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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--In the ongoing effort to uncover the "next big thing" in Oil & Gas exploration, some companies are investing heavily in two unconventional plays in Oklahoma: SCOOP and STACK.
Continental Resources Incorporated (NYSE:CLR) (Oklahoma City, Oklahoma) last year created the SCOOP nickname for several Oklahoma counties, including Grady and Stephens, where it had amassed a lot of acreage and has reported positive drilling results. SCOOP is an acronym for the South Central Oklahoma Oil Province, which is part of the Anadarko Basin, located west of Oklahoma City.
SCOOP is a new, high-impact resource play, an oil- and liquids-rich province with one of the thickest, best-quality shale reservoirs in the country, Continental officials told investors about 14 months ago. Now, a little more than one year after announcing its activity in the area, Continental is producing about 20,000 barrels of oil equivalent per day (BOE/d) from SCOOP, a 293% increase over comparable year-earlier production. Currently, Continental has 12 rigs operating in SCOOP, and it plans to increase that to 18 by mid-2014. Some wells report initial production rates exceeding 1,200 BOE/d. Continental has leased 320,000 net acres in SCOOP.
Continental estimated SCOOP could contain up to 70 billion barrels of oil, an enormous sum. But observers inclined to discount those numbers as overly enthusiastic should remember that Continental was one of the first producers to identify the vast potential of the Bakken formation.
In 2014, Continental will invest about $100 million in exploration activities in SCOOP and an additional $790 million developing its acreage, the company told investors last month. That works out to about 22% of its overall $4.05 billion capital budget next year. In 2012, by contrast, Continental reportedly spent about $510 million in SCOOP.
"It's a huge opportunity for the company and another great asset for us, because we're looking at an asset with rates of return that compete head-to-head with what we're doing in the Bakken," Jack Stark, Continental's senior vice president of exploration, said last year in unveiling SCOOP, which he said had as much upside potential as the Bakken.
SCOOP is geographically smaller than either the Eagle Ford or the Bakken shales, but the thickness of the shale deposits in SCOOP--as much as 400 feet--are larger than in those other shale formations, Continental officials said. Under certain assumptions, including crude oil averaging $90 per barrel and natural gas averaging $3.50 per thousand cubic feet (Mcf), Continental officials last month estimated SCOOP could generate returns of 40% to 60%.
What particularly excited Continental officials is that wells in SCOOP produce mostly oil and natural gas liquids (NGLs), and they have lower rates of decline than other shale wells.
"We're not overly focused on initial production rates," Warren Henry, vice president of investor relations, told World Oil magazine. "What's really important about these wells is they have a slower decline rate than you normally expect from a resource play. Some of these wells may only look OK now, but if you wait six to nine months they're going to look very strong."
Continental is not the only operator in SCOOP--Marathon Oil Corporation (NYSE:MRO) (Houston, Texas) also is active in that area. But Continental acreage accumulation has made it the dominant player there.
Close by SCOOP is another hot Oklahoma oil play, which Newfield Exploration Company (NYSE:NFX) (The Woodlands, Texas) calls STACK. Newfield officials had developed an acronym for the area, but dropped it because it became too cumbersome, a spokesman told Industrial Info. The name refers to the multiple stacked geologic formations found in the Woodford and Meramec shales in the Anadarko Basin, adjacent to SCOOP.
STACK "has thousands of new prospective new drilling locations," Newfield's Chairman, President and Chief Executive Lee K. Boothby said in a conference call with investors last month. "We're very excited about this significant expansion of our position in the Anadarko Basin."
Newfield, which also operates in SCOOP, more than doubled its combined quarterly production from those Oklahoma areas, to about 22,000 BOE/d in the just-completed quarter from about 10,000 BOE/d for the year-earlier quarter, the company told investors last month. By the end of 2014, the company projects average daily production from those areas to double again, to about 50,000 BOE/d.
"Our early results in the STACK play are very encouraging, with initial wells providing about 35% rates of return," Gary D. Packer, Newfield's chief operating officer, said in that same earnings call on November 4. "We are early in our learning curve in the STACK, and history proves that we can lower costs and enhance returns as we move to development mode."
"STACK has the potential to more than double our unrisked resource potential in the basin," Packer continued. "We will be increasing our planned activity levels in the Anadarko Basin, as this region has the potential to drive our corporate growth rates over the next decade. Our net production from the Anadarko Basin is expected to exit 2014 at nearly 50,000 BOE/d."
The STACK play contains predominately crude oil and natural gas liquids (NGLs), and the shale deposit is between 275 feet and 475 feet thick. The shales are located at between 8,000 and 11,000 feet underground. When crude oil averages $90 per barrel and natural gas averages $3.50 per Mcf, Newfield calculates it can earn a 35% rate of return from STACK. Newfield owns about 225,000 acres of land in the Anadarko Basin. Crude-oil production declines have tracked the industry type curves for STACK, but has declined at a slower-than-average pace for SCOOP, validating the upbeat assessments of that play expressed by Continental officials.
"Companies continue to find economic deposits of crude oil and NGLs, because crude oil prices remain relatively high, demand is strong, and operators are getting more familiar with the specifics of each formation," observed Jesus Davis, Industrial Info's vice president of research for Oil & Gas Production, Pipelines and Terminals. "Continental's track record in the Bakken should give the industry added confidence about its estimate of the size of the SCOOP resource, which will need to be confirmed by other operators. But it is encouraging to see oil wells drilled there have production declines that are slower than industry averages."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Continental Resources Incorporated (NYSE:CLR) (Oklahoma City, Oklahoma) last year created the SCOOP nickname for several Oklahoma counties, including Grady and Stephens, where it had amassed a lot of acreage and has reported positive drilling results. SCOOP is an acronym for the South Central Oklahoma Oil Province, which is part of the Anadarko Basin, located west of Oklahoma City.
SCOOP is a new, high-impact resource play, an oil- and liquids-rich province with one of the thickest, best-quality shale reservoirs in the country, Continental officials told investors about 14 months ago. Now, a little more than one year after announcing its activity in the area, Continental is producing about 20,000 barrels of oil equivalent per day (BOE/d) from SCOOP, a 293% increase over comparable year-earlier production. Currently, Continental has 12 rigs operating in SCOOP, and it plans to increase that to 18 by mid-2014. Some wells report initial production rates exceeding 1,200 BOE/d. Continental has leased 320,000 net acres in SCOOP.
Continental estimated SCOOP could contain up to 70 billion barrels of oil, an enormous sum. But observers inclined to discount those numbers as overly enthusiastic should remember that Continental was one of the first producers to identify the vast potential of the Bakken formation.
In 2014, Continental will invest about $100 million in exploration activities in SCOOP and an additional $790 million developing its acreage, the company told investors last month. That works out to about 22% of its overall $4.05 billion capital budget next year. In 2012, by contrast, Continental reportedly spent about $510 million in SCOOP.
"It's a huge opportunity for the company and another great asset for us, because we're looking at an asset with rates of return that compete head-to-head with what we're doing in the Bakken," Jack Stark, Continental's senior vice president of exploration, said last year in unveiling SCOOP, which he said had as much upside potential as the Bakken.
SCOOP is geographically smaller than either the Eagle Ford or the Bakken shales, but the thickness of the shale deposits in SCOOP--as much as 400 feet--are larger than in those other shale formations, Continental officials said. Under certain assumptions, including crude oil averaging $90 per barrel and natural gas averaging $3.50 per thousand cubic feet (Mcf), Continental officials last month estimated SCOOP could generate returns of 40% to 60%.
What particularly excited Continental officials is that wells in SCOOP produce mostly oil and natural gas liquids (NGLs), and they have lower rates of decline than other shale wells.
"We're not overly focused on initial production rates," Warren Henry, vice president of investor relations, told World Oil magazine. "What's really important about these wells is they have a slower decline rate than you normally expect from a resource play. Some of these wells may only look OK now, but if you wait six to nine months they're going to look very strong."
Continental is not the only operator in SCOOP--Marathon Oil Corporation (NYSE:MRO) (Houston, Texas) also is active in that area. But Continental acreage accumulation has made it the dominant player there.
Close by SCOOP is another hot Oklahoma oil play, which Newfield Exploration Company (NYSE:NFX) (The Woodlands, Texas) calls STACK. Newfield officials had developed an acronym for the area, but dropped it because it became too cumbersome, a spokesman told Industrial Info. The name refers to the multiple stacked geologic formations found in the Woodford and Meramec shales in the Anadarko Basin, adjacent to SCOOP.
STACK "has thousands of new prospective new drilling locations," Newfield's Chairman, President and Chief Executive Lee K. Boothby said in a conference call with investors last month. "We're very excited about this significant expansion of our position in the Anadarko Basin."
Newfield, which also operates in SCOOP, more than doubled its combined quarterly production from those Oklahoma areas, to about 22,000 BOE/d in the just-completed quarter from about 10,000 BOE/d for the year-earlier quarter, the company told investors last month. By the end of 2014, the company projects average daily production from those areas to double again, to about 50,000 BOE/d.
"Our early results in the STACK play are very encouraging, with initial wells providing about 35% rates of return," Gary D. Packer, Newfield's chief operating officer, said in that same earnings call on November 4. "We are early in our learning curve in the STACK, and history proves that we can lower costs and enhance returns as we move to development mode."
"STACK has the potential to more than double our unrisked resource potential in the basin," Packer continued. "We will be increasing our planned activity levels in the Anadarko Basin, as this region has the potential to drive our corporate growth rates over the next decade. Our net production from the Anadarko Basin is expected to exit 2014 at nearly 50,000 BOE/d."
The STACK play contains predominately crude oil and natural gas liquids (NGLs), and the shale deposit is between 275 feet and 475 feet thick. The shales are located at between 8,000 and 11,000 feet underground. When crude oil averages $90 per barrel and natural gas averages $3.50 per Mcf, Newfield calculates it can earn a 35% rate of return from STACK. Newfield owns about 225,000 acres of land in the Anadarko Basin. Crude-oil production declines have tracked the industry type curves for STACK, but has declined at a slower-than-average pace for SCOOP, validating the upbeat assessments of that play expressed by Continental officials.
"Companies continue to find economic deposits of crude oil and NGLs, because crude oil prices remain relatively high, demand is strong, and operators are getting more familiar with the specifics of each formation," observed Jesus Davis, Industrial Info's vice president of research for Oil & Gas Production, Pipelines and Terminals. "Continental's track record in the Bakken should give the industry added confidence about its estimate of the size of the SCOOP resource, which will need to be confirmed by other operators. But it is encouraging to see oil wells drilled there have production declines that are slower than industry averages."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
