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David Lawler addresses BP’s investment in the San Juan Basin

FARMINGTON — The Daily Times sent a questionnaire to David Lawler, CEO for BP’s U.S. Lower 48 Onshore business, to ask him about his new job and his commitment to the company’s San Juan Basin operations.

Lawler, 46, took over as CEO of BP’s onshore business in September. During his first week on the job, Lawler made the case to Lamar McKay, BP’s Upstream Segment chief executive, that the company’s San Juan Basin assets should not be sold.

Last summer, while Lawler was executive vice president at Oklahoma City-based SandRidge Energy, Inc., BP announced the sale of those assets. In August, The Daily Times reported the proposed sale of 2,200 operated and 4,400 non-operated natural gas wells, and the company’s interest in the ConocoPhillips San Juan gas plant. The sale offering also put 120 jobs on the chopping block.

What drove your commitment to the San Juan Basin pushing you to fight to stop the sale of assets barely a week into your new job?

In an effort to help BP Group meet its divestment promise, the Lower 48 business announced plans to market for sale its San Juan South operations in early August 2014. One of my first priorities when I arrived in early September as the new L48 CEO was to clearly understand BP’s overall position in the San Juan South Basin and in particular our position in the Mancos play. Following some in-depth discussions with the L48 team, I requested and was granted a pause in the marketing efforts which I shared personally with employees in Farmington on Sept. 25. The asset has now been taken off the market given the significant upside opportunity we see. We expect to drill an appraisal well later this year in the Mancos to help us better understand the potential and then develop future plans.

How many wells is BP drilling in the San Juan Basin currently? And how many does BP have planned this year? Any changes?

BP operates on both the New Mexico and Colorado sides of the San Juan Basin. We began a new drilling program in Colorado (in April) and are currently drilling our third well there. We have submitted applications to drill about 10 additional wells in Colorado this year. In New Mexico, we expect to drill an appraisal well later this year that will help us determine our future plans in the Mancos.

 At the San Juan Basin Energy Conference, you said, “We’re the sixth largest producer of natural gas in New Mexico. … We’re not happy with that.” What are your plans to remedy that ranking?

Despite not drilling new wells in this basin for several years, we’ve been able to minimize decline through active management of the existing well set. We’re now planning to grow production by adding (two) drilling rigs in 2015 — one will continue to develop the coal bed methane reservoir (Colorado), and one will appraise the potential of the Mancos/Gallup condensate intervals. Horizontal drilling and the latest completion technology will be used in both programs. The San Juan Basin is a material asset with years of economic development ahead.

Also at the conference, you said that “stacked pay intervals” were key to the company’s success in a low-price (per barrel of oil) environment. What other efficiencies or technologies is BP planning for operations in the San Juan Basin this year or in 2016?

I expect the advances in horizontal drilling technologies and the latest completion technology will help us unlock potential in the San Juan Basin.

What primary challenges do you face returning to the San Juan Basin since the company has not drilled a well in the San Juan Basin on the Colorado side in five years and seven years on the New Mexico side?

The teams in New Mexico and Colorado have done an excellent job of maintaining the base production through workover rigs and management of the existing wells. The teams are very excited to have the opportunity to bring a rig back into the San Juan Basin and begin growing production again. The reservoir and engineering teams have spent the last few months preparing detailed plans to underpin our drilling program — from choosing the best wellsite locations to selecting service contractors including the rig provider. We began drilling our first well in Colorado earlier this month (April) and are using Aztec Drilling as our rig contractor. (Note Aztec Drilling is based in Aztec, New Mexico.)

Is BP cutting back, asking for service price reductions, laying off workers or taking any other measures to combat the low prices of oil and gas?

A: In March, 2014, BP announced plans to unlock further value from its resources by establishing a separate business — with its own management, headquarters and processes — to run the onshore oil and gas operations in the US Lower 48. BP made this decision to enable the business to compete more effectively in the fast-moving and highly-competitive U.S. onshore environment. Over the course of the last year, the business has made significant progress toward being competitive in the U.S. onshore, which has included evolving the organizational structure along business unit lines and using the services of local suppliers for goods and services. A great example of this is in the San Juan Basin where we recently hired Aztec Drilling as our rig provider for our new drilling program in Colorado. Additionally, the lower price environment is beginning to drive deflation in a number of areas across the industry.

This article was written by James Fenton from The Daily Times, Farmington, N.M. and was legally licensed through the NewsCred publisher network.

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