The oil- and condensate-focused SCOOP and STACK shale plays in Central Oklahoma have been garnering the industry’s attention for their attractive producer economics, which are second only to the Permian among the crude oil shale plays. Rig additions in Oklahoma over the past several months are clearly targeting this 11-county area of the Anadarko Basin, and the RBN Production Economics Model projects production from the region will grow by 1.5 Bcf/d over the next five years. The increased drilling activity and expected production growth has piqued the interest of midstream companies looking to invest in infrastructure in the area. Given the increased output, is more takeaway capacity needed, and if so by when? Today we continue our look at the potential for takeaway constraints out of the SCOOP and STACK.
This blog series provides a snapshot of our latest in-depth analysis of production trends and infrastructure out of the SCOOP/STACK. As we noted in Part 1, drilling activity in the South Central Oklahoma Oil Province (SCOOP) and Sooner Trend Anadarko Canadian Kingfisher (STACK) producing regions primarily targets crude oil, natural gas liquids (NGLs) and condensates in the Woodford and Meramec formations of the Anadarko Basin (see Scoop-y Doo and All Come to Look for a Meramec). But that type of drilling brings with it substantial amounts of associated natural gas production volumes.
Gas production out of the SCOOP/STACK grew in the past two years even as volumes from other areas of Oklahoma and even the Midcontinent region as a whole declined. In fact, SCOOP/STACK has been one of the most prolific of the oil-focused plays in the U.S. over the past couple of years, second only to the Permian. Rig counts have been relatively resilient there, remaining comparatively steady through the low-price environment of the last couple of years and, more recently, growing faster than in most other producing regions now that the market is turning around (see Stardust Part 2). That’s because, as we showed in Part 3, the two plays have some of the highest internal rates of return (IRRs) among oil-focused plays, again second in profitability only to the Permian. Not only are the IRRs highly competitive with other oil plays, but the uplift from the oil production makes the associated gas from SCOOP and STACK highly competitive with even the most prolific dry gas plays, namely the Marcellus/Utica shales.