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Scoop-Stack Playbook 2017

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SCOOP/STACK: OVERVIEW 6 | September 2017 | "Historically, we have not seen much Meramec activity in Canadian," Chandra added. "The activity has been more Woodford-focused, particularly in the southern part of the county. Continued suc- cess and de-risking of this area could drive upside to expectations and valuations for the 'Wedge' or 'Merge,' where the Stack meets the Scoop." Van Slyke cautioned that the results to date in the Merge are still quite variable, and it remains an exploratory effort. The Nor'easter Operators are also pushing into new areas of the Stack in northeast Kingfisher County. Smaller E&P compa- nies such as Alta Mesa Holdings LP, Chaparral Energy Inc., Gastar Exploration Inc. and Longfellow Energy, in addition to Chesapeake, are leading the charge. "We haven't given the area much credit in the past," the WoodMac analysts said. "But we're seeing more Osage development here rather than Meramec. The issue is we've heard of high water cuts, as high as 20 parts water per one part oil. Because it's nor- mally pressured, it can also have lower IP rates than in the core area." Alta Mesa has reported well costs as low as $3 million, however, so the wells can be economic. Smaller operators that didn't have capital to drill during the downturn are beginning to delin- eate their acreage here. "It's an interesting area to watch," Van Slyke said. "It is oilier than the core of the Stack." A recent report from Tudor, Pickering, Holt & Co. (TPH) looked at Stack economics and suggested operators' expansion efforts to the northeast are paying off through liquids yields and oil gravity. "We see properties comparable to the Scoop given a similar shift from the dry gas to the oil win- dow as E&P [companies] move northeast across the basin," TPH analysts said in a May report. "Our analysis shows Stack oil gravity is about 46 to 60 degrees in the liquids-rich window and about 41 to 45 [degrees] in the oil and volatile oil windows. "Additionally, we've mapped out oil-to-gas ratio shifts across the basin over time, from which we note that GORs [gas-oil ratios] decline to a lesser degree of magnitude in the liquids-rich window relative to the wet gas and condensate windows in the Scoop." Chesapeake Energy is targeting an additional for- mation, the Oswego, in the northeast. "We don't see it as repeatable," Van Slyke said. "But Chesapeake has found some hot spots with high oil ratios and high IP rates in Kingfisher County." Northwest Stack Producers are also probing the wet gas Stack to the northwest. Previously, based on 2013 and 2014 activity, the WoodMac analysts had assigned the area an $85 breakeven price. Reduced well costs have brought that number down significantly. Tapstone Energy, backed by Tom Ward, is lead- ing development and delineation in this hot spot. The company announced one well with a hefty IP-30 of 2,600 boe/d (62% oil)—"but it's a small cluster of oilier activity surrounded by gas wells," Van Slyke said. "Is it a sweet spot, or can it be rep- licated? I think many operators agree that it would be tough to replicate that level of success; the aver- age producer is about 800 boe/d at 30% oil. How- ever, there is thick Mississippian reservoir pay in this area (greater than 1,000 ft), and it could be a matter of finding the right landing zone." Devon is also testing in the northwest extension. The big five At press time, Devon had just two rigs in the northwest but planned to run 10 in the Stack overall by year-end 2017 as it puts $750 million to work. In its first-quarter earnings call it reported that initial spacing pilots were successful, and the Meramec was moving to full field development. In the Stack's eastern core, Devon is ramping Woodford development and said extended-reach laterals are on the horizon. By year-end it expected to boost Stack production by 35%, exiting with about 120,000 boe/d. Its current type curve is for 5,000-ft laterals. The Privott well was drilled with a 10,000-ft lateral and landed in the upper Meramec interval near Devon's Showboat development, which will spud in the third quarter, according to the compa- ny's press release. "A key contributor to this pro- lific well result was an improvement in stimulated rock volume around the wellbore through a new proprietary completion design," the release added.

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