It’s been a busy couple of years for CFO Greg Patton and Prairie Operating Co.
Prairie started up two years ago and quickly built a position in the Denver-Julesburg (D-J) Basin in Colorado, acquiring the oil-weighted assets of Nickel Road Operating LLC for $84.5 million and then Bayswater Petroleum for $603 million. Its primary focus is on the Niobrara and Codell formations in the D-J.
Bayswater was “a transformative transaction for Prairie,” Patton said at Hart Energy’s SUPER DUG Conference & Expo in Fort Worth, “morphing us into 25-plus thousand net barrels a day of production, over 50,000 net acres underneath our belt with approximately 157 approved permitted locations for continued drilling.”
Bayswater also built on the Nickel Road deal. The assets are contiguous.
“It was in a very familiar area of development that myself and other colleagues at Prairie had operated in before with our tenure at Great Western,” Patton said. “It was a low-declining asset that provided us a very sustainable PDP production stream to be able to continue to develop and grow from and build upon.”
Prairie plans to keep growing, Patton said, and the company is actively in the M&A space.
“We knew that we were targeting the Bayswater, that we wanted 25,000 barrels a day, but we have aspirations to grow to 100,000 barrels a day,” he said, and Prairie has been focusing on making sure it has access to enough takeaway capacity to support that.
“We’ll be targeting M&A, but we’re not going to be prolifically just focused on consolidation,” he said. “We’re going to be focused on implementation. We’re going to be focused on integration.”
Prairie hasn’t wasted any time getting to work on the new properties. In April, it launched an 11-well development program at the Rusch Pad acquired from Nickel Road in Weld County, Colorado, then it began the completion of the Opal Coalbank Pad acquired from Bayswater.
The work is going smoothly, Patton said.
“The D-J Basin is a very reliable source of hydrocarbons,” he said. “There’s a fairly systematic, reliable approach in terms of the frac design, in terms of the type of sands, the type of fluids that are being put away. We’re not deviating far from the industry standard in the D-J.”
The crude oil price decline this year hasn’t been a factor for Prairie so far, he said. Prairie’s breakeven is “somewhere in the mid-$40s” per barrel, so “all of a sudden you’re in the low $50s to make a 20% minimum threshold return hurdle.”
Right now, the combination of pricing and Prairie’s hedging portfolio is strong enough to support the plan into the fourth quarter.
If crude drops into the $50s, Prairie will “start to plan to pump the brakes,” he said.