NEW YORK (TheStreet) -- Deteriorating crude oil prices could slow down Bonanza Creek Energy (BCEI) , which has been growing its oil and gas production twice as fast as the industry's average. But the company's low-cost asset base puts it in a good position to weather a tough market.
Bonanza Creek increased production at an average annual rate of 84% between 2010 and 2013 and has a production growth target of almost 50% for 2014, says James Masters, investment relations manager at the company.
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This growth, which comes mainly from the company's wells at Wattenberg field in Colorado's Niobrara formation, is significantly higher than the industry's average of around 20%, Bonanza Creek said in a November presentation, but it's in line with Colorado peers such as Bill Barrett (BBG) and PDC Energy (PDCE) .
Gabriele Sorbara, an analyst at Topeka Capital Markets, projects a 43% increase in the company's production in 2015. This will allow Bonanza Creek to grow its earnings to $2.26 a share in 2015 from $1.71 a share in 2013, Sorbara estimates in a Nov. 7 report.
Prolonged weakness in crude oil prices, which have fallen by more than 20% over the last three months, can hurt Bonanza Creek's performance, however.
Sorbara has said his projections are based on the assumption that the average price of a barrel of West Texas Intermediate crude oil will be $86 in 2015, higher than the current price of about $76.
If the average price is less than $80 next year, Bonanza Creek's management is likely to reduce spending levels in order to maintain its financial strength, Sorbara said. Some oil and gas producers, such as Continental Resources (CLR) and ConocoPhillips (COP) , already have announced cuts in capital spending for next year, while others, such as Halcon Resources (HK) , are scaling back drilling activity.
For Bonanza Creek, a reduction in spending could result in lower-than-expected growth. This year, Bonanza Creek expects capital expenditures of between $630 million and $680 million, up from $465.2 million last year. Masters did not provide any guidance for next year as the company is in the planning process, but he did say that Bonanza Creek will look to "preserve balance sheet flexibility" and "will adjust capital spending accordingly".