Unconventional oil and gas activity in Oklahoma is often overlooked by the market due to a complicated data structure and limited access provided by official state sources. In September 2015, Rystad Energy added complete data for all horizontal shale wells in Oklahoma into its shale well database (NASWellData), in a cleaned and structured format, with monthly updates. This data demonstrates that the contribution of Oklahoma to the total US shale light oil output has become significantly higher over recent years, while a closer look at well configuration and performance metrics reveals that several key players successfully completed early development phase across their acreage positions. Their well results were proved to be competitive and indicated that certain areas in Oklahoma should be mentioned along with the best spots of Bakken, Eagle Ford, Niobrara and Permian Basin.
Figure 1 summarizes activity and production in Oklahoma from January 2011. It includes horizontal rig count, oil production and drilled and completed wells. With a stable horizontal rig count during 2011-2014, light oil production increased from less than 50 kbbl/d to nearly 300 kbbl/d during the period. This steep growth was largely driven by an activity shift from shale gas towards liquid-rich areas. Naturally, this led to both higher oil output per well and accelerated drilling (shallower wells). Back in 2009, Woodford Shale activity across gassy Arkoma and Anadarko basins accounted for 60% of total Oklahoma unconventional drilling. This share dropped to 20% in 2014. Currently, 60% is attributable to Mississippian Lime and Woodford Shale activity across the Mississippian Trend, both with approximately 40% of light oil content, which is high for Oklahoma shale plays.
Besides the shift towards liquids, Oklahoma also experienced a common shale industry trend: increased well completion intensity with positive impact on well productivity. Figure 2 shows the average well curves for horizontal shale wells targeting oil for three selected shale players. It covers two different periods: 2011-2013 and 2014-2015. Continental Resources, with core activity across the oil and condensate windows in the Anadarko Basin (mainly Woodford and Springer Shale), exhibited well performance improvement that is aligned with 25% increase in proppant use per ft. Meanwhile, Sandridge Energy has not changed its well completion technique using 16 klbs of proppant per ft since 2011. Still, well productivity improved considerably due to the activity focus on the sweet spots of Mississippian Lime in 2014-2015. Newfield Exploration’s well performance improvements were caused by both 50% increase in completion intensity and focus on the oil window of the Anadarko Basin (mainly Woodford Shale).
Despite the recent low oil prices, Continental Resources and Newfield Exploration kept a significant activity in the Oklahoma shale plays during 2015; Newfield Exploration even increased its operated horizontal rig count from 9 to 15. On the other hand, Sandridge Energy almost abandoned all drilling operations in 2015 with an 86% decline in horizontal rig count from January to October 2015. This difference in operational behavior is mainly due to financial standings of each company, not due to individual well economics, as shown in Figure 3. This figure provides a distribution of the capex per barrel of oil equivalent for all wells drilled during 2014-2015. It includes the drilling and completion cost per well and it refers to the total Estimated Ultimate Recovery (EUR) at wellhead without accounting for NGL uplift. A typical capex per boe ranges 10-15 USD/bbl for the best performing shale plays i.e. Eagle Ford, Bakken, Permian Delaware and Niobrara.
Sandridge Energy’s wells have among the lowest capex per boe, with 49% of its wells below 10 USD/bbl. Hence, the drastic decrease in activity by this company is not due to well economics but due to scarce financing. The distribution of capex per boe for Newfield Exploration also confirms a very attractive acreage position with over 85% of its wells below 30 USD/bbl. Continental Resources’ wells, on the other side, have a higher capex per boe but these wells have a significant upside from NGL.
This well level analysis is critical for understanding, among others, the operational behavior of shale companies during periods of low oil prices.