Hartstreet: The STACK/SCOOP Is Seeing Improved Production Data From Enhanced Completions

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Includes: BNO, CHK, CLR, COP, DBO, DNO, DTO, DVN, DWT, FMSA, GLF, GST, HCLP, JONE, MRO, NFX, OIL, OILK, OILX, OLEM, OLO, QEP, SCO, SD, SLCA, SND, SZO, UCO, USL, USO, USOI, UWT, WTID, WTIU, XEC, XOM
by: Michael Filloon

Summary

Horizontal oil production data has improved significantly in recent years.

Production data is more transparent as we are seeing some huge results linked to increased frac' sand and frac' fluid usage.

Devon has had the best recent results, although Marathon has the best current producer.

We will break down by operator performance in upcoming articles.

US unconventional production continues to improve production per foot. Although frac' sand and fluids usage has increased, the additional costs are offset by better production. This continues to effect balancing world inventories, but not to the extent initially thought. While the Bakken is more transparent, plays in Texas and Oklahoma do not provide the quality of data. Excellent production results from these plays aid in identifying longer term oil prices. We continue to see operator hedges placed at the $50/bbl pivot point, and much of this is due to plays like the Permian and STACK/SCOOP. The US Oil ETF (USO) is headed higher longer term, but we continue to see resistance. OPEC cuts have been working, and we expect oil prices to trade up into a new range in the coming months. Operators may need to decrease activity for this to occur, be we are starting to see decreases in cap ex.

Source: Investing.com

The STACK/SCOOP in Oklahoma has emerged as one of the premier unconventional plays in the US. Newer well designs have improved economics significantly. To provide an idea of economics we pulled 377 horizontal well locations in Blaine, Kingfisher and Canadian counties. We did not use any gas focused wells. The map below provides the locations from which production data was pulled.

Source: Welldatabase.com

We only used locations that had production data.

Source: Welldatabase.com

The above graph provides data on a BOE basis. The cumulative production is shown in months. Olive June 1-27XH has outperformed in a significant manner. It was drilled and completed by Marathon (MRO) and produced more then 1.36 MMBOE in 10 months. Marathon used 19.6MM gallons of fluid and 29.2MM lbs of proppant. The expanded use of sand per foot benefits names like US Silica (SLCA), FMSA (FMSA), Hi Crush (HCLP), and Smart Sand (SND).

Source: Welldatabase.com

Olive June has produced over 800 KBO in 10 months. Dover Unit 10H-24 has produced almost 700 KBO in 33 months. While the data does differ significantly by location, we are starting to see some very good results. Enhanced completions continue to increase production and improve well economics.

Source: Welldatabase.com

Blaine outperforms Canadian and Kingfisher counties when compared on a BOE basis. It is important to note that Kingfisher wells have the longest number of months on line. It could be assumed, the county as a whole has more older locations. Results would be hampered by lesser designs.

Source: Welldatabase.com

Oil production from Blaine is still the top county, but Kingfisher jumps significantly. Canadian county has the lowest average production per well.

Source: Welldatabase.com

When the oil type curve was differentiated by field, there is a relatively large difference. The top four fields are focused around south and southwestern Kingfisher County.

Source: Welldatabase.com

The production curve varies significantly by operator. The top E&P is Devon (DVN). It is followed by Rebellion, Excalibur, Cimarex (XEC), and Chesapeake (CHK).

Name Well Count CUM Gas CUM Oil
NEWFIELD (NFX) 80 33,614,710 8,192,425
DEVON (DVN) 74 41,800,880 6,730,048
MARATHON (MRO) 38 22,072,862 3,565,419
GASTAR (GST) 29 7,794,862 1,848,331
CONTINENTAL (CLR) 20 8,291,898 1,480,323
CHESAPEAKE (CHK) 17 8,198,778 506,264
CIMAREX (XEC) 11 13,991,791 452,038
CONOCO (COP) 1 0 0
EXXON (XOM) 1 0 0
GULF (GLF) 1 109,588 23,588
JONES ENERGY (JONE) 1 49,795 10,071
QEP ENERGY (QEP) 1 502,475 59,383
SANDRIDGE (SD) 1 235,218 -32,069

Source: Welldatabase.com

The above table includes locations by publicly traded operators. Conoco and Exxon only have one location, and the production is not yet listed. Newfield and Devon are the most active. We will be breaking down this data by operator in upcoming articles.

Month Oil Gas BOE
1 5,987.12 18,302.45 9037.53
2 11,585.98 37,880.11 17899.33
3 9,036.24 35,539.03 14959.41
4 7,846.21 11,921.78 5859.25
5 6,121.24 16,352.51 8846.66
6 5,597.80 31,783.65 10895.07
7 5,112.74 36,902.53 11263.16
8 4,606.77 27,440.39 9180.17
9 4,233.75 25,457.29 8476.64
10 3,874.01 22,399.17 7607.20
11 3,213.05 19,498.33 6462.77
12 2,938.41 18,824.98 6075.91
13 2,719.09 16,792.85 5517.89
14 2,565.36 21,007.64 6066.63
15 2,277.19 14,040.16 4617.22
16 2,142.68 14,046.63 4483.79
17 1,994.94 13,742.36 4285.33
18 1,809.81 12,904.54 3960.56
19 1,675.79 7,256.36 466.39
20 1,550.53 13,075.82 3729.83
21 1,448.57 10,619.60 3218.51
22 1,337.36 1,482.34 1090.30
23 1,315.33 9,966.89 2976.48
24 1,274.70 10,364.84 3002.18
Total 92,264.67 447,602.25 159,978.23

Source: Welldatabase.com

The above table provides the average production curve. Although some wells had produced over a much larger time frame, it was shortened to two years. Over the first two years, wells only produce 92 KBO, but this includes much older designs. A marked increase in oil production has been seen in recent years. The table below provides an overview.


Source: Welldatabase.com

The average production for all horizontal locations is shown above. Natural gas (red) has been much more volatile with oil providing a shallow decline curve.

In summary, production data out of Oklahoma is becoming more consistent. Devon, Newfield, Marathon, and Continental are well placed going forward. Although the Delaware a Midland seem better placed, we should have a much more transparent view in the coming quarters.

Disclosure: I am/we are long CLR, NFX, DVN, SLCA, OILU.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Well data is provided by WellDatabase. Accordingly, the publication of articles should not be construed by any consumer and/or prospective client as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. This information is provided for guidance and information purposes only. This information is not intended to provide investment, tax, or legal advice. The information contained herein has been compiled from sources deemed reliable and it is accurate to the best of our knowledge and belief. However, I cannot guarantee its accuracy, completeness, and validity and cannot be held liable for any errors or omissions. All information contained herein should be independently verified and confirmed. Hartstreet LLC does not accept any liability for any loss or damage whatsoever caused in reliance upon such information. Readers are advised that the material contained herein should be used solely for informational purposes. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Welldatabase.com provided the data for this article. There might be a delay between upcoming articles because we are working on securing investments for Hartstreet LLC.

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