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.
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.
We only used locations that had production data.
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).
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.
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.
Oil production from Blaine is still the top county, but Kingfisher jumps significantly. Canadian county has the lowest average production per well.
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.
|Name||Well Count||CUM Gas||CUM Oil|
|JONES ENERGY (JONE)||1||49,795||10,071|
|QEP ENERGY (QEP)||1||502,475||59,383|
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.
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.
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.
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