WOODWARD — FourPoint Energy LLC has drilling rigs ready to go in western Oklahoma, waiting to drill horizontal wells up to two miles long beginning Nov. 1 when the new state law allowing the process becomes effective.
“This is going to be huge for us,” Scott Goodwin Jr., FourPoint’s vice president of operations, said at the Tri-State Oil and Gas Convention in Woodward on Thursday.
“Longer laterals make more wells economic. This adds jobs. This adds investment. It will mean big things for you in the future.”
Denver-based FourPoint is one of the largest operators in the western Anadarko Basin, which covers much of western Oklahoma and the Texas Panhandle. The company for years has been drilling long horizontal wells in Texas, but its horizontal reach has been limited to one mile east of the border.
“Long laterals is the future of onshore U.S. drilling,” Goodwin said. “If you look at the popular basins, all are drilling longer laterals.”
Goodwin pointed out that more than 90 percent of the wells drilled in west Texas’ Midland Basin and in North Dakota’s Bakken Shale are horizontal wells more than a mile long. Other popular basins also have seen strong increases in long laterals in recent years. Meanwhile, fewer than 10 percent of the Anadarko Basin wells are more than a mile long.
FourPoint has identified about 40,000 drilling locations in its acreage, but Goodwin said about 3,500 are economical with today’s prices and technology.
“Long laterals unlock those economic locations,” he said.
Led by larger industry players, oil and natural gas industry leaders for years have lobbied Oklahoma lawmakers and regulators to allow them to drill longer wells, which typically double production for a marginal increase in the price of the wells, boosting wells’ profits.
But while many of the larger producers have described long laterals as a financial windfall for companies, mineral owners and state coffers, some smaller vertical well operators warned that the process could damage their existing wells. Oklahoma’s force-pooling laws add to the concerns because the state is one of the few places where a minority interest owner can force other interest owners to participate in an expensive well or sell their stake.
The Legislature in 2011 allowed up to two-mile laterals in shale rock layers, but Senate Bill 867 passed earlier this year extends the ability to all producing rock layers.
Sen. Bryce Marlatt, R-Woodward, helped lead the effort to advance the long laterals bill though the legislature.
“I think it’s historic legislation that will allow more investment in Oklahoma,” Marlatt said Thursday. “A tremendous amount of our revenue comes from the oil and gas investment in the state, the things companies are doing. The jobs, the sales tax revenues, the hotel and motel tax, it all comes off the drilling rig.”
While the legislation allows long laterals, it leaves it to the Oklahoma Corporation Commission to work out the details and to protect the smaller producers.
“I think it’s good legislation,” Corporation Commissioner Dana Murphy said Thursday.
“It was a challenging decision for them to make, and I respect what they had to deal with to do it,” Murphy said. “I do think the devil is in the details, and I do think there will have to be some adjustments. But I agree that you’re going to see formations that have been discovered are now going to be able to be developed with longer laterals. I think that will be especially good news for western Oklahoma.”
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About Oklahoma Minerals Founder GIB KNIGHT
Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.