JIM REDDEN, Contributing Editor
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| Devon drilling location within its Cana-Woodford holdings. Courtesy of Devon Energy |
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Heralded as the pioneering operator of the Bakken shale, Continental Resources is staking what may become a similar claim in the liquids-rich, southernmost portion of Oklahoma’s Woodford shale.
Over just 18 months, Continental quietly embarked on a leasing binge, targeting the atypically thick oil and condensate-rich fairways of the Cana-Woodford shale to the west. By the end of September, it increased its leasehold in the area by well over 80%. The firm has amassed a 197,340 net-acre position, with 20% held by production (HBP) in an area that takes in some of Oklahoma’s premier oil producing counties, including Carter, Stephens, Garvin and Grady, Fig. 1.
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| Fig. 1. Currently delineated Can-Woodford SCOOP play. Source: Continental Resources |
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The covert leasing program and results of a 35-well campaign all culminated in late November, when Continental unveiled its South Central Oklahoma Oil Province, or SCOOP, described as “one of the thickest and best quality shale reservoirs in the country.” When the wraps came off, so did the bullish comparisons to a certain play, much farther north, where Continental dominantes.
“It’s a huge opportunity for the company and another great asset for us, because we’re looking at an asset with rates of return that compete head-to-head with what we’re doing in the Bakken,” said Jack Stark, Continental’s senior vice president of exploration. Stark’s comments came as SCOOP was formally introduced at the operator’s third-quarter investor day in its hometown of Oklahoma City. “With that as another opportunity, which is, widespread and repeatable, it gives us one more avenue of growth that has as much upside potential as we see in the Bakken,” added Stark.
Continental says that the aftermath of its contemporary Oklahoma Land Rush is an emerging “high-impact resource play” that could deliver up to 1.8 billion boe of net reserves with verified per-well decline rates slower than typical shale producers. This year, the operator will put its money where its convictions are, earmarking about 15% of its $3.4 billion of its capital expenditure budget to SCOOP, Warren Henry, vice president of investor relations, told World Oil last month.
“We have six rigs there right now, basically holding acreage in the upper part of the play in Grady County,” he said. “By the end of 2013, we plan to have 17 operated rigs working there. We will average 12 rigs during the year, with most of the build-up from June on.”
SHIFTING GEARS
Continental holds 330,540 net acres across the entire Woodford Shale that underlies most of Oklahoma, where the firm has sourced some of the state’s largest fields. In its relative infancy as a reservoir rock, the Woodford’s diverse production mix ranges from the mostly gassy Arkoma basin in the east to the expansive oil and condensate-prone Anadarko Basin in the west. As the Anadarko covers all of highly productive Canadian County, the western portion is commonly known as the Cana-Woodford, home to some of the world’s deepest horizontal shale wells.
Reflecting the national trend, Oklahoma operators are traversing the state, redeploying rigs from the dry gas Arkoma to the other end, to target its liquids-rich reservoirs. Like Continental, fellow Oklahoma independent Devon Energy, a pioneer in the gas-rich Barnett shale, has established what it describes as a “significant first-mover position” in the Cana-Woodford, Fig. 2. Devon claims to hold about 50% of the most prospective acreage in the play, with more than 11 Tcfe of risked resource potential and 5,400 risked locations remaining to be drilled.
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| Fig. 2. Oklahoma geological provinces. Source: University of Oklahoma from “Seismic Characterization of the Woodford shale in the Anadarko Basin” |
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Nevertheless, the activity redistribution from gas to liquids was not enough to stave off a modest year-over-year decline in rig count. According to Baker Hughes, Oklahoma averaged 187 active drilling rigs as of Dec. 14, compared to a monthly average of 197 working rigs the previous December. Of those, 74 are drilling in the 10 counties that comprise the state’s portion of the Mississippi Lime play, according to the Dec. 10 issue of the Powell Shale Digest.
Meanwhile, API’s most recent estimate had Oklahoma operators producing oil and condensate at a 225,000-bpd clip as of September. That tally compares to 211,000 bopd during the like month of 2011, when an aggregate 77 MMbbl of conventional and unconventional liquids were produced for the year, according to the U.S. Energy Information Administration (EIA). Carter, Stephens, Garvin and Grady counties, combined, accounted for just under 16 MMbbl of that yearly total, based on the most recent data available from the Oklahoma Corporation Commission (OCC), the state’s chief regulator.
As for gas, despite low prices and a shift to liquids, production increased to 5.55 Bcfd as of September, compared to the average 4.24 Bcfd the OCC recorded for all of 2011.
COMPLEX GEOLOGICAL SETTING
While mostly Late Devonian, the Oklahoma Woodford shale ranges from Middle Devonian to Early Mississippian. Similar in age and depositional environment to the Barnett, the Woodford, contains significant healed natural fractures with ultra-low permeability. The U.S. Geological Survey (USGS) in 2010 assessed undiscovered resources for the Devonian Woodford shale to be about 16 Tcf of gas, and as much as 400 MMbbl of recoverable oil and another 250 MMbbl of condensate.
The Woodford unconformably overlies the Devonian Misener Sandstone of the Hunton Group and unconformably underlies the Sycamore limestone. The shale is far more complex than Devonian black shales found elsewhere in North America. Halliburton says the complexity is especially evident in southern Oklahoma, where the Woodford comprises alternating bands of chert-like amorphous silica and silica-rich shale. These chert-like silica bands vary from 7 in. thick, separated by 1-2 in. of shale, to 1 in. of silica for every 2 ft or more of shale.
The Cana-Woodford, which is part of the greater Late Devonian/Early Mississippian-age Woodford formation in the Anadarko basin, is an overpressured reservoir with shales ranging from 100 to 300 ft thick. Continental, however, says shale groups within its SCOOP prospect are as thick as 400 ft. According to the Oklahoma Geological Survey, condensate within the Anadarko Woodford has a thermal maturity of 1.1% to 1.5% Ro, with oil and condensate gravities ranging from 45° to 65°API.
Covering an aggregate 3,300 sq mi, the core Woodford shale area is significantly smaller than either the Bakken or the South Texas Eagle Ford, Fig. 3. However, the considerably thicker shales offset its smaller area. Further, total organic content (TOC) of between 6% and 12% falls roughly between the Bakken at 5% to 20% and the 3% to 7% TOC in the Eagle Ford.
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| Fig. 3. A Continental drilling location in its Cana-Woodford shale holdings. Courtesy of Continental Resources |
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Ironically, wells in the liquids-rich sector of the Woodford are considerably deeper, and hence much more expensive, than their dry gas counterparts in the Arkoma-Woodford. According to Devon and others, the Cana-Woodford holds the world’s deepest commercial horizontal wells with drilled depths from11,500 ft to 14,500 ft TVD (16,700 ft–19,000 ft MD). The core of the play is a 1,000-sq-mi area covering Blaine, Caddo, Canadian, and Grady counties, about 50 mi west of Oklahoma City.
THE FULL SCOOP
With more than 600 sq mi derisked, SCOOP is a “broad and repeatable liquids fairway,” according to Continental, which has established a five-year objective to triple company-wide oil production to 3,000,000 boed by 2017. Based on 80-acre spacing, Continental fully expects SCOOP to generate 40% to 55% rates of return at $3.50-Mcf gas and $90-bbl oil. “This is a huge resource play and that’s its similarity to the Bakken,” Henry said.
During the investor presentation that introduced SCOOP, the operator also released results of eight wells drilled last year. Three wells completed in the oil zone recorded production averaging 666 boepd with up to 86% liquid content, while five wells drilled in the condensate fairway averaged around 1,393 boepd with liquid content averaging slightly less than 58%.
However, Henry said that what sets SCOOP wells apart from other shale plays is not necessarily the initial production rates, but their potential to produce long term. “We’re not overly focused on initial production rates,” he said. “What’s really important about these wells is they have a slower decline rate than you normally expect from a resource play. Some of these wells may only look OK now, but if you wait six to nine months they’re going to look very strong.”
Henry said the play likely will be developed in at least two levels, with what could be “decades” of drilling ahead. “What we talked about in our investor’s day is that if we get this down to 160-acre spacing in our acreage on one level, with four wells per section, that would imply we have acreage that would support 1,114 wells. “If we’re on two levels with four wells per section in two zones, we would double that, and then if you go down to 80-acre spacing on two levels, you double it again,” he said.
While its upside is being compared favorably to the Bakken, the play closely mirrors the Eagle Ford in the manner in which it unfolded. There, then-Petrohawk went about nabbing acreage completely under the radar and went on to essentially spawn one of the nation’s most prolific shale plays. The birth of SCOOP began with a challenge and went on to defy generally accepted knowledge of reservoir characteristics.
Henry explains, “What happened with SCOOP is that we were drilling in the Anadarko Woodford play where we had the northwest area up in Dewey and Blain counties and the southeastern Cana, primarily in Grady County. As gas prices came down in the last 18 months, we challenged our southern team and said, ‘your rates of return are declining because of the low gas prices, so either you have to get well costs down or else come up with another model to compete for capital in this play or we have to put it in the Bakken.’”
“At that point, they shifted down to the southeast Cana and started holding acreage and drilling in what we call Andy’s Neck in the southern part of Grady County. They started producing these huge wells with a lot of oil and condensate and got their rates of return up to where they were competitive with the Bakken.”
“So, we kept working there,” he continued. “We looked farther south, but thought that as the basin gets deeper and hotter, it should get gassier, but that’s not the way the deposition occurred. It has just been pushed down since it was deposited. Therefore, we thought the oil part of the play would keep going south into these deeper areas. We studied cores and other wells drilled there and that’s where we came up with the concept of SCOOP. We discovered this play kept running farther south toward the Texas border.”
REIGNING IN COSTS
Constructing wells in the Cana-Woodford is not for the economically faint-of-heart. The depth and geological complexity generate a host of drilling problems that can increase costs. According to Halliburton, “the area’s complex structural geology and mineralogy have broad implications, affecting drilling and completion design, production practices and, ultimately, well productivity. In particular, they can have a major impact on horizontal drilling, slowing penetration rates and quickly destroying bits.”
Henry said that individual SCOOP wells cost $9.5 to $10 million, which Continental hopes to reduce by up to $500,000/well by the end of this year. “This is very challenging drilling and very expensive. We think that’s why we don’t have more competition there,” he said. As with the Bakken, Continental believes it has a leg up by being able to leverage technologies it employs in North Dakota to the SCOOP play. “Technology transfer is a huge part of this business right now,” Stark said.
One of the first cost-cutting technology applications that Continental will apply in SCOOP to control costs is drilling longer laterals, which in Oklahoma requires state approval. While nearly all the SCOOP wells are being drilled with 4,200-to-4,500-ft laterals, Henry said the independent drilled two wells in the northwest quadrant of the Cana-Woodford in Blaine County, with 7,500 to 9,000-ft laterals. “You have to have a permit in Oklahoma to hold multiple spacing units with one well, but we think that’s a very good application for SCOOP,” he said.
Cimarex Energy has been able to improve drilling efficiencies and lower well costs. The operator is conducting infill drilling in its core holdings, which nets (Fig. 4) an 18% to 40% return. Cimarex and others also cite state passage of House Bill 1909 in early 2011 that authorized multi-unit drilling and spurred the use of multi-well pad drilling. Continental’s Henry said the operator eventually plans to bring to SCOOP its multi-well Eco-Pad drilling technology that has cut well costs in the Bakken.
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| Fig. 4. Cimarex in-fill drilling row looking west to east. Courtesy of Cimarex Corp. |
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The downhole difficulties, however, do not end once a Cana-Woodford well is drilled. Schlumberger said one of the major issues in developing the Anadarko-Woodford is the fracing of intervals that are 200 to 300-ft thick or more. “Using the vertical pilot hole data, Schlumberger experts are starting to understand how much interval can be contacted with conventional thin fluids, and whether viscous fluid jobs can be more effective in stimulating the entire interval and retaining adequate connectivity back to the horizontal wellbore,” the company said. Schlumberger added its HiWAY flow-channel hydraulic fracing technology is applicable when it is determined that viscous fluids would deliver greater coverage of the vertical fracturing interval.
OPERATOR ACTIVITY
While Continental and its SCOOP prospect have garnered most of the attention, a handful of other companies have a mixed bag of 2013 Woodford development plans.
Newfield Exploration holds 300,000 net acres in the Woodford Shale, including the 125,000 net acres it acquired during 2012 in the liquids-rich Cana Woodford. Last year, the Woodlands, Texas, independent operated a four-to-five-rig drilling program in the play and says it will continue an aggressive assessment of its oily lease position this year.
Devon Energy said by the third quarter, liquids production from its Cana-Woodford shale properties had increased 64%, year-on-year, to 13,000 bpd. Devon holds 254,000 net acres in the Anadarko basin and 38,000 net acres in the gas-rich Arkoma Woodford, nearly all of which is held by production.
Last year, the operator shifted most of its drilling activity to the liquids-rich Cana-Woodford, where it operates more than 450 producing wells and, as part of an aggressive drilling program planned for the oily Woodford, announced plans to drill around 200 more wells last year.
Devon said its Cana-Woodford acreage holds an estimated 328 MMboe, of which 36% comprise liquids. Net production in the second quarter amounted to 47 MMboed, which included 30% liquids.
Marathon Oil holds 220,000 net acres in its Oklahoma Resource basin, of which 163,000 are in the core Woodford play. As of the third quarter, the operator produced about 12,000 boed from its Anadarko Woodford holdings. Marathon’s Woodford acreage holds 600 MMboe of net 2P resource.
Earlier, Marathon said it would drill between 45 and 55 wells by the beginning of this year, using three to six rigs. However, last year the operator cut back significantly in the Anadarko basin, where it was operating two rigs at year’s end. Regardless, Marathon planned to maintain its end-of-2012 production rate of 10,000 boed from its Woodford holdings.
Cimarex Energy holds 120,000 net acres in the Cana-Woodford, of which 75,000 are in the liquids-rich fairway, with nearly all of it HBP. The 2012 focus was core infill development in the liquids play where Cimarex operated or participated in 115 infill wells. Second-quarter output was 156 MMcfed, a 36% increase over the like period in 2011. The company says its Cana-Woodford holdings contain a total risked resource of 4,360 Bcfe.
ExxonMobil’s XTO subsidiary in April acquired 58,400 net acres in the oily Texoma Woodford from Chesapeake Energy, adding to the more than 170,000 net acres it previously held in the Woodford oil fairway. XTO said early last year that it had tripled its year-over-year position in the liquids-rich Woodford with assets that hold the potential to produce 70,000 boed.
PetroQuest Energy holds 46,000 net acres in the Woodford shale, where it reports 176 Bcfe of proved reserves. As part of its Woodford shale joint development agreement (JDA), PetroQuest drilled 78 horizontal wells in the play and this year plans to drill 20 net wells in the liquids-rich portion. Last year, the JDA amended its Phase 2 drilling initiative to provide for development in both the Woodford and the Mississippi Lime plays.
NEW BREATH OF LIFE
The horizontal Woodford shale play, in particular the Cana-Woodford, is breathing new life into Oklahoma’s aging oil and gas production network that has long been dominated by conventional output, including more than a few stripper wells. With many of the state’s most mature conventional assets in decline, the ever-increasing use of horizontal wellbores and the rapid emergence of the Woodford shale as a reservoir rock, promises to expand production appreciably as the play further unfolds. 
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