The competition for upstream assets in the Permian is fierce. It’s a different story in the Anadarko, where production has been flat and some larger E&Ps have been exiting. But there’s been a lot of big-money M&A in the Anadarko lately, most for steady-as-she-goes production assets at reasonable prices.
The prospect of procuring steady production assets at reasonable prices has been spurring interest in the Anadarko Basin. In the past few weeks, two privately held producers closed on deals totaling more than $4 billion, with another $1-billion-plus agreement announced this month. What’s going on?
Activity in Oklahoma’s SCOOP/STACK play has been picking up. In 2021, the number of active rigs there improved by about 30 — that’s a bigger gain than any U.S. hydrocarbon production basin except the Permian. On a percentage basis, the 160% year-over-year increase in the SCOOP/STACK rig count was exceeded — and just barely — by only a couple of other rich-gas regions: the Niobrara and Ohio portion of Marcellus/Utica. Is SCOOP/STACK really on the rebound and, if so, why? The answers are tied to commodity prices and the fact that the Oklahoma play offers producers both crude oil and “rich,” NGL-saturated associated gas. In today’s RBN blog, we discuss recent developments in the Sooner State’s premier production area.
The market dislocations of the past year and a half really took the wind out of the sails of many U.S. hydrocarbon plays. Not the Permian, of course. Sure, production there declined some in the spring of 2020, but has been on the rebound ever since — aside from a brief, Deep Freeze-related downward spike back in February, that is. But the recovery in many other leading production areas was short-lived. Production in the Bakken has stayed close to flat lately, and output in the Eagle Ford has been slipping. The same is true in SCOOP/STACK, which only a few years ago was hailed as maybe the next big thing. What happened? And is there hope for a comeback? In today’s RBN blog, we discuss the once-hot Oklahoma play and its prospects.
In the nearly three months since it began initial service, natural gas flows on Cheniere Energy’s Midship Pipeline out of the SCOOP/STACK have ramped up, and now consistently top 700 MMcf/d. This, despite production from the Oklahoma basins declining by close to 10% in that time. In other words, Midship is doing what it was supposed to do — namely, giving producers and shippers incremental capacity to reach relatively more attractively priced markets. However, the pipeline was also meant to connect that supply region with growing LNG export demand on the Gulf Coast, which has been slashed in recent months as global oversupply and poor economics have marginalized U.S. LNG cargoes. That raises the question, where are Midship flows heading? Today, we provide an update on Midship gas flows.
The initial start-up of Cheniere Energy’s Midship Pipeline two weeks ago occurred in a radically different market environment than when the project was conceived. As the first greenfield, large-diameter natural gas pipeline project out of the SCOOP/STACK in years, it was meant to provide relief for the once takeaway-constrained producers in the Central Oklahoma production region and connect what was until the past year a rapidly growing supply region to emerging LNG export demand along the Gulf Coast, including at Cheniere’s own Corpus Christi, TX, terminal. Instead, SCOOP/STACK production hit the skids last fall, and rig counts since then have plunged to the lowest levels in well over a decade. On the delivery end of the pipe, U.S. LNG export demand is being challenged by a global gas glut and disappearing margins to international markets. Still, the Midship project’s initial capacity of 1.1 Bcf/d is more than 80% subscribed by firm shippers, and the new pipeline is slated to provide some of the most economic routes out of the SCOOP/STACK. Today, we provide an update on the project’s start-up and the changed market environment it’s facing.
Crude oil production in the Permian grew steadily through the 2010s and now tops 4.5 MMb/d — five times what it was at the start of the decade. Production in the Bakken and the Denver-Julesburg (D-J) Basin sagged when crude prices plummeted in 2014-15, but both regions chugged their way back, with output setting new records every month or two in 2018-19. SCOOP and STACK are another story. Only a year or two ago, many producers and others were talking up the neighboring crude-focused plays in central Oklahoma as the next big thing, maybe even a Sooner State Permian. But while SCOOP/STACK production increased through 2018, it’s been flat or falling ever since, and most producers there have been slashing their drilling activity. Today, we look at recent developments in the once-hot region.
Midstreamers have been struggling to keep processing and natural gas pipeline constraints at bay in Oklahoma’s SCOOP/STACK plays, and the situation hasn’t gotten any easier in the past 18 months or so. Associated gas production from the Cana-Woodford has surpassed expectations, climbing 1 Bcf/d in that time to new highs near ~4.5 Bcf/d. Efforts by pipeline operators to keep pace with production gains have largely been on a piecemeal basis, mostly to tie in processing plants or modify/expand existing systems. Cheniere Energy’s Midship Project is looking to change that. The greenfield project, which received its final notice to proceed with construction from the Federal Energy Regulatory Commission (FERC) late last month, will level-shift takeaway capacity out of Oklahoma up by 1.44 Bcf/d in one fell swoop by the end of 2019. Today’s blog provides an update on Midship and other expansions in the region.
The push to develop local sources of frac sand — and significantly reduce well-completion costs in the process — started in the Permian Basin, but it didn’t end there. A number of new sand mines are being opened and developed in the Eagle Ford in South Texas, and there are early signs the same is happening in the SCOOP/STACK in Oklahoma. With local sand eliminating the need for rail deliveries and rail-to-truck transloading terminals, sand and logistics companies are streamlining the delivery and management of frac sand by providing integrated mine-to-well-site proppant services. Today, we discuss recent developments on the frac sand front and what they mean for exploration and production companies in key plays.
Increasing production of NGL-packed associated gas in the adjoining SCOOP, STACK and Merge plays in central Oklahoma and rising interest in the Arkoma Woodford play in the southeastern part of the state are spurring a bevy of natural gas-related infrastructure projects. New gas-gathering systems are being developed, new gas processing capacity has come online, and at least another 1.1 Bcf/d of processing capacity is under construction or will be soon. To help bring all the resulting gas and NGLs to market, new takeaway pipeline capacity out of Oklahoma is being planned too. Today, we continue our review of ongoing efforts to add gas-processing and takeaway capacity in the hottest parts of the Sooner State.
