NEW YORK (Reuters) - California Resources Corp expects that, as oil prices recover, technology may enable extraction of Monterey Shale reserves previously thought to be unrecoverable, the company’s chief executive said this week.
The company was spun off from Occidental Petroleum Corp in November, three days after an OPEC decision sent prices into a tailspin and contributed to the worst decline since 2008.
As prices have plummeted, CRC has scaled back its drilling, cutting its rig count to just 3 this year from 27 a year earlier. The company, which releases first quarter earnings later on Thursday, does not have any rigs operating in the Monterey shale, which runs through the San Joaquin basin and the other three basins where CRC drills.
As prices rebound, Chief Executive Officer Todd Stevens said drilling will pick up as well.
“I’m more optimistic now than a few years ago on the lower Monterey,” Stevens told Reuters on Tuesday. He said advances in drilling technologies give him hope that the oil trapped deep within the vast formation will be recoverable in the future.
The government once estimated that the Monterey Shale, which spans large swaths of the state, held up to 13.7 billion barrels of oil. Last year, the Energy Information Administration slashed its estimate of recoverable reserves from the formation by 96 percent to just 600 million barrels, citing difficulty extracting the oil.
“The Lower Monterey has an extremely limited production history compared to the Upper Monterey, with only about 25 wells drilled and completed into the Lower Monterey to date,” Stevens said.
CRC holds a leading mineral interest in the onshore portion of the shale formation and last year produced more than 50,000 barrels of oil equivalent per day from it, nearly a third of the company’s production.
Stevens did not specify how quickly production in the formation might rebound. When commodity prices rise, the company is poised to increase its activity level, while living within its cash flow, he said.
In the interim, the company is focusing on steamflood and waterflood drive mechanisms, which improve recovery from oil wells, according to Margita Thompson, a spokeswoman for CRC.
Editing by Jessica Resnick-Ault and Andrew Hay