All Come To Look For A Meramec - A Look at STACK's Over-Pressured Hot Spot

The STACK shale play west/northwest of Oklahoma City has quickly emerged as one of the hottest hot spots, and two “sweet-spot” counties in the heart of the play rank near the top nationwide in drilling activity.  For now, the primary focus of the small group of producers active in STACK (for “Sooner Trend Anadarko Canadian Kingfisher”) isn’t on production, it’s on gaining a more complete understanding of the play’s complex geology, which offers (as acronym luck would have it) a bona fide stack of hydrocarbon production layers (including the particularly promising Meramec) that together may offer off-the-chart volumes. Today, we consider a play that can provide some producers a 75% rate of return at $45/bbl oil and $2.25/MMBtu natural gas—that is, at prices 11% to 13% lower than they are today.

We’ve blogged extensively about how the collapse in oil prices that started two years ago spurred shale producers to focus their drilling-and-completion dollars on the plays—or, more specifically, the counties (and parts of counties) within the plays—where they could quickly produce sufficient oil, natural gas and/or natural gas liquids (NGLs) to recoup their capital investments and help pay the bills. Profitability (and, in some cases, corporate survival) depended on successful execution of this “flight to quality”. As we described in our The Good, the Bad, and the Ugly blog series and Drill Down Report, producers in the Eagle Ford in South Texas zeroed in on the counties with the highest initial production rates on a barrels-of-oil-equivalent (boe) basis. Then, in our May 18 (2016) webcast for Backstage Pass subscribers, we noted that two-thirds of the active drilling rigs in the U.S. are now doing their thing in only 20 counties, another sign that producers are focusing on the sweetest sweet spots. As it turns out, 10 of those counties are in the Permian Basin, two are in the Eagle Ford, and two (Blaine and Kingfisher) are in STACK—which until recently was far less known than its Texas counterparts.

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STACK’s days of relative anonymity are over. As we explained a few months ago in Like A Prayer?, STACK and another promising play nearby—SCOOP, an acronym for the South Central Oklahoma Oil Province (see SCOOP-y-Doo)—are part of the Anadarko Basin, which covers approximately 60,000 square miles in western Oklahoma, southwestern Kansas, and slivers of the Texas Panhandle and southeastern Colorado. Like the Permian Basin in West Texas, the Anadarko is certainly not a “new” oil and natural gas basin but has been extensively and successfully exploited since the 1920s using conventional vertical drilling technology. Over the past four years, the basin has been successfully targeted by producers using horizontal drilling and fracturing technology to extract unconventional oil and condensates from shale.

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