Newfield Exploration

Natural gas production from the oil- and condensate-focused SCOOP/STACK combo play in Oklahoma—one of the most productive plays in the U.S. currently—grew through 2016, even as other producing areas in the state, and in the Midcontinent as a whole, declined. As one of just a handful of locations that returning rigs are targeting, the SCOOP/STACK has the potential to single-handedly offset production declines in other parts of the U.S. Midcontinent and make Oklahoma a natural gas growth state again. Moreover, the RBN production economics model shows the natural gas output from the SCOOP/STACK has the numbers and the proximity to be directly competitive with gas supply from the Marcellus/Utica. Today, we continue our SCOOP/STACK series, with a look at the production economics driving interest in this play.

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.

The SCOOP and STACK combo play in central Oklahoma recently has emerged as one of the most prolific and attractive shale production regions in the U.S. Like the Permian Basin (albeit on a much smaller scale), rig counts in this play have weathered the crude oil price decline better than most of the rest and, along with the Permian, are leading a rebound as prices move higher. These days, SCOOP/STACK producers are primarily targeting crude oil and condensates, but the area also is seeing a resurgence of natural gas output from associated gas. More than that, given its economics, location and ample infrastructure, gas supply from the region has the potential to be directly competitive with Marcellus/Utica supply. Today, we begin a series analyzing production trends in the SCOOP/STACK, with a focus on natural gas.

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.

Crushing oil prices are hitting U.S. shale producers hard and the outlook for 2016 shows little sign of a let-up. Production has continued to prove resilient but the odds are that something has to give at these prices. However there are still sweet spots in U.S. shale plays where producers are increasing acreage and drilling new wells. The headline plays that many analysts talk about are the Delaware and Midland basins in the West Texas Permian but as we outline in today’s blog there is also continued interest in the relatively less well-known central Oklahoma SCOOP and STACK plays.

Oil-Weighted exploration and production companies (E&Ps) are slashing capital spending in 2015, as they need to regain control of their costs in today’s lower oil price environment. With robust oil prices over the past three years, these companies only posted middling profitability as capital and operating costs ate up much of their incremental revenue. The Large Oil Weighted E&Ps are cutting back less than the Small/Mid-Sized Oil Weighted E&Ps as they are more financially secure and have more ability to spend through the price cycle. The Small/Mid-Sized Oil Weighted E&Ps are focused on getting their spending in line with cash flows and to get to a point where they are self-funding their capital investment. Today we explore how each of the companies in the two oil-weighted peer groups is trying to resolve these issues.

<p>Newfield Exploration - the largest crude oil producer in Utah’s Uinta basin - has temporarily suspended new drilling operations there in response to lower prices. Other producers in the region have reduced their drilling and capex budgets as well.</p>

A number of independent crude producers are testing the potential of the South Central Oklahoma Oil Province—SCOOP, for short—and liking what they see. It is too early to know if SCOOP, a legacy shale play in the southern reaches of the Woodford Shale, will be the next big thing in US crude production. But SCOOP seems to have a lot going for it geology-wise and, as an added bonus, the play is located near several pipelines and the Cushing, OK oil pipeline and storage hub. Today we take a look at SCOOP, its potential for crude production, and the E&P companies chasing the dream.