 new horizontal Fruitland Coal wells and kicked off our Mancos Shale exploration campaign.
Q: What was the outcome of your well density amendment application on the Blanco Mesa Verde formation, and the rationale behind it?
A: Hilcorp went before the New Mexico Oil Conservation Division (NMOCD) on Sept. 13, 2018 seeking an amendment to the Blanco Mesaverde pool rule to allow for up to eight wells per 320-acre unit. The original pool rule was established in 1949 and has been amended several times, each time allowing for more wells to produce the Mesaverde reservoir in order to not waste resource. The Commission stated Hilcorp’s proposal has technical merit and asked for a continued hearing scheduled for Nov. 19, 2018. At the Commission’s request, Hilcorp will send a second notice to the operators within the area of the proposal.
The rationale for the proposed amendment is simple. There is immense gas resource that will be stranded and wasted if the rules are not amended. This gas resource has the potential to create jobs, boost the local economy, and provide significant revenues to both state and local governments.
There are hundreds of existing wells throughout the San Juan Basin that have the potential to produce from the Mesaverde reservoir. In our deeper wells, the resource is there and already drilled through. We simply need to open up the Mesaverde in those deeper wells and allow it to flow.
Over the last year, Hilcorp has applied for and received over 60 exceptions from the NMOCD to allow us to open up the Mesaverde reservoir in existing wells. These types of projects make use of what already exists, allows us to upgrade the equipment, and extends the life of the Basin.
Even with a density change, each workover project or additional new well would still require permitting, environmental approvals, and the other requirements on such work. The new density requirement would be the first update in nearly 20 years and would give operators within the Mesaverde reservoir flexibility to develop effectively and safely the resource, and, in many cases, to do so without drilling additional, new wells.
Q: What price would natural gas have to reach before the San Juan Basin becomes a viable extraction region again?
The San Juan Basin is viable under today’s conditions. There are thousands of high quality projects to be executed to extend the life of this basin. Most viable projects come from working on and improving the existing wells. With improved commodity prices, the viable project count increases drastically.
Q: What is your company’s forecast over the next five years for Rio Arriba and San Juan County’s extraction industry?
A: The 5-year future for the industry in Rio Arriba and San Juan Counties is what we collectively make of it. By collectively, I mean the operators, the oilfield service providers, and the community. The San Juan Basin has tremendous potential, but what we do with that potential is what really matters. We will do everything we can to be a best-in-class operator and extend the life of this asset for decades to come. With support from adjacent operators, oilfield service providers, and the community, I feel that the future looks very bright.
Q: Does Hilcorp foresee divesting itself of assets in our region over the next 5 to 10 years?
A: We look forward to the next several decades in the Four Corners Region.
Q: Have your activities in our region been of benefit to other companies (mechanics, other oilfield service firms) or do you keep most of your work in-house?
A: Absolutely. In 2018 alone, Hilcorp is projected to invest approximately $100 million of capital in the San Juan Basin. These are primarily dollars spent with businesses in the Four Corners Area, such as local oilfield service providers, local hotels, local restaurants, local clothing outfitters, and the Four Corners Regional Airport to name a few. Capital investments are critical to extending the life of the San Juan Basin for many years to come.
Q: Is Hilcorp among the firms and entities interested in purchasing assets up for sale by BP American?
A: As a company, we do not comment on market sensitive content such as acquisition or divestiture activity.
Q: With the departure of BP and others from Farmington regional charities like The United Way lost volunteers and donors. Is Hilcorp involved in any corporate giving or charitable sponsorship programs here?
A: Yes, in a meaningful way through a platform we call ‘The Hilcorp Giving Program.’ This program is very different than what other companies traditionally embrace. Our program allows every employee to have their own personal donor advised fund. Hilcorp seeds each employee’s fund with $2,500 upon their hire date and will match dollar-for dollar up to an additional $2,000 per year for every dollar that each employee contributes into their fund. Since inception in 2007, the Hilcorp Giving Program has granted over $12 million to charitable organizations.
Rather than a single corporate oversight committee dictating what charities will and won’t receive contributions, we empower every employee to make that decision for themselves. Each participating employee has full discretion on which 501(c) (3) organization(s) receive their funds. We want our employees giving to organizations that resonate with them personally… that touch their daily lives… rather than telling them what to do.
Specific to the Four Corners Region, Hilcorp has cumulatively seeded the local employees with over $700,000 and employees have already given over $200,000 to New Mexico charities over the last year alone. We encourage every employee to participate in this impactful program, and the vast majority do.
Q: What have you learned over the past year or so about the assets you purchased?
A: Our biggest learning isn’t so much about the asset, rather more about our employees and the communities. I continue to be impressed by the caliber and the work ethic of our workforce that recently joined the Hilcorp family. They know how to innovate and create long term value for the asset. As our employees work day in and day out, their cumulative actions will manifest as economic stability for the San Juan Basin and long-term value creation for the community as a whole.