The low price environment of 2015 has depressed drilling activity across U.S. onshore plays. Rig counts have fallen substantially, with many plays seeing a reduction of more than 50% over 2014 levels.

The Woodford Shale has continued to draw interest and investment, however, despite the year-long downturn. Rig counts in the Cana-Woodford region, encompassing the Scoop and Stack areas, have averaged 38 throughout 2015, a bump up from the 2014 average of 34. When compared with neighboring shale plays such as the Eagle Ford, where the average rig count fell nearly 50% from 213 in 2014 to 124 through October 2015, activity in the Woodford remains robust amid difficult economics. High IP rates, which allow relatively quick recovery of investment costs, and liquids-rich hydrocarbon potential have captured both attention and dollars as top operators continue to drive delineation in the play.

When compared with neighboring shale plays such as the Eagle Ford, activity in the Woodford remains robust amid difficult economics.

Exploration activity in the Woodford has shifted from largely delineated gassy areas of the Arkoma and Ardmore basins to focus on the Scoop (South-Central Oklahoma Oil Province) and Stack (Sooner Trend, Anadarko [Basin], Canadian [and] Kingfisher [counties]) regions, and this trend is intensifying amid tightening budgets. The Scoop is attracting continued investment from Continental Resources Inc. due to the area’s liquids-rich hydrocarbon resources and favorable initial production (IP) rates. While Continental has reduced 2015 capital expenditures by approximately 50%, the reduction was primarily realized through spending cuts made across its Bakken assets, favoring investment in the Scoop over alternative plays.

Utilizing improved drilling and completion techniques in the Scoop, Continental currently averages IP rates of about 1,500 boe/d. Test wells operated by the company have produced favorable IP rates from efficient lateral lengths, including the Dungan 1-31-30XH and Kellner 1-19H wells. In second-quarter 2015, Continental reported IP rates from the Dungan of 1,754 boe/d with 50% oil, and from the Kellner of 2,816 boe/d. These wells used lateral lengths of 6,031 and 4,971 feet, respectively. Higher IP rates create more favorable economics in the short term, allowing operators to recover investment much more quickly.

Similarly, Newfield has led delineation with an increased focus on its assets in the Stack region of the Woodford, in the Anadarko Basin. The company has boosted its activity and spending in the Stack, seeking more favorable economics as well as HBP (held by production) status across its Woodford leases by 2016. Newfield increased drilling activity in second-half 2015 and allocated an additional $200 million in capex to the Anadarko Basin, going against the industry trend of cutting activity and investment dollars to withstand the downturn.

In addition to achieving 100% HBP status, Newfield is also being driven by strong returns to continue to funnel investment to the Stack. Is has used longer lateral lengths of nearly 10,000 feet and more concentrated fracture stages to maximize production rates in the oil-prone play. The most recent well results reported by the operator have produced about 75% oil and an internal rate of return in second-quarter 2015 of 35%.

Economic success in the play has been propelled by improvements made in drilling techniques, including expanding lateral lengths to nearly 10,000 feet, the resulting record-setting IP rates, as well as modest average well costs hovering between $7 million and $8 million. Additionally, the high NGL and oil composition of the hydrocarbon stream in the Scoop and Stack regions is increasing returns for operators in the play.

Despite the challenging economics across the sector, opportunities in the Woodford continue to draw capital investment in place of alternative investments for several operators, including Continental Resources and Newfield, which have allocated more than $700 million and $840 million, respectively, to the play for 2015, as updated in third-quarter reports.

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