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Ward Polzin speaks at the January Wildcatter Lunch

Wade Hutchings and Ward Polzin.

Ward Polzin speaks at the January Wildcatter Lunch

Polzin: Camino committed to the SCOOP/Merge

January 16, 2019
The number of wells producing in the SCOOP/STACK/Merge more than doubled in 2018, Ward Polzin told the Wildcatter Wednesday crowd, and that rate of change indicates a dynamism that the industry outside the state may not be aware of.
“I think the industry outside Oklahoma doesn’t realize how much is changing here now,” Polzin, CEO of Camino Natural Resources, told the OIPA-OKOGA Wildcatter Wednesday Luncheon crowd on Jan. 9.

“The rate of change is phenomenal. Other areas are more mature. We haven’t been doing what we’re doing now for that long, and that’s good news for all of us.”

Camino is based in Denver and Oklahoma City and owns approximately 114,000 net acres in the SCOOP and Merge plays, averaging about 27,000 barrels of oil equivalent per day. All but one of their 23 wells spud in 2018 were long laterals.

Being a private equity-backed company comes with some pros and some cons, Polzin said.

“When you’re taking someone else’s money, you have to give it back eventually. Luckily, we have a track record of doing that.”

Camino’s team initially was formed from two groups that were purchased, Delaware Basin operator Centennial and Marcellus operator Vantage Energy.

“We had some common DNA — focusing on one growth zone at a time and really working on execution and development,” he said.

Now less than two years in business, Camino employs 70 people, with 20 in the Oklahoma City office and around a dozen working out of the company’s field office in Chickasha.

Camino had a three-rig program set for 2018, put up a fourth when oil was at $70, and now plans to pull back to three rigs as prices have fallen.

“I don’t apologize for adding a rig and then two months later dropping a rig,” Polzin said. “You just have to be adaptable and you have to be quick about it.”

Camino choose to enter the SCOOP/Merge because the opportunity matched the company’s skill set.

“The Permian is the big dog,” he said. “Those of us who aren’t there need to understand that and know what our competition is. And we have to find plays that are like the Permian. One of the ways that Oklahoma, I believe, is like the Permian more than any other basin, is the stacked play. You’ve got a lot of zones to go after.”

The SCOOP/STACK/Merge are still being figured out, and their core areas are expanding, Polzin said.

“We’re trying to be diversified,” Polzin said. “We’re 50/50 in the SCOOP/Merge by design.”

Camino entered the basin with 15,000 acres and has since scaled up dramatically through mergers and acquisitions.

Camino’s growth is a factor of the business today, Polzin said.

“It’s not an ego thing,” he said. “The public companies are seeing more mergers. I think private companies need to do the same thing. There are a lot of reasons for that. It gives you more deal flow, more opportunities.”

Being larger helps in development, helps with exit opportunities — being purchased or going public — and it also helps to stand the test of time, he said.

“You can get to cash flow neutrality quicker the bigger you are,” he said.

Camino has begun sourcing its own sand, he said, and has partnered with Iron Horse Midstream, which has a new plant running northeast of Chickasha that could expand to process 625 MMcf/day.

“We’re committed,” Polzin said. “This is where we’re at. This is where we want to be. We’re not going to add another basin, we’re just going to get bigger here west of the city.”

Polzin also outlined what he sees as the headwinds for the industry on a global, national and statewide scale, as well as some possible solutions.

Internationally, oil demand could crest as the worldwide economy slows down, the actions of Russia and the Saudis could throw oil supply into unknown territory, climate change policies will impact the industry, and Wall Street has a poor opinion of oil and gas right now.

“I can do nothing about oil demand or about what the Saudis are going to do,” Polzin said.
“But I think we can impact our own license to operate — we have to earn it every single day. Dealing with your surface owners, whatever you did before, you need to go a little bit further.

“We’re already very environmentally friendly. We just need to go further.”

United States producers are the main source of increased supply, and they need to dial it back, he said.

“And we’re doing that. If you’re a 20-rig company, it seems like you’re dropping two or three or four. I appreciate that’s not good for our partners in the drilling business, but we all live in this cycle. I think everybody needs to dial back 10, 15, 20 percent this year.”

The stock market typically accuses Oklahoma of being “too gassy,” so Polzin said producers need to prove oilier zones and areas. He also predicted consolidation and multi-zone pad development would be part of Oklahoma companies’ moves in the near-term.
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