Evolving Oklahoma STACK Play Continues to Draw Interest as E&P Operators Seek Sweet Spots, IHS Markit Says

Attractive economics at multiple pay zones entice drillers as
alternative to crowded Permian Basin

HOUSTON–(BUSINESS WIRE)–Despite the fact that the Oklahoma STACK oil and gas play is still
evolving and its total potential is undetermined, evidence thus far
indicates the play is delivering impressive results, leading operators
to commit significant 2017 CAPEX to its development, according to new
analysis from IHS
Markit (Nasdaq: INFO), a world leader in critical information,
analytics and solutions.

“The Oklahoma STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher
County) play is early in its development but wells have shown great
productivity,” said Imre Kugler, associate director, energy research at
IHS Markit and author of the IHS Markit Plays and Basins: Oklahoma
STACK analysis. “Questions still remain regarding potential across
various horizons; however, for operators with acreage and capital to
test the play, economic upside exists so the biggest six operators in
the play are on track to invest more than $2.5 billion during 2017.”

Whether the play will be a major contributor to domestic supply is still
undetermined, Kugler said. “To date, fewer than 1,000 wells have been
brought online in the liquids-rich STACK play, but estimated break-evens
for first quintile wells in the play are quite low and competitive with
top Permian plays. First quintile wells in the STACK for both short- and
long-laterals are estimated to break even under $30 per barrel.”

The early stage of the STACK play equates to some variance in well
performance as operators seek to optimize development. The spread
between first and second quintile wells is wider when compared with the
relatively more well-known Permian plays, with second quintile STACK
wells estimated to break even near $41 per barrel for longer laterals,
and $55 per barrel for shorter laterals, IHS Markit said.

“The Oklahoma STACK play is economic for many operators at current
prices and it offers multiple drilling targets due to its complex
geology, which is attractive for drillers seeking to leverage pads to
expand resources,” Kugler said. “While the play covers about one-fifth
the aerial extent of the Permian Basin, it is attractive to many
operators who find the Permian over-heated in terms of acreage
availability and cost of entry. The STACK and the Anadarko Basin offer
attractive investments, lower entry costs, and the potential for
economic returns, and the play is becoming a core focus for several
companies.”

The STACK play is located in the northern Anadarko Basin, the deepest
Phanerozoic basin on the North American craton. It contains more than
40,000 vertical feet of sediments that were deposited in a relatively
shallow-water, platform environment. Operators have identified as many
as 10 horizontal targets in the play, including the various
Mississippian formations, as well as Woodford, Hunton, and Oswego
reported formations. These formations have been most productive in
Oklahoma’s Kingfisher, Canadian, Dewey and Blaine Counties.

While a clear sweet spot has not been established, the most promising
region is the over-pressured Meramec area in southeastern Kingfisher and
adjacent areas of Blaine and Canadian counties, the IHS Markit report
noted. This area has higher average productivity and lacks lower
quintile wells.

Wells in northeast Kingfisher County are generally 7,000 feet deep or
less, where operators are targeting the shallower Oswego Formation.
Wells in the Kingfisher fairway in the southwest portion of the county
range from 7,000 feet to 8,500 feet, where the primary target is the
Meramec Formation. There is a steep subsurface drop-off into Blaine
County, noted the IHS Markit report, where operators target the Woodford
Formation, with depths quickly exceeding 10,000 feet. To the west of
Kingfisher County, the play deepens below 10,000 feet and liquids
content falls significantly—the western area wells produce dry gas or
wet gas, with very few oil-prone wells.

Main operators in the play include Devon Energy, Newfield Energy,
Marathon Oil, Chesapeake Energy, Continental Resources, Cimarex Energy,
Payrock Energy and Oklahoma Energy. Newfield is a play pioneer credited
with naming the play, and the company considers the STACK a core part of
its portfolio, as does Devon Energy.

In July 2017, Devon Energy Corp. announced it brought online a
“record-setting” Privott 17-H Meramec well in Kingfisher County that
achieved a “‘facility-constrained’ peak 24-hour rate of 6,000 barrels of
oil-equivalent (BOE) per day (50 percent oil).” Devon’s announcement
went on to say that, ”when compared against publicly available data in
the STACK, the 10,000 foot lateral Privott well achieved the highest
initial production rate of any well by a wide margin and is expected to
recover in excess of 2 million BOE over the life of the well.”

Devon also brought online four additional high-rate Meramec wells in the
core of the over-pressured oil window during the second quarter of 2017.
In aggregate, these four wells attained an average 30-day initial
production rate of 2,000 BOE per day. These well results were even more
impressive on a per-lateral-foot basis with average well productivity of
greater than 300 BOE per day per 1,000 feet of gross perforated interval.

According to the IHS Markit report, peak per-lateral foot productivity
in the STACK has made substantial improvements and is comparable to the
Eagle Ford shale play, both of which are closing in on Permian results.
The STACK peak-month productivity averaged above 110 BOE per day (20:1)
per 1,000 lateral feet in 2016.

“Drilling and completion trends in the STACK are leaning toward longer
laterals (10,000 feet) that now account for about 40 percent of new
wells and increased proppant (upward of 2,500 pounds per foot),” Kugler
said. “However, although some operators are still developing wells with
shorter laterals (4,500 foot) and less proppant, the estimated economics
appear to favor the longer laterals. The STACK story continues to
feature geographic and vertical expansion as Tapstone and others achieve
solid results westward, and operators are mentioning Oswego, Osage,
Hunton and other formations, compared with mostly Meramec mentions
during 2016.”

To speak with Imre Kugler, please contact Melissa Manning at [email protected].
For more information on the IHS Markit Plays and Basins: Oklahoma
STACK analysis, please contact [email protected].

About IHS Markit (www.ihsmarkit.com)

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[email protected]
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