On 18 September 2014, Continental Resources announced its latest discovery, a play it refers to as the Springer Shale. On that same day, Newfield Exploration disclosed a position in the nascent play through a regulatory filing with the US Securities & Exchange Commission.
The Springer Shale provides upside to the drilling inventory and reserves for operators active in drilling the Woodford in the South-Central Oklahoma Oil Province (SCOOP). Within five years Wood Mackenzie estimates Springer Shale oil production to be between 40-60 kb/d.
Beyond the Springer, these announcements by Continental and Newfield indicate that operators continue to gain traction and experience using new unconventional technologies to rekindle the region’s once-prolific fields. In addition to these two companies, Apache, Marathon, and EOG have been active of late in the southern Anadarko Basin.
The hybrid characteristics of the formation, in combination with Continental’s application of unconventional technologies to develop this field, contribute to our assessment of the Springer Shale as an example of the type of play that will become more common in the next wave of unconventional development - a period we have termed Unconventional 3.0.
Looking out over the next 12-24 months, Wood Mackenzie has identified four key signposts that will be indicative of the Springer Shale’s potential:
• Well repeatability – The 11 wells for which Continental released IP data are highly concentrated in a handful of sections, yet are coming online at widely variable rates; the ability to keep laterals within the target zone as well as take advantage of natural fracture patterns will be key to mastering the variable geology.
• Production decline rates (particularly oil) – Initial type curves for the Springer Shale indicate shallow decline rates relative to other shale and tight oil plays; closely monitoring production data will be necessary to confirm both the bullish 940 mboe EUR and 100%+ IRR that Continental claims.
• Fracture communication in density pilots – Some early Springer wells have been drilled and completed in sections with producing Woodford horizontals, and any prolonged production declines in those wells would reduce the ability to increase well inventory vertically through the stratigraphic column, removing a key value driver of Mid-Continent leasehold.
• Midstream infrastructure – While initial data suggests that the oil-weighted Springer type curve will not cause gas processing constraints, particularly when taking into consideration recently announced expansions from Enable and ONEOK, the expected crude and condensate production gives more upside to the potential wave of oil heading for Cushing from the Anadarko Basin flow to Cushing has the potential to lead to temporary price blow-outs similar to what has been seen lately in the Permian.