The rigs are still there, just not as many. Western Oklahoma’s pool table-flat prairie sported multiple steel fingers poking into the sky’s blue dome not long ago. When you stood in the dark at the right spot on some obscure, section-line road in the Scoop or Stack, lights twinkled on rigs in every direction.

To the east, where the Sooner State rolls into the Crosstimbers, then climbs into the Ouachitas—looking more Appalachia than the Great Plains—the tops of masts and crown blocks poked above the trees.

A recent ramble as fall began through the back country of Pittsburg County, Okla., near Hartshorne, found signs pointing down dirt roads to this-or-that pad—Arkoma Woodford wells. Oilfield trucks passed on the highway— but not many.

It’s a current trend throughout the industry, so why should the Midcontinent be immune? Oklahomans don’t embroil themselves in the litigious political drama common elsewhere, so blame weak prices, geology and an unfortunate nearness to the energy industry’s current Mr. Big: the Permian.


But when?

A few years ago, many thought the Midcontinent’s unconventional plays would combine to offer the industry’s Next Big Thing to producers and the midstream—right behind the Permian.

Maybe they will, someday, but not yet.

“Autumn has brought a dual tailwind impacting midstream financial performance,” James Wagstaff, senior vice president for oil and gas at PowerAdvocate, told Midstream Business. “Steel prices, which are a critical cost driver for a midstream operator, stabilized [in September] and we expect further declines in steel prices. Additionally, our analysis of top midstream operators in the Scoop/Stack shows overall spending in the market has declined by 10% over the first six months of 2019. Notably, operating expenditures have taken an increasingly large portion of total spending—a thread which is five years in the making. In 2014, Opex [operating expenditures] accounted for less than 20% of total midstream spending; today that number is more than 40%.

“The top midstream performers in the basin will be the ones who prioritize more efficient Opex spending,” Wagstaff added of the Midcontinent.

Platts noted in a report as the fourth quarter began that Oklahoma’s rig count had fallen to the lowest point in three years, a 44% decline from 105 rigs as 2019 began. The pinnacle came in second-quarter 2018 at 116 rigs making hole. Oklahoma went into November with 54 rigs running.

“This year, though, higher well costs, varying rock quality and increasingly unpredictable, often disappointing, rates of return have seen major acreage holders, such as Chesapeake, Cimarex, Devon, Marathon and others, move in droves to pause their drilling activity— particularly in the Stack of Kingfisher County (Okla.),” the report said.

“In September, half-cycle internal rates of return in the Stack were estimated at 17% and in the Scoop at less than 11%, data from S&P Global Platts Well Economics Analyzer shows.

“Of particular concern for many operators are the rock formations. Although many pilot wells drilled in Central Oklahoma at first appeared similar to those found in the Permian Basin, upon deeper exploration, those formations have been weighted more heavily toward gas. In the Stack, gas comprises about 42% of the production mix. In the Scoop, gas accounts for about 47% of the recoverable resources, Platts Analytics data shows.”

The South Central Oklahoma Oil Province is nearly 50% gas? Things don’t always go as planned.

Sorry, producers want crude.

A midstream breather

So where does that leave the Midcontinent midstream? Maybe a breather will help it catch up.

Wells Fargo Securities’ Midstream Monthly Outlook for September headlined that “Anadarko Basin/ Scoop-Stack has sufficient takeaway” capacity into the foreseeable future. Anadarko crude line capacity could exceed production by as much as 69% by fourth-quarter 2025—if current trends continue. The outlook projected late 2025 Anadarko oil output at 703,000 barrels per day (Mbbl/d), up from somewhere around 600 Mbbl/d in the first half of this year.

Capacity in and out of the sprawling Cushing, Okla., crude terminal and trading hub also will be positive by then, the report said.

Things look a bit more snug for NGL. Capacity from western Oklahoma to the Conway, Kan., NGL hub should exceed production by 11% by late 2025, a little better than the slim 7% excess capacity for gas processing, Wells Fargo projected.

Like all producing regions, there are shifts in and out of areas as crude oil, natural gas and NGL prices shift, along with other variables.

“I think the fundamental shift that we’ve seen in the Midcontinent is a shift back to the Scoop, after we originally saw a move out of the Scoop and into the Stack, and now we’ve seen a shift back to the Scoop,” Tina Faraca, Enable Midstream’s senior commercial executive, told Midstream Business. “There is a focus, obviously given where commodity prices are, on the oilier portion of the Scoop, and that’s been the big change that we’ve seen within the Anadarko Basin. A lot of rigs on our footprint, and I think generally, have moved south.”


Oklahoma City-based Enable is one of the region’s biggest midstream players and the largest gas processor in the Scoop and Stack. It ranks No. 17 on this publication’s Midstream 50 list of the sector’s largest publicly held players.

It’s a matter of favoring oil and reducing gas, but even when producers are “going for oil and not gas, there’s still obviously associated gas,” Faraca added.


The rest of the story

And like other plays, the rig count doesn’t tell the whole story, thanks to technology, efficiency gains and concerns about maintaining cash flow.

But sometimes technology takes two steps forward and one step back, and that’s certainly the case in the Stack.

More wells drilled per section, combined with more proppant, doesn’t necessarily equal greater productivity. At least that was the case for an operator targeting the Mississippian in a normal-pressured window of the Stack in Kingfisher County, Okla.

“The operator increased [its] well spacing from six to eight wells per section. At the same time, [it] increased proppant intensity about 40%,” said Sarp Ozkan, a senior oil and gas market analyst and manager of upstream and crude market efforts for Enverus, formerly Drillinginfo, in a third-quarter webinar.

“However, that resulted in about a 30% loss in productivity. … An aggressive development plan of increasing frac intensity and downspacing at the same time can greatly impact productivity to the negative side.”

The case study focused on the first six months of oil production, using the firm’s spacing dataset, which has spacing metrics on neighbor, parent, child and co-completed wells along with well density, estimated ultimate recovery, production and completion data related to spacing among other data.

Sorting out what works best takes time, and midstream operators will have to wait while producers sort out the productivity gains—and the not-so-productive gains.

“We’re seeing the rig count going down on our system in the basin, but producers are using increased efficiencies to maintain a similar well count, the well count is staying similar,” Faraca explained. “That has a lot to do with producers being mindful of living within cash flow, being very efficient. Our producers have said basically they’re into section-line drilling right now.


Down the line

“They’re just moving down section lines. Some of ours have quoted this a 20% to 40% efficiency range that they’re gaining from their current drilling techniques.”

Enable enjoys a system that can handle shifts in drilling, Faraca noted. The firm’s “super header” can move production to processing as gas plant flows top out or drop off.

“We have a rich-gas header that stretches from [western Oklahoma’s] Granite Wash all the way down into the Scoop so we can utilize our plants there. Our plant in the Granite Wash is full, processing a significant amount of gas, a lot of that is just the way we shift gas around on the super header.

“So, regardless of where the activity is, we can move it on the header to make sure we’re maintaining very high efficiency in our plants. It’s a really nice setup and, again, allows us to be efficient with our construction of our new plants to make sure we’re not overbuilding, and that we can capture the movement,” she added.

ONEOK’s plans

Tulsa, Okla.-based ONEOK Inc. is another big midstream player in the Midcontinent, ranking No. 10 on the Midstream 50. It has approximately 1.2 billion cubic feet per day (Bcf/d) of capacity in the region, with some 300,000 dedicated acres in the Stack and Scoop.

Those Wells Fargo numbers indicate that if there’s a capacity constraint looming in the region, it will be for NGL—and ONEOK’s responding. It plans to put its Arbuckle II Pipeline in service during the first quarter of next year. The 530-mile, 24- and 30-inch line will have an initial capacity of 400 Mbbl/d, expandable to 1 MMbbl/d.

ONEOK recently told investors that 375 Mbbl/d of initial capacity is under contract. ONEOK projects long-term Scoop/Stack production growth, it added.

MPLX LP, No. 7 on the Midstream 50, has committed to enlarging its Midcontinent footprint.

In the Stack, it’s enlarging its Omega gas processing plant in Custer County, Okla., to 120 million cubic feet per day (MMcf/d), along with rich-gas and crude gathering and logistics facilities. It started the Omega I plant in 2018 at 75 MMcf/d. Omega II, originally scheduled to go on stream late this year, is now scheduled to start up in first-quarter 2020.

“Some of the hardest-hit systems, from a rig count perspective, include Enable, DCP and EnLink,” Melissa Saurborn, senior commodity fundamentals analyst for East Daley Capital, told Midstream Business. “ONEOK has also realized a decrease in rigs on their system; however, the larger impact for them is the volume of NGLs produced in the basin, as they are connected to the majority of the plants in the region. The drop in rigs and lower production outlook comes as ONEOK looks to bring the Arbuckle II pipeline online.”

Cushing Connect

Holly Energy Partners LP and Plains All American Pipeline, Nos. 33 and 8, respectively, on the Midstream 50, announced in October the formation of a 50/50 joint venture, Cushing Connect Pipeline & Terminal LLC, to build a 160 Mbbl/d, common-carrier crude line that will connect the Cushing complex to the big HollyFrontier Corp. refining operation in Tulsa. The JV also will own and operate 1.5 MMbbls. of storage at Cushing.

The partners plan to have the Cushing terminal start up in second-quarter 2020, with the pipeline to enter service in first-quarter 2021.

In southeastern Oklahoma, MPLX and partner Targa Resources started up two plants, Hickory Hills, located in Hughes County, Okla., and Tupelo, in Coal County, Okla. as 2019 began, to serve Arkoma Woodford producers. The two plants have a combined capacity of 270 MMcf/d.

Another addition to NGL midstream capacity will come with expansion of the Southern Hills Pipeline, scheduled for fourth-quarter 2020. The project will enlarge the line, which serves northwestern and Central Oklahoma, to 230 Mbbl/d.

Southern Hills partners are Enbridge Inc., Phillips 66 Co. and DCP Midstream partners. The line entered service in 2013. DCP has some 2 Bcf/d of gathering and processing capacity in the Midcontinent.

Next door

No play operates in a vacuum, of course, and the Midcontinent has a problem from being awfully close to the booming Permian. Midcontinent production wants to flow to the same markets at Permian output.

“The debottlenecking of current infrastructure constraints in the Permian has started and should facilitate continued production growth in the basin,” Sunil Sibal, senior energy infrastructure and MLP analyst at Seaport Global Securities, wrote in a recently published analysis. “This can put other regions under pressure especially if weak demand puts a dent on commodity prices and drilling economics … the Midcontinent and Eagle Ford would be the regions to watch.”

“We continue to see the region as growing,” Enable’s Faraca said. “It’s very productive. It has got the benefit of commodity price shifts, and when we see a shift in gas prices going up, we have some gassier areas. But right now, obviously there’s a crude focus. We think that is going to be the focus for a while.

Gulf Run

“We continue to work closely with the producers to get them to the best markets. We want to make sure the producers we have in the Anadarko have the ability to get to the water, which is becoming one of the premier markets,” she added, mentioning Enable’s Gulf Run gas pipeline.

Gulf Run line will connect to Enable’s existing Haynesville operations, which connect to its Midcontinent system. It will serve the Golden Pass LNG plant on the Gulf Coast with a projected 2022 start-up.

“We do that with all commodities. We also have condensate, crude and NGL. We want to make sure that we have a focus that our producers get to the best markets, they get the best net back, which obviously gives them more cash flow, allowing for more drilling.”