Approach Resources, Inc. (NASDAQ: AREX) is an independent energy company focused on the exploration, development, production and acquisition of unconventional oil and gas reserves in the Midland Basin of the greater Permian Basin in West Texas. As of December 31, 2014, the company owned and operated 729 producing oil and gas wells throughout Texas, providing access to reserves of nearly 150 million barrels of oil equivalent in Crockett and Schleicher counties alone.
According to the Railroad Commission of Texas, the Permian Basin is a significant oil-producing area for the state. In 2010, the region produced more than 270 million barrels of oil, and production increased slightly in 2011, reaching 280 million barrels. To date, the basin has produced more than 29 billion barrels of oil, in addition to 75 trillion cubic feet of gas, demonstrating Approach’s immense potential for sustained production into the future.
Moving forward, Approach will continue to focus on the development of its Wolfcamp shale oil resource play. In recent years, the company has built a large, multi-year inventory of identified drilling locations that should allow for continued increases of production and reserves at a competitive cost. By investing in improved field infrastructure systems, Approach has effectively reduced drilling and completion costs, allowing the company to thrive as a low-cost producer in the increasingly competitive oil and gas industry.
In the first quarter of 2015, Approach shifted its focus towards enhanced cost-reduction measures in order to remain profitable with slumping oil prices. In addition to recording a 21 percent year-over-year increase in total production, the company located significant savings in operating costs, allowing Approach to protect its balance sheet while increasing efficiency. As crude oil prices recover, these efforts should place the company in a formidable position to capture upside for investors.
“During the first quarter of 2015, we concentrated our efforts on identifying and implementing various cost-reduction initiatives and completing our backlog of uncompleted wells,” stated J. Ross Craft, President and Chief Executive Officer of Approach. “I am pleased to report our current well costs have been reduced to approximately $4.6 million as a result of our water recycling facility and service cost concessions.”
By entering into commodity price swaps and collars from time-to-time, Approach is well-positioned to partially mitigate the risk of commodity price volatility, which has proven a valuable strategy in recent months. As US crude oil inventories continue to drop and support greater oil prices, Approach is in a favorable position to further increase production throughout the Permian Basin.
For more information, visit www.approachresources.com
