Interview with
Jared Huckabee

Jared Huckabee the man behind Cub Creek Energy

Cub Creek Energy was founded by Deutsche Rohstoff and the management team in 2014. The company has 12 employees (9 professionals & 3 field staff) and is headquartered in Highlands Ranch, Colorado, close to Denver. The company drilled 55 horizontal wells in the Colorado DJ Basin since 2016 and has produced approximately 6.4 million Barrel of Oil Equivalent (BOE). In early February 2021, Cub Creek commenced drilling on the Knight Pad and expects to start production in the fourth quarter of 2021.

Jared Huckabee joined Cub Creek in September 2018. As CEO he leads the management team and is responsible for production, operations and engineering. He also oversees projects such as the Knight Pad drilling program. Before joining Cub Creek, Jared worked more that 25 years for other leading oil and gas companies in the Rockies.

Cub Creek Energy was founded by Deutsche Rohstoff and the management team in 2014. The company has 12 employees (9 professionals & 3 field staff) and is headquartered in Highlands Ranch, Colorado, close to Denver. The company drilled 55 horizontal wells in the Colorado DJ Basin since 2016 and has produced approximately 6.4 million Barrel of Oil Equivalent (BOE). In early February 2021, Cub Creek commenced drilling on the Knight Pad and expects to start production in the fourth quarter of 2021.

Jared Huckabee joined Cub Creek in September 2018. As CEO he leads the management team and is responsible for production, operations and engineering. He also oversees projects such as the Knight Pad drilling program. Before joining Cub Creek, Jared worked more that 25 years for other leading oil and gas companies in the Rockies.

Jared Huckabee the man behind Cub Creek Energy

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Jared, how was the start into 2021 for Cub Creek?

We have had a great start to the year and are very pleased! Our assumption and strategy that oil prices would recover has so far exceeded our expectations. With oil prices on the rise, we are now returning to full production and continuing our lease development with the drilling of the Knight Pad.

All pads are producing again. Is everything going as expected?

Production was curtailed in 2020 due to the oil price collapse associated with COVID-19. With the recent oil price improvements, we have now returned all pads to full production. Overall our winters here in Colorado are mild. When we do get a deep arctic freeze, our staff is prepared for operational issues and usually can restore production within a few days. The new tankless battery on the Olander Pad is working very well and we expect to adopt that design to the Knight Pad.

Olander is the most important pad with the highest production. Was the restart successful? How many barrels do you expect Olander to produce in 2021?

Olander is our largest pad and as we returned it to production, we have had minimal difficulties. Accordingly, we are focusing on optimizing this location. Currently we are producing ~5000 BOPD with more room to increase rate. Total gross production for the year will be price dependent however most likely in excess of 800,000 BO for 2021. We plan to produce this pad at current prices to generate strong cash flow.

Cub Creek shut down most pads last year. How flexible can you handle the production in general? Is there any danger that you lose reserves during such a shut-in?

We have a very flexible facility installation with appropriate artificial lift which reduces the cost and risk of lost reserves. Not all operators have this facility setup. Our production is back at rates that match those numbers seen prior to curtailment and Cub Creek’s portfolio has minimal reserve risk.

What about the ongoing costs for the pads? Were you able to reduce them last year?

The Cub Creek team works to optimize costs and production to yield the most profitable oil & gas assets. We continually improve how we operate. There were cost reductions in 2020 due to additional operational improvements. Managing vendor charges are critical to our economic success.

For example, going out to get competitive market bids on services which change with oil & gas activity in the DJ Basin can be very beneficial. We were able to reduce water handling costs by combining trucking and disposal with one vendor as a package per bbl price. These improvements significantly contribute to our bottom line.

Is there enough pipeline capacity for oil and gas available?

Yes, pipeline constraints are not a problem for Cub Creek pads. In fact, previous years have experienced high line pressure for gas takeaway. These issues have been eliminated in the basin by the midstream companies adding additional booster stations and minimizing line restrictions.

These pipeline constraints are no longer a problem for Cub Creek pads. The capacity we need is secured and we can supply the market at our will with ease. This will continue to give us a significant economic advantage in the future by reducing compression charges.

Environmental and safety issues have become very important for the industry. How do you make sure Cub Creek is in compliance with all the rules and regulation?

Cub Creek is well established in the industry and our experienced team has a good understanding of what it takes to be both legally and operationally compliant with all regulatory bodies who govern our line of work. We are a prudent operator which works diligently to abide by current regulations and also maintain a good relationship with landowners and the public communities where we work.

This of course requires a team effort from all of us at Cub Creek. Above all, we are constantly working to ensure that we are compliant with the ever-changing regulations.

How many days do you need to drill a well at Knight?

The drilling process is complicated and depends on many factors. Due to our experienced team and close work with drilling contractors, we are able to make very accurate predictions about how long our planned wells will take to drill. We can drill a 2.25 mile lateral well on average within 6-7 days.

Drilling oil wells is a complex project. How many service companies do you use and how many people are working at the drill site?

Of course, this always depends on the individual project and the specific borehole. Usually there are 15-20 people per 12-hour shift to sufficiently operate a horizontal drilling rig. When you consider how complex it is to operationally place a 18,000’ plus well in the ground and prepare it for completion, it is easier to see how technology has improved our efficiency and the success rate across a project base.

Do you think you can drill the new wells cheaper due to the reduced activity in the US market after the price drop last year?

Yes, service prices are suppressed due to the lack of activity so that yields cost savings to Cub Creek on a $/well capital development basis. We enjoy working on projects during the slow times as that allows us to drill and complete with lower total well costs.

We are taking a counter-cyclical approach and Cub Creek is now benefiting significantly from this decision by locking in lower development costs on our Knight Pad drilling project. In addition to the lower prices, our access to goods and services is improved due to the lower activity level in the DJ Basin.

This is a win-win for Cub Creek which doesn’t drill year-round and sometimes has difficulty securing services during the busy times. All this equates to higher overall economic results for the projects we develop in the oil & gas sector.

How is the overall market situation? Has activity picked up significantly with higher oil prices?

Not a large increase in activity yet. The service companies are getting more contracts and in some instances that has yielded an increase in costs, but for the most part the total well costs are still significantly lower than our last pad which was developed in 2019.

Colorado is amongst the US states with the highest environmental standards. Is it likely that the new government will introduce even stricter regulation?

Yes, Colorado continues to revise the policies with stricter regulations on oil & gas activities. This is unlikely to change and will continue as the regulatory agencies work towards a greener focus. Our pads are in great operating condition which sets Cub Creek up for long term stable production during the coming years.

Does Cub Creek have any issue with the permitting moratorium on Federal land that the new government announced?

Currently this doesn’t impact Cub Creek’s activity for 2021. The Knight Pad development is not influenced by these Federal changes. As we evaluate acquisition opportunities, there may be some exposure with certain deals that may be subject to the new Federal restrictions. Typically these changes are adjusted as the long term intent isn’t to cease all future development on Federal lands, however the time needed to revise laws to match regulatory intent may take some time. Cub Creek feels that this is a good buying opportunity to secure Federal acreage that can later be permitted when the moratorium is lifted thus allowing oil & gas development to resume. This topic will certainly be heavily reviewed as we consider acquisitions that include Federal acreage.

Do you see opportunities to acquire new leases in Colorado or in basins outside Colorado? Are you offered many deals?

Yes, our optimism is growing. As the oil price increases, we have noticed that the deal flow is starting to pick up again. Cub Creek is actively focused on expanding into other oil & gas friendly states to increase our production base and leasehold position. We currently see this as an excellent opportunity to improve our position in the market and increase the size of the company.

Jared, thank you very much for the comprehensive interview.

March, 2021