Patience may very well become a virtue for Granite Wash aficionados during the next two years.

The oil and gas industry has done a good job of reducing well costs in the wake of soft natural gas and natural gas liquids (NGL) prices, keeping drilling activity stable — and an exceptional job unraveling the secrets of an intricate resource-like, but non-resource-style play, thanks to cutting-edge geologic sleuthing.

But persistently low commodity prices are prompting Granite Wash operators to pause in 2013 rather than emulate the Rolling Stones’ musical hero, Jumpin' Jack Flash (It’s a gas, gas, gas).

Fortunately, what the commodity price gods take away in gas prices, they are providing for with oil prices, which means operators are turning attention to shallower oil-prone targets in the Cleveland and Tonkawa sands versus the gassier Granite Wash objectives that dominated industry focus prior to the natural gas price collapse in 2012.

The Granite Wash should not be viewed a standard unconventional resource-style play. Rather, it is a series of tight sands with successful exploitation a result of careful, local geoscience. Granite Wash wells tend to be sandier and produce higher production results than shale plays, but can contain copious amounts of water and suffer from steep decline rates. Results vary depending on local depositional characteristics, and the stimulus behind activity during the last three years involves the adaptation of unconventional drilling techniques, including horizontal drilling and multi-stage fracturing, coupled with better bits and improved geo-steering, guided by 3D seismic and thorough petro-physics.

Current Granite Wash rig count is in the low 50s with another 35 rigs targeting shallower, oilier zones up hole.

The Granite Wash takes its name from the clastics ? wash ? shed from the Amarillo Uplift in Pennsylvanian and Permian times. Those clastics eroded out of volcanic mountains, crossed a short shelf and dropped over the shelf edge into the deeper Anadarko Basin, commingling as interlocking submarine fans. The Granite Wash proper is located over the deepest part of the Anadarko Basin, and stretches in a 10- to 20-mile band roughly 130 miles southeasterly from the Texas Panhandle into Oklahoma. The Granite Wash features as many as 11 producing zones and 3,500 feet of hydrocarbon-bearing stratigraphic column.

Shallower, oilier formations above the Granite Wash provide an overall stacked column that can contain up to 15 objectives.

Making sense of the stacked formation play has been a challenge. Unlike many shales, the Granite Wash has no outcrops to study. Nomenclature has been a steep barrier to understanding the extent of the regional play. Most fields were viewed in isolation, often named for various locales on the Anadarko shelf in Kansas.

Consequently, operator news releases trumpet results in the Marmaton Wash, Skinner Wash, Cottage Grove Wash, Canyon Wash, Checkerboard Wash, Colony Wash, and Hogshooter Wash or, in Texas, Buffalo Wallow, Frye Ranch or Stiles Ranch — to name just a few. In reality, those names describe different formations within the Granite Wash.

To overcome the confusion, the industry embarked on a coordinated effort beginning in 2010 to develop a regional profile. It was not easy. Multiple logging companies had used a variety of techniques over 60 years, making regional correlation challenging. The presence of radioactive grains muddied information from gamma-ray logs. However, the industry worked its way through 30,000 well logs and a multi-year effort to normalize disparate data points and nomenclature, producing a regional stratigraphic framework that allowed the industry to understand the play’s idiosyncracies.

Instead of isolated regional plays, it turned out the Granite Wash was a stacked play that featured as many as 15 distinct reservoirs at depths from 11,000 to 15,400 feet.

Operators are currently using technology to cope in a low commodity price environment and sustain momentum in the Granite Wash. Apache Corp. has adopted new drill-bit technology and cementing procedures to shorten the drilling cycle while shifting to natural gas to fuel drilling rigs. The company has also embarked on a pad drilling program. Those efforts lowered well costs by 15% versus one year ago, saving $1.3 to $2 million per well, depending on depth.

Apache currently operates 120 Granite Wash wells, and results from the first six Granite Wash wells drilled in 2013 averaged 1,495 barrels of oil equivalent per day (Boepd) on a 30-day initial production rate (IP), including 291 barrels of oil, 469 barrels of NGLs, and 4.4 million cubic feet of natural gas per day (MMcfpd). The company has 350,000 net acres prospective for the Granite Wash and estimates it has 22,800 Granite Wash locations in its inventory.

Apache will drill 100 Granite Wash wells in 2013 as part of a regional $1.6 billion capital spending program, and will also drill a similar number of wells in the shallower, oilier Tonkawa Sands. Apache is reporting 30-day IPs of 428 barrels of oil, 103 barrels of NGLs, and 789,000 cubic feet of natural gas per day on the first seven Tonkawa wells the company drilled in 2013 and will double its Tonkawa rig count to 10 units by July on 318,000 net acres.

Apache doubled its Anadarko Basin acreage with the January 2012 $2.85 billion purchase of 254,000 net acres from Cordillera Energy Partners and was running 20 rigs in the Anadarko Basin in May 2013, down from 25 previously.

Tulsa-based Unit Corp. is drilling $5.3 million Granite Wash wells targeting estimated ultimate recoveries (EURs) of 3.5 to 4 Bcfe, with 46% of the production stream characterized as liquids. Unit plans to spend $140 million drilling 30 Granite Wash wells in 2013, and will increase its rig count from four units currently to six by yearend.

Regional variability makes the Granite Wash a tough target. During its first-quarter 2013 earnings conference call, Chesapeake Granite Wash Trust reported reservoir permeability and sand body continuity was higher than expected. That geologic circumstance generated lower reservoir pressures, smaller IP rates, and fewer recoverable reserves in new wells, prompting the trust to reduce its reserve volume by 11.5 million barrels of oil equivalent (MMBoe) at the end of 2012 with 10.4 MMboe of that tied to the reservoir quality issue. The trust is evaluating reducing its wells per section from four to three in response.

Chesapeake Energy Corp. is expanding its drilling objectives in the Anadarko Basin to oilier formations with three rigs at work in the Tonkawa Sands, six in the Cleveland sands, and up to 11 targeting various Granite Wash objectives, including a two- to four-rig program focusing on the Hogshooter Wash portion of the Granite Wash.

Houston-based Linn Energy also encountered lower than expected results from the Hogshooter Granite Wash interval in Wheeler County, Texas, where the company has drilled 28 horizontal wells. The MLP is shifting 2013 drilling efforts east across the Oklahoma border. Of the four initial Hogshooter Wash wells drilled near Mayfield, Okla., Linn reported average IP rates of 3,375 Boepd, 72% liquids. Linn is running four rigs in the Oklahoma portion of the Granite Wash in 2013 and will drill 60 Hogshooter locations on its 25,000 net acres. The company will spend less capital in 2013 because of a lower average working interest in its Oklahoma acreage, but is evaluating shallower oil-bearing intervals as part of its Oklahoma Hogshooter effort. Meanwhile, Linn is temporarily suspending its Granite Wash program in Wheeler County, Texas, while it re-evaluates geologic data from the area.

Elsewhere, Newfield Exploration Inc. is experimenting with stacked horizontal laterals in the Granite Wash targeting the Marmaton Redford, and Cherokee Wash intervals.

The mature nature of the play means that new entrants must rely on acquisitions to participate in the play. The interest is there. Over the last 60 days, two deals totaled more than $1 billion. Midstates Petroleum Corp. acquired 140,000 net acres, including 8,000 Boepd in production and 36.4 MMboe in proved reserves, from privately held, Tulsa-based Panther Energy Co. LLC for $620 million in cash.

Upon closing, the transaction will expand Midstates’ Anadarko Basin presence with acreage prospective for the Cleveland and Marmaton in the Texas Panhandle, and the Cottage Grove Wash and Tonkawa Sands horizontal play in western Oklahoma. Midstates plans to run six rigs by the end of the summer and drill 40 to 45 wells in 2013. Midstates projects well costs at $3 million. Typical wells are 6,000 to 8,000 feet in depth with a 4,000-foot horizontal lateral and 16 frac stages with EURs of 150 to 200 Mboe.

Similarly, EnerVest Ltd. purchased the Anadarko Basin assets of Tulsa-based Laredo Petroleum Holdings Inc. for $438 million in cash. The deal, which is expected to close in August, involves 104,000 net acres and reserves of 1.5 MMboe and 162 Bcf in natural gas.

Laredo had drilled 25 horizontal Granite Wash wells on its acreage in Roger Mills County, Okla., and Hemphill County, Texas. Laredo previously published well costs of $8 to $9.5 million per well, with 30-day IPs of 1,690 Boepd and EURs of 735 Mboe.

The Granite Wash and nearby Cleveland, Tonkawa and Marmaton plays have witnessed $5.3 billion in transactions since January 2011 with the $2.85 billion Apache/Cordillera transaction representing more than half of dollar volume. Other notable deals include Unit Corp.’s $617 million July 2012 purchase of Noble Energy Inc.’s 84,000 net Granite Wash and Marmaton acres in the Texas and Oklahoma panhandles, and Linn Energy LLC’s $600 million purchase of Plains Exploration & Production Co.’s 100,000 net acres in November 2011.

When natural gas prices improve, the future of the Granite Wash will be carved in stone.

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