SCOOP-STACK operators plan to continue drilling and boost production until 2022

Strong points

The number of platforms rebounded to 40, hitting its highest level in 20 months in December.

Number of wells drilled, completed at pre-pandemic levels

Gas production reaches its highest since January 2020

The outlook for natural gas production from Oklahoma’s SCOOP-STACK Basin looks increasingly optimistic as the new year approaches as rig deployments and drilling activity continue to accelerate.

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Since early July, operators in the central Oklahoma basin have extended their drilling footprint by roughly 60 percent, adding 15 rigs to a total of 40 during the week ended Dec. 15, according to data released by Enverus.

The recently deployed platforms are already having an impact on the results.

In November, the number of wells drilled each month in the Anadarko Basin rose to 47, from just 30 in July, according to recent data released by the US Energy Information Administration.

EIA data – which references a more broadly defined Anadarko producing region in the Texas Panhandle, central and western Oklahoma – also shows an increase in well completions which totaled 57 in November. , compared to an average of 50 completions per month in June, July and August. .

As drilling activity accelerates, the inventory of drilled but unfinished wells, or DUCs, in the Anadarko Basin has declined steadily, falling to 789 in November, from more than 840 in July, according to data from the ‘EIA.

The rebound in SCOOP-STACK and Anadarko drilling, now comparable to pre-pandemic levels, should come as no surprise. As of December, internal after-tax mid-cycle rates of return are now estimated at 30% in SCOOP and around 27% in STACK, according to a recent IRR analysis from S&P Global Platts Analytics.

Production prospects

In December, gas production in the SCOOP-STACK is in full swing. Earlier this month, production hit levels above 4 Bcf / d, marking its highest level since late January 2020.

High prices in the midcontinent gas futures market make it increasingly likely that the drilling and production boom in Oklahoma will continue into the next year. At NGPL Midcontinent, the region’s benchmark upstream hub, the forward curve for the year 2022 is now at an average price of $ 3.60 / MMBtu. For the first quarter of 2022, the average is even higher at nearly $ 4 / MMBtu, according to data from S&P Global Platts.

In recent Q3 earnings calls, some of SCOOP-STACK’s most prominent producers offered field insights into the basin’s growth potential by 2022.

In a Nov. 3 conference call with investors and analysts, Devon Energy executives highlighted the company’s performance in Oklahoma this year, saying its acreage likely deserves a larger share of its spending there. in capital next year.

Devon currently operates a two-rig program on its concentrated 300,000 net acre position in a liquid-rich window that straddles parts of Canadian, Blaine and Kingfisher counties. As part of a $ 100 million drill-port partnership with Dow, the company has funded some 30 new wells there this year.

In its own conference call in the third quarter, executives at Gulfport Energy also highlighted the company’s performance in the SCOOP, noting a 12% increase in production from the previous quarter.

“The wells are declining at a slower rate than expected,” said Tim Cutt, CEO and President of Gulfport, on the Nov. 3 call. “We attribute the improved performance to wider spacing and longer laterals and are happy with the results so far,” he said.

Gulfport operates a one-rig program on its 73,000-acre net position in the SCOOP. The company plans to close 2021 with 11 rough wells turned into sales for the year.

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