The mystery of the SCOOP in Oklahoma

Housley Carr for RBN Energy

A number of independent crude producers are testing the potential of the South Central Oklahoma Oil Province—SCOOP, for short—and liking what they see. It is too early to know if SCOOP, a legacy shale play in the southern reaches of the Woodford Shale, will be the next big thing in US crude production. But SCOOP seems to have a lot going for it geology-wise and, as an added bonus, the play is located near several pipelines and the Cushing, OK oil pipeline and storage hub. Today we take a look at SCOOP, its potential for crude production, and the E&P companies chasing the dream.

As its name suggests, SCOOP, a southern extension of the Woodford Shale’s Cana play, encompasses 3,300 square miles of south-central Oklahoma; most of the interest is within four counties: Stephens, Grady, Garvin and Carter. To date, shale plays in Oklahoma as a whole have yielded mostly natural gas, but production of oil and condensates has been rising, in part because of increasing exploration and production (E&P) activity in wet gas and oil fairways in SCOOP. The mystery that a handful of E&P companies are trying to solve is whether their initial, largely positive results in SCOOP are fortunate flukes or a sign that they are really onto something.

The oil-rich rock in SCOOP (formed during the Devonian age, about 360 million years ago, just like the Bakken) is within bands up to 400 feet thick at depths of 8,000 to 16,000 feet. The total organic carbon by weight (TOC) is 6 to 15% (the Bakken is 5% to 20%, and the Eagle Ford 3% to 7%); the porosity of 5 to 8% is in line with both the Bakken and the Eagle Ford; and the original oil in place (OOIP), according to SCOOP pioneer Continental Resources, is 45 to 70 MMb/section (a “section” is 640 acres). The Bakken’s OOIP is 60 to 70 MMb/section, and the Eagle Ford’s is less than 50. (SCOOP’s geographic reach is only one-quarter that of the Bakken’s 13,000 square miles, though, and two-thirds that of the Eagle Ford’s 5,000 square miles.). The considerable depth of the play’s oil-rich layer makes for relatively costly wells: $9 million, on average, for a standard one-mile lateral--again, according to Continental, whose aim is to reduce the cost of that basis well to $8.7 million by the end of this year. 

There are four E&P companies with extensive leaseholds in SCOOP and exploration activity underway there: Continental Resources, Marathon Oil, Newfield Exploration, and Eagle Rock Energy Partners. Continental, a leading crude producer in the Bakken (it has 1.2 million net acres leased there, and produced 97.5 MBOE/d in the first quarter of 2014), is out front in SCOOP as well. It started exploration in SCOOP in 2012, and now has a working interest in more than 185 wells across its 425,000 net acres of leasehold in the play (according to a May presentation by the company; see Figure #1). 

Figure #1

Source: Continental Resources presentation

Continental (who’s marketing savvy CEO Harold Hamm, by the way, came up with the SCOOP moniker in the first place) is the largest producer in SCOOP; its wells produced 29.4 MBOE/d in the first quarter, up 24% from fourth quarter of 2013 and up 106% from the first quarter of last year, and Continental reports that the well economics in SCOOP are on par with those in the Bakken. The company’s focus for now is on exploration, on delineating (especially in the southern third of the play; again see Figure #1), and on drilling extended laterals (1.5 to two miles) to maximize well productivity. (Continent expects to operate an average of about 18 wells through 2014, about half of which will be extended lateral wells.) It expects to know more by the end of the third quarter on just how much potential SCOOP has, but puts its proven reserves in SCOOP at 215 MMBOE.

Marathon Oil, meanwhile, has 100,000 net acres of leasehold in SCOOP, and is planning 20 wells in the play this year. Like Continental, Marathon has seen very positive initial production rates. Newfield Exploration has 75,000 net acres and 38 wells in SCOOP—23 in wet gas parts of the play and 15 in the oil parts; it is producing about 35 MBOE/d in the Woodford Shale as a whole, including SCOOP and STACK (the latter of which, located just north of SCOOP, is named for the way several layers of oil-rich rock—including the Woodford Shale--are stacked atop each other in parts of the Anadarko Basin; see Figure #2).

Figure #2

Source: Newfield Exploration

Eagle Rock Energy Partners is a smaller player in SCOOP but, like its larger brethren there, is a believer in the play’s potential. Eagle Rock recently completed its fourth SCOOP well, which has a 6,100-foot lateral and whose 16-stage frac completion occurred in March. The well cost $9.6 million to drill, according to Eagle Rock, and has averaged 350 Bbl/d (and over 2 MMcfe/d of gas and condensate) ever since. That’s a big well.  Eagle Rock now is at work on a follow-up well in SCOOP with a 5,300-foot lateral and an expected cost of $10 million. The company also has worked with Continental and Newfield on wells they operate. Four recently drilled Newfield wells in which Eagle Rocks holds a 36% working interest cost about $13.5 million each to complete; each well is expected to produce 1.8 MMBbl over time.

At this point it is still unclear whether SCOOP will turn out to be the next Bakken or a more modest oil producer. One analyst a few months ago predicted SCOOP production would top out at only 100 Mb/d in 2018—substantial, but one-tenth of Bakken production. SCOOP enthusiasts see production at several times that 100 Mb/d prediction in a few years. It is also difficult to know just when production activity will ramp up at a “new” play like SCOOP. Last fall we looked into the growing interest among oil producers in the Tuscaloosa Marine Shale (TMS) in central Louisiana and southwestern Mississippi (see Frackin’ the Shale in Tuscaloosa—Is TMS the Next Bakken?). Interest in TMS continues, but it has yet to emerge as a major production region. What is clear, though, is that there will be other Bakkens and Eagle Fords in our future, and that exploration companies are using what they have learned in those and other active plays tohelp them more quickly assess the potential of areas like SCOOP.

 

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