Are Drilling Operations Still Profitable in This Weak Economic Climate?

Even with current oil prices, Southern Oklahoma is showing no signs of slowing down. With budgets being cut and production scaling back across the county, Southern and Central Oklahoma is gaining new attention because of its very productive plays.
Many of these new plays are what are referred to as stacked plays. This means that in the same surface area there could be several different plays at varying depths beneath the surface. These newer areas cover a large part of Southern and Central Oklahoma and have specific names usually given by the company that is first to develop them. Some of the most promising and already well produced plays are Continental’s SCOOP, Unit’s SOHOT, Newfield’s STACK and Devon’s Cana field. While these companies are the largest and or earliest producers of these areas, there are still numerous outfits operating in these areas.
Brandon Mikael, US Lower 48 upstream analyst from Wood Makenzie said, “the early Oklahoma development is only beginning to attract attention from other parts of the county. The mid-continent doesn’t get enough credit for the stacked position we see in other parts of the county. It is an undervalued and under-appreciated market.”
drillingThis area has historically been produced for oil as the price of oil has been much greater than the price of gas in the last eight years. Mikael said that oil is not the only resource in the area “This is very much a gas play. It’s a very wet, heavy gas play, but it’s very much a gas play.” While much of this area has been great for oil producers, some sections may not be as profitable. Mikael said, “Some of the best rock is in a narrow band of the SCOOP mostly controlled by Continental Resources. It’s still too early to know, however, how much of the region will be as successful. I think there are great economics here, this is some of the best rock we have drilled in the lower 48. You should believe the hype. The only question is how long it will run.”
By looking at the drilling report it seems that the SCOOP and STACK plays are sustainable to drill even at today’s prices. Drilling and completions costs are continuing to come down as service companies see the demand decreasing in other areas. It seems that many producers are cutting costs by disbanding drilling in riskier areas and focusing on Oklahoma for the time being as it has proved reserves and a lot of potential.