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Analyzing Extraction Oil & Gas’s Operational Details

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Extraction Oil & Gas’s 3Q16 production

For 3Q16, Extraction Oil & Gas (XOG) reported total production of ~28.9 Mboepd (thousand barrels of oil equivalent per day), which is ~45% higher than its 3Q15 total production of ~20 Mboepd.

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Extraction Oil & Gas’s 3Q16 production mix

Extraction Oil & Gas’s (XOG) production mix contains ~48% crude oil, ~30% natural gas, and ~22% natural gas liquids, indicating that XOG is tilted toward liquids production. Its total liquids production stands at ~70%.

Areas of operations

Extraction Oil & Gas primarily operates in the Greater Wattenberg Field of Colorado’s DJ (Denver-Julesburg) Basin, targeting development of the Codell and Niobrara formations. XOG has a position of ~220,000 net acres in the DJ Basin, of which ~100,000 net acres are located in the core of the Wattenberg Field. These core ~100,000 net acres comprise XOG’s primary focus area.

Extraction Oil & Gas’s Wattenberg’s acreage blocks are contiguous in nature, allowing for longer laterals for the company. So far, XOG has drilled and completed more than 500 horizontal wells in the Wattenberg Field.

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Growth strategy

Extraction Oil & Gas (XOG) is working to increase its current high-quality crude oil–focused inventory of its drilling locations. During its Corporate Update and Guidance presentation on December 5, 2016, the company’s management indicated that it plans to double this high-quality inventory by utilizing de-risking, completion enhancements, organic leasing, increased well density, and acquisitions.

According to Extraction Oil & Gas’s management, de-risking has the potential to add more than 1,000 incremental gross locations. Plus, completion enhancements have the potential to add more than 1,500 incremental locations into economic inventory. The increased well density in the southern focus area of Wattenberg Field has the potential to add up to 600 incremental gross locations.

Proved reserves

On September 30, 2016, Extraction Oil & Gas had proved reserves totaling ~187 MMboe (million barrels of oil equivalent). XOG’s proved reserves contain ~42% crude oil, ~33% natural gas, and ~25% natural gas liquids. XOG’s total liquid proved reserves stand at ~67% of total proved reserves.

Other upstream companies

On December 31, 2015, upstream companies Denbury Resources (DNR), Pioneer Natural Resources (PXD), and Devon Energy (DVN) had proved reserves of ~289 MMboe (million barrels of oil equivalent), ~664 MMboe, and ~2,180 MMboe, respectively.

The Energy Select Sector SPDR ETF (XLE) typically invests at least 95% of its total assets in oil and gas–related equities from the S&P 500.

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