Stardust, and Much More - Natural Gas Production Trends in the SCOOP and STACK, Part 2

As U.S. crude oil and natural gas market prices and rig counts climb, the SCOOP and STACK in central Oklahoma continue to be two of the handful of plays attracting significant increased activity and investment, both on the producer and midstream sides.  Production growth from the 11-county region covering the two plays is helping to offset declines in oil and gas volumes from other parts of Oklahoma and the Midcontinent region as a whole. Today we look at historical and recent drilling activity as an indicator of potential growth.

This is Part 2 of our blog series on the SCOOP/STACK. In Part 1 we provided an overview of the play’s geographic and geologic profile and recent trends in production from the area. As we described, the SCOOP and STACK (acronyms for South Central Oklahoma Oil Province and Sooner Trend Anadarko Canadian Kingfisher, respectively), are situated within a fairly compact area—an 11-county section of central-Oklahoma—mostly inside the bounds of what is generally known as the Cana-Woodford, which is part of the greater Anadarko Basin. From a geological standpoint, producers in these plays are primarily targeting the Devonian-age Woodford Shale formation, though the STACK in north-central Oklahoma also has access to the Mississippian-era Meramec reservoir (see Scoop-y Doo and All Come to Look for a Meramec).

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As we noted in Part 1, producers have successfully exploited this area for decades, first using conventional vertical drilling to target oil and natural gas. In the early years of the Shale Revolution, activity in Oklahoma shifted to primarily target natural gas. But by late 2012–early 2013, gas-focused rigs had declined significantly in the area, and starting in mid-2013, rigs increasingly began targeting unconventional oil and condensates in the play. This effort was led by Continental Resources in what it named the SCOOP and by Newfield Exploration in the STACK. Energy Information Administration’s (EIA) historical crude oil production data for Oklahoma shows that after more than two decades of declining, the state’s oil production nearly doubled from 205 Mb/d in 2011 to 398 Mb/d in 2014. Growth slowed in 2015, and based on the most recent data available through October 2016 it has shown a small decline, with 2016 output averaging 424 Mb/d, down 8 Mb/d (2%) from 2015, though the EIA monthly data since April 2016 shows production averaging about flat with October up 12 Mb/d over September.

We also observed that with the increased drilling for crude oil, associated gas production growth has accelerated in the area. After stagnating in prior years, gross gas volumes in Oklahoma as a whole jumped nearly 0.9 Bcf/d (16%) in 2014 to 6.3 Bcf/d and rose another 0.5 Bcf/d (8%) in 2015 to 6.8 Bcf/d, according to data from our friends at PointLogic Energy. In 2016, gross gas volumes flattened, on average, right around that 6.8-Bcf/d level. Looking at the same data by play, however, production in most of Oklahoma has been relatively down. But these declines are being offset by growth out of the Cana-Woodford region, which is more or less synonymous with the SCOOP and STACK geography. Gross gas production volumes from the SCOOP/STACK counties grew by 1.0 Bcf/d, or 60%, between 2013 and 2016 to about 2.7 Bcf/d. Back in 2013, SCOOP/STACK production was about 30% of the about 5.5 Bcf/d total in Oklahoma. Just three years later (in 2016), it accounted for 40% of the nearly 6.9 Bcf/d total. This is because with crude oil prices relatively low, producers have been—and continue to be—quite picky about where they focus their rigs. So next let’s take a look at what the rig counts in Oklahoma have been doing. For our analysis, we used state-level Baker Hughes rig count data to get total Oklahoma rig counts and then used its county-level data to break that down by the six major plays within Oklahoma, as they are defined by PointLogic:  Ardmore Woodford, Arkoma Woodford, Cana-Woodford, Granite Wash, Mississippian and “Other”. Before we get to that play-by-play breakdown, let’s start with what’s happened to total rig counts in the state, as shown in Figure 1.

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