SCOOP-STACK operators eye continued drilling, production push into 2022

The outlook for natural gas production from Oklahoma's SCOOP-STACK basin looks increasingly bullish heading into the New Year as rig deployments and drilling activity there continue to accelerate.

Since early July, operators in the central Oklahoma basin have expanded their drilling footprint by some 60%, adding 15 rigs to a total of 40 in the week ended Dec. 15, data published by Enverus shows.

Recently deployed rigs are already having a bottom-line impact.

In November, the number of monthly wells drilled in the Anadarko Basin surged to 47, up from just 30 in July, recent data published by the US Energy Information Administration shows.

The EIA data – which references a more broadly defined Anadarko producing region in the Texas Panhandle, central and western Oklahoma – also reveals an uptick in well completions which totaled 57 in November, up from an average 50 completions per month in June, July and August.

As drilling activity accelerates, the Anadarko Basin's inventory of drilled-but-uncompleted wells, or DUCs, has declined steadily, falling to 789 in November, down from over 840 in July, EIA data shows.

The rebound in SCOOP-STACK and Anadarko drilling, which is now comparable with pre-pandemic levels, should come as no surprise. In December, half-cycle, post-tax internal rates of return, are now estimated at 30% in the SCOOP and about 27% in the STACK, according to a recent IRRs analysis from S&P Global Platts Analytics.

Production outlook

In December, gas production in the SCOOP-STACK is on a tear. Earlier this month, output surged to levels above 4 Bcf/d, marking its highest since late January 2020.

Strong pricing in the Midcontinent forward gas market makes it increasingly likely that the boom in Oklahoma drilling and production will continue next year. At NGPL Midcontinent, the region's benchmark upstream hub, the full-year 2022 forward curve is now priced at an average $3.60/MMBtu. For first-quarter 2022, the average is even higher at nearly $4/MMBtu, S&P Global Platts data shows.

On recent third-quarter earnings calls, some of the SCOOP-STACK's most prominent producers have offered field-level insights on the basin's potential for growth heading into 2022.

On a Nov. 3 conference call with investors and analysts, executives at Devon Energy highlighted the company's performance in Oklahoma this year saying that its acreage there would likely merit a larger share of its capital expenditures next year.

Devon currently operates a two-rig program across its concentrated 300,000 net-acre position in a liquids-rich window that straddles portions of Canadian, Blaine and Kingfisher County. As part of a $100 million drilling-carry partnership with Dow, the company has funded some 30 new wells there this year.

On its own third-quarter conference call, executives at Gulfport Energy also underscored the company's performance in the SCOOP, noting a 12% increase in production from the prior quarter.

"The wells are declining at a slower rate than budgeted," Tim Cutt, CEO and Chairman of Gulfport said on the Nov. 3 call. "We attribute the improved performance to wider spacing and longer laterals and are pleased with the results to date," he said.

Gulfport operates a one-rig program across its 73,000 net acre position in the SCOOP. The company plans to conclude 2021 with 11 gross wells turned to sales for the year.