Story updated at 4:35 p.m. CST Nov. 14. For more reports on DUG Midcontinent, check back throughout the day or follow @HartEnergConf on Twitter.
OKLAHOMA CITY—Spacing is crucial in the Stack play, Wade Hutchings, senior vice president of exploration and production at Devon Energy Corp. (NYSE: DVN), said during a keynote address at Hart Energy’s DUG Midcontinent conference.
Devon’s 24-well Showboat project in the Stack has delivered critical learnings this year, Hutchings told conference attendees at the Cox Convention Center in downtown Oklahoma City. The project located in Blaine County, Okla., had 12 wells per unit.
Following the initial 12-well Showboat spacing project, Devon has quickly recalibrated its completion designs and flowback strategy to improve results at nearby projects, Bernhardt and Horsefly, in the Stack.
“Spacing matters and early projects were spaced too tightly,” he said adding the company’s next 12 projects will have four to eight wells per unit.
Technical learnings from Devon’s Showboat Stack project: 100% increase in clusters per stage while cost per fracture was reduced 40%.
“More fractures for less money, more effective drainage and fewer wells required to access resource,” he said.
Spacing throughout the various shale plays in the Midcontinent region was a hot topic during the conference.
In the Western Anadarko Basin, FourPoint Energy LLC generally sticks to three gas wells per section and four liquids-prone wells per section for the development of its acreage, said Brendan Curran, vice president of geology for the company.
FourPoint is a private E&P company based in Denver that has a position in the Anadarko Basin of more than 2 million gross acres across two states. According to the company website, FourPoint currently operates five rigs across its Anadarko position where gross production is about 1.05 billion cubic feet equivalent per day.
Elsewhere in the Anadarko Basin, eight to 10 Woodford wells per section is working in the core Scoop, according to Jeff Sieler, managing director in the global energy group of Citigroup Investment Bank
“The Anadarko Basin works,” Sieler told conference attendees.
A panel focused on minerals in the Midcontinent region said operators resetting expectations around downspacing has given minerals buyers a boost. For some reservoirs, six to eight wells per section looks like the way forward.
It’s an exciting time for minerals buyers in the Midcontinent, said the minerals panel comprised of LongPoint Minerals Vice President Will Cullen, Case Energy Partners COO Blake Harris and Shak Ahmed, a senior research associate at RS Energy Group.
A big advantage the minerals panelists pointed to was Oklahoma’s force pooling regulations.
“They give a lot more certainty to development,” the minerals panel said.
Founder and president of Oklahoma operator Antioch Energy LLC, Nathaniel Harding, said the company’s Arkoma Stack acreage is a “contiguous, repeatable resource play.” The acreage features the Woodford, Mayes and Caney reservoirs.
Antioch, backed by TPH Partners, operates in 10 counties across the Stack/Scoop and the emerging Arkoma Stack in Oklahoma within the Anadarko Basin.
Harding, who spoke during an operator spotlight right before the conference dismissed for lunch, noted there are several new private equity-backed entrants in and around Hughes County, Okla.
According to Sieler, there are about 20 private equity-backed companies with material acreage in the Midcontinent and 50 teams working the region. The big public companies could be the consolidators in the Midcontinent, he added.
“36 deals over $25 million are active,” he said. “Look out for M&A to come.”
A panel of A&D experts said companies seeking size and scale are driving the big deals and consolidation the industry has recently seen. However, E&Ps in the Midcontinent are currently working on the optimal way to develop assets and a lot is still unknown.
“Investors like certainty,” said the A&D panel comprised of RBC Richardson Barr Managing Director Nick Woodruff, KeyBanc Capital Markets Managing Director Jay Salitza and Stephen Beck, senior director of upstream at Stratas Advisors.
Tapstone Energy Inc. plans to be a consolidator, according to Chuck Duginski, senior vice president and COO of the Oklahoma City-based company which operates in the Northwest Stack play.
Duginski told conference attendees that Tapstone is pursuing bolt-on acquisitions to add size and scale in the Northwest Stack.
Headquartered in Tulsa, Okla., Canyon Creek Energy - Arkoma LLC is another private E&P operating in the Arkoma Stack play in the Midcontinent region.
Luke Essman, Canyon Creek’s president and CEO who spoke on the last panel of the day, said the Arkoma Stack is primarily controlled by private equity-backed companies.
Pre-2015, roughly 1,800 Woodford wells were drilled in the Arkoma Stack targeting dry gas. However, private players are now targeting liquids-rich reservoirs that are stacked across their acreage, Essman told conference attendees.
The updip portion of the Scoop is the focus of privately held Casillas Petroleum Corp., said Greg Casillas, the company’s president and CEO. The Tulsa-based company has drilled 36 Woodford and 14 Sycamore wells.
Casillas said his company is planning the first Woodford/Sycamore co-development spacing test in the Scoop. It will have 12 Woodford and eight Sycamore wells.
Tecolote Energy LLC, a private E&P formed in 2015 with backing from NGP, has 210,000 net acres in the Midcontinent region’s Granite Wash play.
Earlier in the day, Earl Reynolds, CEO of Chaparral Energy Inc. (NYSE: CHAP), kicked off the conference by saying the Midcontintent is one of the most underappreciated petroleum regions in the U.S. despite creating “great value” for companies and investors.
Chaparral, based in Oklahoma City, is a pure-play Stack producer of oil and natural gas in the Midcontintent region. The company has operations across a roughly 127,000 net acre position in the heart of Oklahoma.
“The Stack is prolific,” Reynolds told conference attendees, noting Chaparral’s acreage position is located in the black oil normal-pressure window of the play.
Reynolds said Chaparral is currently running four rigs in the Stack. This is up from the three total drilling rigs the company operated during the third quarter in Canadian, Kingfisher and Garfield counties, Okla.
Chaparral’s drilling program for the first three quarters was focused on strategic development of its Canadian and Garfield county acreage in Oklahoma.
During the third quarter, Chaparral grew Stack production 53% on a year-over-year basis to 15,663 barrels of oil equivalent per day (boe/d). The company brought 12 new gross Stack wells on production in the quarter, four in Canadian and eight in Garfield.
Chaparral’s total capex during the third quarter was $74 million.
Joshua Lawson, an executive with fellow Midcontinent operator Gulfport Energy Corp. (NASDAQ: GPOR), said during 2018 his company shifted its program in the Scoop to largely focus on full section development in the Woodford.
In 2019, Gulfport plans to add Sycamore wells to that effort, said Lawson, who oversees the company’s operations in the Midcontinent as vice president of operations for the region.
Gulfport’s net production averaged 1,427.5 million cubic feet equivalent per day during the third quarter. In the Scoop, the net production from the company’s acreage averaged roughly 274.6 MMcfe/d, a 41% increase from the prior year.
Currently, the company has two operated horizontal drilling rigs active in the Scoop play.
“The play is delivering strong production results to date,” Lawson told conference attendees.
The combination of thick stacked pay and overpressured reservoir makes the Scoop “very attractive,” he said.
On the midstream front, Tom Petrie, chairman and founder of Petrie Partners, said the U.S. needs pipeline construction to relieve bottlenecks.
Further, Petrie told conference attendees that during the coming decade, optimal marketing of U.S. light, tight oil will require international deliveries via many very large crude carriers.
“After an unusual period of price stability, energy price volatility has been re-triggered,” he said. “This is a critical factor for motivating large-scale private sector infrastructure outlays.”
Daniel Rice, former CEO of Rice Energy who now sits on the EQT board, addressed the elephant in the room earlier this month at Hart Energy’s Energy Capital Conference.
Denbury Resources and Penn Virginia mutually agreed to terminate their merger after the $1.7 billion cash-and-stock transaction faced difficult market conditions and shareholder opposition.
Murphy Oil plans to use proceeds from its Malaysia exit to PTTEP for share buybacks as well as funding Eagle Ford Shale and U.S. Gulf of Mexico operations.