WOODWARD — Oil production continues to expand throughout much of Oklahoma, including in areas outside of the state’s core STACK and SCOOP fields.
Those two fields are dominated by larger, independent oil companies, including Continental Resources Inc., Devon Energy Corp. and Newfield Exploration.
But smaller, privately held companies are reporting strong results in other parts of the state, including the Merge — which lies between the STACK and SCOOP — the western Anadarko Basin in western Oklahoma and the Texas Panhandle, the NW STACK — which, as its name implies, is northwest of the STACK — and in southeast Oklahoma’sArkoma Basin, parts of which now are being called the Arkoma Stack.
Oklahoma’s modern horizontal oil developments are newer and core developments less spread out than in the vast Permian Basin of west Texas and southeast New Mexico, but operators in Oklahoma tout several unique benefits to the state’s resources.
“Oklahoma is unique in how many stack interval plays are available. There are 14 different commercial targets in the Anadarko Basin,” Rome Nichols, production manager for Oklahoma City-based LeNorman Operating, said at the Tri-State Oil and Gas Convention in Woodward last week.
LeNorman started operating in western Oklahoma in 2011 and expanded through several purchases. The company is operating two rigs in the area.
Oklahoma’s oil fields also have the benefit of being near plenty of pipelines, storage facilities, processing plants and refineries.
Sales prices have fallen in some parts of the Permian Basin because pipeline and other midstream infrastructure is at or near capacity. Projects planned or under construction promise to relieve the bottleneck, but the problem is likely to continue at least until late next year.
“I think we’re better protected here,” Nichols said of Oklahoma’s oil fields. “I don’t think we’ll see this area get in quite the same situation. We’re closer to some of the main transmissions lines, with great takeaway capacity to the Midwest, Gulf Coast and Cushing.”
Natural gas transportation
While Oklahoma may have enough pipeline capacity to prevent bottlenecks, the state’s oil fields still are affected by changing patterns. Much of Oklahoma’s natural gas production historically has moved north to markets in the Midwest, areas that now are served primarily by production in the Ohio and Pennsylvania areas.
As a result, some Oklahoma production has been discounted to U.S. benchmark prices as local producers face higher differentials — the cost to transport oil and natural gas to market.
Pipeline projects planned and under constriction in Oklahoma promise to open up more capacity moving south to export terminals and chemicals plants along the Gulf Coast.
“Right now, the way the U.S. methane market is situated, the vast majority of producers are paying higher differentials than they’re historically used to just to get gas to market,” said Scott Goodwin, vice president of operations at Denver-based FourPoint Energy. “We’ve seen it just in the last month ease up very significantly. I think it will continue to ease up. I’m pretty upbeat about gas exports.”
While Oklahoma’s oil fields have some advantages, the area also presents some unique challenges.
“The Osage rock we’re drilling in the NW STACK is among the hardest rock in the world being developed now,” said Chuck Duginski, chief operating officer at Oklahoma City-based Tapstone Energy Corp.
“Drilling technologies have advanced to the point where we’re able to drill that rock efficiently. That’s allowing us to move activity back to areas where there hasn’t been development for a long time.”
At least one characteristic is both a challenge and an opportunity, the executives said. Oklahoma’s oil fields have been developed in many cases for more than a century. Thousands of wells have been drilled in most of the state’s producing counties, creating engineering challenges in dealing with existing holes and legal challenges in tracking down lease agreements.
“But in an area like ours where there have been a lot of wells, it’s important to remember that each well is a data point,” Goodwin said. “We can understand a lot about the subsurface just by the fact that there are so many wells that have been drilled.”
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