S&P Global Platts – Brandon Evans – Continued production in Oklahoma’s SCOOP-STACK demonstrates how tracking rig count to determine production swings has become an antiquated practice in some US shale plays.
For example, crude oil production in the SCOOP-STACK recently reached annual highs of 488,000 b/d even as rigs continued to plummet to new lows last seen in 2016, according to data from S&P Global Platts Analytics. While producers had more than 100 rigs deployed across the SCOOP-STACK in January, the number has since fallen to 44 rigs.
While tracking rigs used to be a key indication of where basin production would head in the near-term future, SCOOP-STACK operators have proven in 2019 this modeling concept does not always apply, as the region is expected to grow production 7% year over year, while rigs are down 60% year to date from the most recent drilling data by Enverus.
While well-level efficiencies are a key contributor toward understanding production gains or losses, the SCOOP-STACK happened to significantly draw from their built drilled-but-uncompleted (DUC) inventory for most of 2019, as heightened completion activity from January through May helped operators grow production.
Moving into 2020, Platts Analytics is forecasting the SCOOP-STACK to grow by 11,000 b/d, as operators such as Continental Resources and Encana can continue to utilize the same strategy developed in 2019.
FINANCIAL DISCIPLINE
In the new shale world of financial discipline, operators who choose to go back and complete previously drilled wells and take off rigs can reduce their drilling and exploration capital expenditure budgets by 25% to 30%. This allows them to focus more on optimizing their completion design to get the most possible production out of each hydraulically fractured well.
To more accurately track production swings, fundamentals such as completions, DUC movement, initial production (IP) rates and declining history provide a more accurate approach. Moving forward, rigs should mainly be used to analyze operator future development interest but not near-term production swings.
The SCOOP-STACK currently has 679 DUC wells, according to the US Energy Information Administration. Only the Permian, Eagle Ford and Bakken have greater DUC inventory across US shale plays.
Interestingly, while the strategy of completing DUC wells helped producers grow oil production in 2019, natural gas produced in the play dropped precipitously over the year as the rig count fell. Gas production fell by more than 500 MMcf/d from January through December, from 3.8 Bcf/d to 3.3 Bcf/d, according to Platts Analytics. It is forecast to decline approximately 100 MMcf/d in 2020.
