Companies Increase Oklahoma Production While Cutting Rigs
August 10, 2019
Oil and natural gas production in Oklahoma is likely to continue increasing even as companies further cut the number of rigs active in the state.
That’s the message from the state’s most active publicly traded producers, detailed over the past two weeks in the companies’ second-quarter earnings reports.
The result likely will continue a trend the state’s oil patch experienced over the past year if actions follow company forecasts.
Oil production continued to grow over the past year even as the number of rigs active in the state tumbled by 36% and the rig count in the state’s Cana Woodford Basin — which includes the STACK and SCOOP fields — is off 29% from one year ago, according to Baker Hughes.
The trend is led by a continued focus on cutting costs; while at the same time, improved technology and processes have allowed companies to produce more with less — less drilling and completion time, less money, fewer rigs and fewer employees.
It’s a mixed report for the economies of Oklahoma and the state’s oil patch. The reduction allows companies to stay in business and stay active in the state. But the reduced rig count means fewer employees and lower spending levels.
Devon Energy Corp. executives this week boosted the company’s forecast for 2019 oil production, saying the company now is expected to recover 19% more oil in 2019 than in 2018.
At the same time, company officials said they are cutting capital expenditures in Oklahoma in the second half of the year by $50 million. Instead, they are redirecting that money to the company's operations in New Mexico and Wyoming.
Officials blamed the shift on continued low natural gas prices, saying they are moving spending from Oklahoma, which has relatively high natural gas production percentages, to its operations with more oil content.
“Because the projects in the STACK tend to have a higher natural gas and natural gas liquids content than our other project areas in the Delaware and Powder River basins, we have reallocated some capital away from the STACK to those other plays," CEO Dave Hager said in this week’s earnings announcement.
“But we still are investing in the STACK play, albeit at a somewhat lower level than we had anticipated.”
Continental Resources officials said the company plans to bring online another 30 wells in south-central Oklahoma’s Project Springboard by the end of this year. They also announced plans to drop seven rigs running the area by the end of the year, citing efficiency gains.
Continental Resources’ second-quarter total production in Oklahoma increased 10% from the year-ago quarter, while its oil production in the state surged 35% from year-ago levels.
Encana Corp. earlier this year bought Newfield Exploration, which was one of the most active drillers in Oklahoma’s STACK play. Encana immediately announced plans to slash by midyear the company’s rig count in the state to four from 10.
Company officials this week said the effort cut the company's STACK drilling cost to $6.5 million per well, down $1.4 million from Newfield’s average cost in the area in 2018.
While cutting costs and the rig count, Encana boosted production in the area by 31% from the first quarter 2019. The company completed 89 STACK wells in the Meramack rock layer this year, including 18 of Encana’s modern cube-style wells.