Convey Energy Consultants

Energy publications have been focusing on the Permian Basin (TX) and STACK Play (OK) for the past year or so due to those two regions experiencing”profitability in current economic conditions.” But take one step into the courthouse lying within Tornado Alley, and you will see that something is also brewing in Grady County, OK.

Located 45 mins SW of Oklahoma City is Chickasha, OK, the county seat for Grady County.  The courthouse is no stranger to activity, as it was the epicenter of the SCOOP play back in 2012. The courthouse saw a slow down in activity when the STACK became the hot ticket in the State; but recent discoveries and new entries have once again brought companies back to the region.

 

 

 

 

 

 

At Convey Energy we are lucky to be located a minute away from the Grady/McClain County Line. Our office is located near the southern sections of 08N-05W. Over the past few months, activity around our office has drastically increased. I am sure some of the local residents are not too thrilled, but we find it fascinating. Nothing better then seeing the industry that you love right outside your windows.

 

Let’s take a deeper dive into Grady and see what all the fuss is about.  The tables and illustrations that follow cover 01/01/2017 – 07/31/2017:

POOLING APPS

Pooling applications in 2017 have been led by TPR Mid-Continent, LLC. TPR, or Travis Peak Resources, is an EnCap Investments backed group, headquartered in Austin, TX, formed in 2013. Some other new entries to the region include Nosley (Jones Energy), who in 2016 purchased 18,000 nma from SCOOP Energy, an American Energy Partners associate, and Rebellion Energy, LLC, a Natural Gas Partners backed company formed in 2015 and located in Tulsa, OK.

 

LEASING

So far, approximately 3,889 leases have been filed in Grady County. The majority of new leasing activity is focused in the northern part of the County, in 08N and 09N. As mentioned, SCOOP activity started around 2012. During that time, companies were focusing their efforts in the “Core”, which covered the townships of 3N – 6N, lying between the ranges of 05W and 06W. Today, in the core, you are likely to find more mineral buyers chasing acreage than non-op buyers.

 

Continental continues to lead the leasing efforts in Grady County. Continental’s leasing budget is impressive, as they have substantial leasing operations going on in multiple counties thorughout the State. Travis Peak Resources is a close 2nd, followed by Keystone Energy Partners, Arbuckle Resources, and Unit Petroleum.

 

PERMITS

 

99 Permits have been approved in Grady County. Linn Operating accounts for 15, followed by Apache Corporation and Continental Resources, Inc.

Linn and Citizen Energy recently announced the formation of Roan Resources, a pure MERGE/SCOOP/STACK play focused company. They plan to drill 58 gross wells in 2017, and will focus their drilling efforts in the Woodford and Mississippian formations.

 

WELL TRANSFERS

 

The most notable well transfer activity to date was between Vitruvian II Woodford, LLC and OKC based, Gulfport Energy.  The two companies entered into an agreement in late December, wherein Vitruvian sold approximately 85,000 net effective acres, covering Grady, Stephens, and Garvin, to Gulfport Energy for $1.85 billion. Gulfport has recently been publishing some impressive well results.

 

As you can see, there are a lot of great things happening in Grady County. If operators continue to drill high rate of return wells in the region, then you will likely see more acquisitions/mergers and Grady County Headlines across the top of your favorite energy publications.

If your company is active, or looking to become active in this region, please contact a member of our team to learn how our client-focused services can save you time and money.

CONVEY ENERGY CONSULTANTS

 

On June 16, 2017, James Bennett, the CEO of SandRidge, said that SandRidge will use their proceeds from legacy production in the Mississippi Lime to focus on the NW STACK. Read Full Interview

 

As leasehold prices have increased in the Core STACK, companies have been looking to the NW where they believe the formations show similar characteristics, and where they can acquire larger chunks of acreage for a fraction of the price.

Tapstone, which had personnel ties to SandRidge (Tom Ward), is also operating in the NW STACK. Read our overview of Tapstone

Legacy Production

We limited our research to wells who had a first production date between 01/01/2012 and present day. Based on this criteria, SandRidge appears to currently operate 1100+ wells. The majority of these wells are located in Alfalfa County, an area that Chesapeake and SandRidge targeted heavily, 5+ years ago.

 

Existing production from the Mississippi Lime region is expected to generate about $160 million in cash flow this year, according to Mr. Bennett. SandRidge will use these funds to invest in the counties of Major, Woodward, and Garfield, where they plan to target the Meramec and Osage Formations.

 

According to SandRidge’s Investor Presentation, Meramec IP, in their target region, has averaged 700-800 BOEPD.

 

As of June 2, 2017, SandRidge claims to own approximately 70,000 net acres in the NW STACK.

 

2017 Leases

For 2017 (based on the data available and subject to the counties reporting), SandRidge has acquired approximately 340 leases (via OGLs and Assignments).

 

 

2017 Oklahoma Corporation Commission Apps/Orders

Based on their current OCC filings, it appears that SandRidge is going to first focus their efforts in the townships of 20N and 21N in Woodward and Major County.

• Horizontal: 19
• Increased Density: 7
• Location Exceptions: 28
• Poolings: 11

 

2017 Permits

 

Mr. Bennett said SandRidge executives will be closely monitoring the oil prices and will reevaluate their drilling plans if they see a prolonged downtown and cannot generate a 20% Rate of Return. This morning, 06/22/2017, oil prices were around $42.73.

Convey Energy Consultants

Today kicked off Blanchard’s May Daze Festival, an annual weekend event that brings vendors, carnival games, food trucks, and theme park rides to main street in Blanchard, OK.

 

Keeping with the festive, fun spirit, we put together a quick overview of “Oklahoma Active Well Fun Facts.”

According to production data obtained online, Chesapeake Operating, LLC currently operates the most wells.

 

Stephens County has the most reported active wells, with 4,337. Six counties in the state of Oklahoma appear to not have any “active” wells . Side Note: McCurtain County, in the SE corner of Oklahoma, is known for its tree logging industry. When you go to the county clerk’s office, you will notice legal instruments related to tree farms rather than oil and gas activity.

 

 

The below map illustrates the number of active wells based on their main production type.

Notice how the above map is very similar to the Oil & Gas Fields Map produced by the Oklahoma Geological Survey.

 

Enjoy your weekend and be sure to check out next weeks, “Weekly Permit Update.”

Devon Energy is the focus of this weeks Oklahoma Operator Overview, following their Q1 2017 Financial and Operationlal Results. The full report can be downloaded here.

 

According to their report, Devon averaged 95,000 BOE/day during the first quarter of 2017; an 8% increase over Q4 2016. The increase was due to Devon bringing online >25 operated wells; with initial 30-day rate averaging 1,600 BOE/day. Devon’s Lease Operating Expense averaged $4.79 per BOE.

In the STACK Devon claims to have the largest leasehold position of any operator, with 430,000 Net Surface Acres. 80,000 acres was acquired from Felix Energy at the end of 2016. As you can see by the below map, Felix’s acreage was located in the core STACK, particularly the “over-pressured region.” Additionally, Felix transferred 119 wells to Devon, as reflected in the attached 1073 Form (Well Transfer Form).

Like most operators, Devon is targeting the Meramec and Woodford Formations. Devon is testing up to 8 wells per section. Due to the number of wells being proposed, mineral and leasehold prices have skyrocketed in the STACK.

We examined wells operated by Devon Energy that were completed after 01/01/2012. The analysis can be examined in the charts that follow. Please be advised that the data is based on production numbers reported by DrillingInfo. Additionally, some anomalies may exist in the reported averages since production data from recent wells may be limited and/or reflected as zero.

 

 

 

 

Devon’s president and CEO, Dave Hager stated, “Looking ahead, we expect our operational momentum to build as we continue to accelerate investment across our world-class U.S. drilling programs and shift to full-field development. With excellent first-quarter results in hand, we are firmly on track to achieve our multi-year growth targets and deliver peer-leading cash flow expansion.”

 

Today, April 28, 2017, Chaparral Energy (“Chaparral”) released their 2017 strategy. Chaparral also posted an updated Investor Presentation, which contains great details for those interested. In this week’s Oklahoma Operator News we take a brief look at Chaparral’s 2017 strategy.

On March 21, 2017, Chaparral emerged from Chapter 11 bankruptcy protection. They were able to eliminate approximately $100 million of annual interest expense. Chaparral plans to divest their Enhanced Oil Recovery Assets, and have hired CIBC Griffis & Small as an advisor. Chaparral plans to use the proceeds from their divestments to help fund their 2017 strategy.

Chaparral’s primary strategy in 2017 is to transition to a “Premium Pure-Play STACK Company.” Currently, Chaparral has 110,000 acres of STACK assets. This acreage covers the original STACK counties, Canadian and Kingfisher, as well as Blaine, Dewey, Woodward, Major, and Garfield.

 

 

 

 

 

Chaparral’s acreage is primarily located in the normal pressured region. Continental’s record well, the Angus Trust 1-4-33XH, is located in the over pressured region of Blaine county. However, Newfield’s record well, the Burgess 1H-18, is located in the normal pressured region, specifically in 15N-07W, Kingfisher County, OK.

 

 

 

 

The STACK play has been the source for recent Acquisition & Divestment activity. Chaparral’s presentation included a great overview of this activity. As you can see, there have been some significant transactions take place in 2016/2017. Due to the surrounding transactions, Chaparral can easily assign value to their acreage, and provide their investors with concrete evidence.

To date, Chaparral has filed 11 Permits to Drill, covering the counties of Canadian, Garfield, and Kingfisher. Chaparral claims to be the “lowest-cost Meramec Operator” (on a like-for-like basis, one mile laterals).

Chaparral’s CEO, Earl Reynold’s stated that “we are committed to maintaining a strong balance sheet and safely delivering solid repeatable results as we develop and expand our premier STACK position.” Based on the recent well results of other operators in the area, and the $/acre prices obtained by recent sellers, Chaparral appears to be positioning themselves for a strong future. This is great news for the state of Oklahoma whose budget and economy has suffered with the decline of oil and gas activity and layoffs.

Tapstone Energy (“Tapstone”) announced on April 13, 2017, plans to become publicly traded. Tapstone plans to raise up to $100 million in an IPO and trade on the NYSE under the ticker, “TE.” Compared to the other Oklahoma majors, like Continental, Sandridge, Chesapeake, Devon; Tapstone seems to fly under the radar when it comes to Oklahoma industry news and water cooler conversations.

Tapstone was founded by Tom Ward in 2013. Tom is known for his role as the former CEO of Sandridge and co-founder of Chesapeake Energy. Tom Ward also co-founded White Fields in 2000, a non-profit organization that cares for abused and neglected boys who are in the custody of the state of Oklahoma.

On January 1, 2017, Tom Ward stepped down as Tapstone’s CEO, and Steve Dixon, a former Chesapeake Energy executive, took his place.

Tapstone primarily operates in the NW STACK play, and have completed approximately 39 wells, the majority targeting the Mississippian (Meramec and Upper Osage) formation(s). Statewide, Tapstone operates approximately 449 active wells.

From March 2014 to April 2017, Tapstone took approximately 5,000 oil and gas leases; the majority located in Woodward county as illustrated in the map.  During the same time period, Tapstone applied for approximately 52 drilling permits.

The STACK is trending NW into the counties of Custer, Dewey, and Woodward. Tapstone claims to own the largest contiguous leasehold position in the NW STACK. It will be interesting to examine well results of the NW STACK as more operators enter the region; Continental, Newfield, and Devon have some recent activity. If the well results are similar to those being reported in Blaine, then Tapstone is going to be in a very favorable position.

3-27-2017: Newfield announced the results of a record STACK well, The Burgess 1H-18, which produced a 24-hr flowrate of 2,931 BOE/D and a 20-day average rate of 2,492 BOE/D.

“When compared against publicly available industry data, the Burgess achieved record 24-hour oil production per 1,000′ of gross perforated interval (1,000′ GPI) — or 417 barrels of oil per 1,000′ GPI. The well also had a record 20-day average oil production rate of 361 barrels per 1,000′ GPI. These rates are the highest oil production rates per 1,000′ GPI publicly reported to date in SCOOP and STACK” according to Newfield’s press release.

 

The Burgess 1H-18 is located in Section 07-15N-07W (BHL: 18-15N-07W), of Kingfisher County, OK; which is located in the southern portion of Kingfisher County.

 

 

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Newfield currently has approximately 400,000 net acres in the STACK/SCOOP. According to their 2017 Outlook Presentation, Newfield plans to average 10 rigs in the STACK/SCOOP.

 

Last November we looked at the top 50 wells in the STACK based on their first months oil production. Newfield had the most wells in the top 50 as the chart illustrates.

Read Full Article: Oklahoma STACK Play Ranks #1

 

 

From a mineral buying standpoint it appears that a lot of attention is given to those townships which are located in the “Over-Pressured Region” of the STACK, the majority of which is located in Blaine County, OK.  A lot of the recent attention is due to the results Continental reported on 12/13/2016, when they announced that the Angus Trust 1-4-33XH Well, located in 14N-12W, produced 4,642 BOE/D in a 24-hour test. To learn more about this well read our December “Oklahoma Operator News” article.

Mineral prices around 15N-07W, Kingfisher County, OK will now likely jump due to Newfield’s announcement. Leasing trends have been heading West into Dewey and Custer Counties. It will be interesting to see if companies continue moving West, or re-focus their attention on the Canadian/Kingfisher border in and around Newfield acreage.

I will admit, running title is not the most exciting sector of the oil and gas industry. Nevertheless, title is the foundation of exploration and production and it lays the groundwork for the many pieces that follow. Whether your company buys minerals, royalties, leases or operates wells, having accurate title reports that do not break your bank will determine if your operations are a boom or bust.

There are many title companies who provide exceptional services. However, if your company is experiencing any of these problems, it is an indication you may need to find another title company.

1.    Expensive Title Costs
The majority of title companies charge their clients on a day rate which does not vary too much between each company. Keep in mind, each additional work day adds up, and in no time, you can be looking at a large bill. If your title costs are consistently over budget you need to search for a more efficient company.

2.    Lack of Communication
You should be able to contact your title company at any time during the project and determine status, inquire about potential title issues, and be able to get an overall feel of the project. If your current title company cannot answer any of your questions you may be working with the wrong company.

3.    Missing Deadlines
Unless you are a major operator, you likely acquire interests in areas that have signs of future activity. Therefore, you have acquisition deadlines that must be met due to order dates or psa terms. Miss the deadline and you lose out on the acreage. If your current title company continuously misses deadlines, it might be time to look elsewhere.

4.    Title Errors
Another sign that you are working with the wrong title company is if you are constantly having to file correction instruments or finding out that reported nma is different than actual nma. Preparing title reports is a difficult task and there are many steps involved; therefore, mistakes are going to happen. Due to the costs associated with title mistakes, it is important that title agents understand the consequences of their errors and take the necessary steps to ensure that the same mistake does not happen twice.

5.    Office Not Located Near Your Buy Area
Each state has their own title laws and legal instruments. It is important to hire a company that is experienced in the state you are acquiring acreage. Many times, title agents think that just because they worked in Texas they can easily run title in Oklahoma (or vice versa), and often times this is not the case. Additionally, there are costs associated with travel; from mileage, hotels, to meal per diems. If your current company is not local, you may want to examine your travel expenses and compare costs with a local company.

If you are not completely satisfied with your current title company do not be afraid to switch. By partnering with a title company who provides efficient and accurate title reports, along with understanding your specific needs, you are better positioning yourself to acquire more acreage at lower costs.

Contact Convey Energy Consultants to learn about our title services. Our team would be honored to assist you on your next transaction(s). And if we do not feel like we can adequately meet your needs we will be happy to point you in the direction of a company who can. Our goal is to provide valuable services no matter the project size. Visit our services page to learn more about how we can help you and your company.

Continental Resources announced a record STACK Meramec Well on 12/13/2016. Since the announcement did not contain any visuals or location details wanted to reproduce with the well forms and well maps attached. Disclaimer: The content noted below was copied directly from Continental’s Press Release, and the CLR company maps are from their STACK/SCOOP Presentations.

OKLAHOMA CITY, Dec. 13, 2016 /PRNewswire/ — Continental Resources, Inc. (NYSE: CLR) (the “Company”) today announced a new Company record well in the over-pressured oil window of the Oklahoma STACK play.

 

The Angus Trust 1-4-33XH produced 4,642 barrels of oil equivalent (Boe) per day in a 24-hour test, comprised of 2,088 barrels of oil (Bo) and 15.3 million cubic feet (MMcf) of natural gas. During this initial production test, the Angus Trust flowed at 5,200 psi (pounds per square inch). Continental has a 78% working interest in the well.

The Angus Trust well is located immediately north of Continental’s Boden 1-15-10XH in south central Blaine County.

 

Permit to Drill Form (Download)

Notice of Spud Form (Download)

Surface Location: 04-14N-12W

Bottom Hole: 33-15N-12W

 

The Boden produced an initial 24-hour test rate of 3,508 Boe, 28% oil, at a flowing casing pressure of more than 5,000 psi. The Boden was Continental’s first completion in the condensate window of the over-pressured STACK. In just over a year, the Boden has produced 591,000 Boe, 26% oil. The Boden is currently producing 1,815 Boe per day, 22% oil, at a flowing casing pressure of 2,900 psi.

 

“The Angus Trust is another tremendous STACK Meramec well,” said Harold Hamm, Chairman and Chief Executive Officer. “Aside from being a Company record well, it further validates our perspective of the extent of the over-pressured oil window.”

The Company estimates its total completed well cost for the Angus Trust is $8.9 million, approximately 30% less than the Boden. The Angus Trust’s 9,500-foot lateral was completed in 36 stages, with 20 million pounds of white sand, similar to the Boden.

For more information, please visit www.CLR.com.