Oklahoma is something of a sleeper in shale oil and gas world.
The vaunted oil and gas plays of Texas and North Dakota cast long shadows—long enough sometimes to obscure entire states. Yet Oklahoma’s varied mix of oil and natural gas is impressive.
Oklahoma is one of the top five oil-producing states, and three of the nation’s largest oil fields are found there. The state also produced more natural gas than the output of Louisiana, Wyoming or New Mexico from July 2014 to July 2015, according to Barclays Capital Inc. statistics.
In September, oil and gas consulting services Rystad Energy added complete data for all horizontal shale wells in Oklahoma into its shale well database (NASWellData). The data show that Oklahoma’s volume of U.S. shale light oil output has consistently improved during the past several years.
That’s partly shown by continued deal activity in Oklahoma. FourPoint Energy LLC paid $840 million for Chesapeake Energy Corp.’s (NYSE: CHK) interests in the Anadarko Basin, the fifth largest E&P transaction in 2015. FourPoint purchased interests in about 1,500 producing wells and more than a quarter-million acres.
And on Oct. 15, Gastar Exploration Inc. (NYSE: GST) announced it would sell its Marcellus and Utica shale acreage as it moves into the Oklahoma Scoop and Stack plays.
For companies already in Oklahoma, Rystad said several key players have successfully completed early development in their acreage positions.
Well results have proven competitive and indicate that “certain areas in Oklahoma should be mentioned along with the best spots of the Bakken, Eagle Ford, Niobrara and Permian Basin,” Rystad said.
And Oklahoma operators have pushed production. Oklahoma oil production increased 74% to 128 million barrels (MMbbl) from 2011-14, according to data from the U.S. Energy Information Administration.
In 2015, with rig counts falling monthly, Oklahoma had surpassed its 2011 total of 73 MMbbl by July.
With a stable rig count, Oklahoma’s daily production of light oil from 2011-2014 increased by nearly 300 Mbbl/d.
“This steep growth was largely driven by an activity shift from shale gas toward liquid-rich areas,” Rystad noted.
That also led to higher oil output per well and accelerated drilling of shallower wells.
In 2009, Woodford Shale activity across the gassy Arkoma and Anadarko basins accounted for 60% of total Oklahoma unconventional drilling. By 2014, that activity dropped to 20%.
As of September, operators were targeting the Mississippian Lime and Woodford, both of which hold about 40% light oil content—high for Oklahoma shale plays.
Like most of the industry, Oklahoma operators made a shift toward liquids as gas prices plunged.
Continental Resources Inc. (NYSE: CLR), with core activity across the oil and condensate windows predominately in the Woodford and Springer shales, saw well performance increases in line with a 25% boost in proppants per foot.
In Continental’s Poteet project in the Woodford, the company had 10 wells with combined peak production rates of 146,840 thousand cubic feet per day (Mcf/d) and 3,240 bbl/d of oil, the company said in September.
Continental reported that its Woodford wells are showing IP rates of 280 bbl/d and 7,000 Mcf/d. In the Springer Shale, the company has shown IP rates of 670 bbl/d and 867 Mcf/d, the company said.
Sandridge Energy Inc. (NYSE: SD), on the other hand, has not changed its well completion technique of using 16,000 pounds of proppant per foot since 2011, Rystad said.
However, well productivity improved considerably due to the activity focus on the sweet spots of Mississippian Lime in 2014-2015, Rystad said.
Sandridge, whose Midcontinent position straddles the Kansas-Oklahoma state line, said in September that its wells estimated ultimate recovery (EUR) for Woodford wells is 250-275 thousand barrels of oil equivalent per well. The company says it has 3,760 proved and probable (2P) future locations.
For Newfield Exploration Co. (NYSE: NFX), well performance improvements included a 50% increase in completion intensity and a focus on the oil window of the Anadarko, mainly in the Woodford Shale.
But even with service discounts, commodity prices are catching up with the companies.
Continental said in September it would cut spending by up to $350 million to align spending with cash flow because of faltering commodity prices. The company planned to defer well completion activity, except where it has contractual considerations or accomplishes specific strategic objectives.
Harold Hamm, chairman and CEO, said the company would reduce capex “to protect our balance sheet and to preserve the value of our world-class assets until commodity prices improve."
Despite recent low oil prices, Continental and Newfield kept up activity in the Oklahoma shale plays in 2015, Rystad said.
Newfield increased its operated horizontal rig count to 15 from nine.
During the second quarter of 2015, Sandridge drilled 43 laterals and averaged seven horizontal rigs operating the Midcontinent. Its assets produced 79.3 Mboe/d during the second quarter (32% oil, 18% NGL, 50% natural gas).
Sandridge abandoned much of its drilling operations in 2015 as its horizontal rig count declined to about 80% in October from 35 at the end of 2014, the company said.
From 2012-14, Sandridge drilled and completed an average of 1,707 wells, according to the Oklahoma Corporation Commission and UGCenter analysis. Through June 2015, the company completed 696 wells.
“This difference in operational behavior is mainly due to financial standings of each company, not due to individual well economics,” Rystad said.
Contact the author, Darren Barbee, at firstname.lastname@example.org.
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