Exploration

Several SCOOP and STACK producers look to scale back operations in 2020

SCOOP STACK

S&P Global PlattsMultiple operators in the SCOOP/STACK look to cut capital expenditures and oil and gas production volumes in 2020 as rig counts have plummeted across the Oklahoma plays over the past year.

Most recently, Riviera Resources said in its fourth-quarter earnings report that it currently has no plans to drill any new wells during 2020 barring an uptick in natural gas and crude prices.

“We have judiciously invested capital and in 2019 we drilled two wells in North Louisiana with expected internal rates of return in excess of 100% and six northwest STACK wells with good results,” Riviera CEO David Rottino said during the company’s Q4 2019 earnings report on Monday. “During the fourth quarter of 2019 we did not drill any wells and do not plan to drill any wells in the first quarter of 2020. However, we remain encouraged by the reliability and results of development locations in the Ruston field and may drill up to four additional wells later in 2020 depending on commodity prices.”

After a plummet from more than 110 rigs in early 2019 to just over 40 by early 2020, rig count in Oklahoma’s SCOOP/STACK play have finally appeared to stabilize. However, the loss of 70% of its active rigs will affect the basin’s future production, according to S&P Global Platts Analytics.

Scoop Stack forecast

While rigs plummeted to all-time lows in 2019, operators were able to make substantial well efficiency increases, raising production 20% in the first 90 days compared with output from wells in 2018. With a production response from drilling at a three- to four-month lag, sharpening decline-curve profiles will not provide a strong base for the SCOOP-STACK.

Wells brought into production in 2018 on average lost 76% of their initial production after the first year, meaning more and more new wells will have to continue coming online to stabilize production, according to Platts Analytics. This must be accounted for after watching rigs fall in the region, as without new wells available to come online, the basin will likely enter a decline on this weak base production.

Platts Analytics has forecast the region will lose 50,000 b/d of production by the end of 2022, with little reason to anticipate upside. Gas production is projected to fall to 3.18 Bcf/d in the SCOOP/STACK by the end of 2021. Production in the plays peaked at 4.21 Bcf/d in June 2019, but has steadily declined every month since due to slower drilling activity.

Most majors look to cut activity in the SCOOP/STACK plays in 2020. Following Ovintiv’s acquisition of Newfield Exploration’s SCOOP/STACK assets, Ovintiv is focused on reducing well costs and bringing online wells that can provide the best returns for shareholders in 2020, as many of their investors do not want to be associated with the challenging play.

Marathon rigs in the play peaked at eight in 2019, but have since trimmed that figure down to three rigs in 2020. However, Marathon does have a modest number of drilled-but-uncompleted wells, about 25, according to Platts Analytics, which could provide enough inventory for the company to grow production with fewer rigs in 2020.

And although the Permian remains the main focus of ExxonMobil’s US onshore development in 2020, the company has deployed three more rigs to the SCOOP/STACK this year, bringing its total to five as it potentially looks to achieve some growth in its 1.1 million acres spread throughout the SCOOP and STACK.

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