[Editor's note: A version of this story appears in the August 2019 edition of Oil and Gas Investor. Subscribe to the magazine here.]

How about some oil and gas love for the Powder River Basin?

After all, this stacked pay tight formation province was perennially branded as the last shale play standing. E&Ps have placed 2.6 million acres under lease split almost evenly between private and public companies. The largest privately held position—and the largest overall—is Anschutz Exploration Corp. with 460,000 acres straddling the Campbell/Johnson county line in Wyoming. Occidental Petroleum Corp. meanwhile picked up 445,000 acres via the Anadarko Petroleum Corp. acquisition. Anadarko previously planned two wells monthly in 2019 on a one-rig appraisal program.

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Public players include EOG Resources Inc. at 400,000 acres, Devon Energy Corp. at 330,000 acres and Chesapeake Energy Corp. at 248,000 acres. For 2019, Devon will double Powder River activity to four rigs and one frack crew and add a Niobrara Shale appraisal program to its tight sand effort. Devon’s Oklahoma City neighbor, Chesapeake Energy Corp., is transferring capital in 2019 from the Marcellus and Midcontinent to the Powder River Basin as it transitions a one-rig program from tight sand targets to source rock Niobrara Shale.

Operators drilled 188 horizontal wells in 2018 with 23 rigs active (activity equivalent to Ohio’s Utica Shale), primarily in Converse County, Wyo., with spillover into Campbell County, where higher GOR ratios reflect better thermal maturity. To date, operators have emphasized stacked pay tight sands charged from Upper Cretaceous source rocks. For example, 42% of horizontal wells since 2010 tested the regionally variable Shannon, Sussex, Parkman and Teapot formations, which are charged by the underlying Niobrara Shale. Another 37% of horizontal wells targeted the overpressured Frontier/Turner formations, which feature 30-day IPs of 2,000 barrels of oil equivalent per day (boe/d).

Operators had been appraising tight sand formations on the western side of the basin, where engineering efforts are focused on spacing and well density with the best wells producing more than 375,000 boe cumulative in the first year of production (oil cuts greater than 75%).

Now E&Ps are focusing on source rock. The Powder River’s Niobrara Shale is up to 500 feet thick, while the Mowry Shale is a thinner (120 feet) and shallower resource that features multiple landing zones in economically viable acreage in the basin’s eastern half.

E&Ps are witnessing a step change in well performance as they increase downhole intensity in the Niobrara and the Mowry. EOG, for example, reported four Mowry wells in 2018 with 30-day IPs above 2,050 boe/d on a 35% oil cut. Although one-year Mowry cumulative production averages less than 150,000 boe industrywide, EOG drilled the best well to date with nine-month cumulative production of more than 300,000 boe. The company told investors at the J.P. Morgan Energy Conference in June that the Mowry exhibits the highest profitability ratio in the company’s premium well inventory thanks to lower well costs. Overall, EOG is targeting 40 net Powder River completions in 2019, double its Bakken program.

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EOG Resources Powers Up In Powder River Basin

VIDEO: Anschutz Exploration, Ballard Petroleum At DUG Rockies 2019 Conference

While big name public companies are active, don’t overlook privately held firms. Anschutz Exploration will add a third rig to its program in fourth-quarter 2019 on the way to drilling and completing 28 wells this year. The company is moving from delineation and spacing tests in early 2019 to a well optimization focus by year-end. Anschutz is projecting 18,000 boe/d out of the Powder River by the first half of 2020, which would make the company cash-flow neutral.

Elsewhere, Ballard Petroleum Holdings LLC outlined a 40% drop in Turner and Parkman well costs following the 2014 peak for attendees at Hart Energy’s DUG Rockies conference in May. Drilling optimization saves the company $1 million per well on four-well pads as Ballard transitions to longer laterals at a completed well cost of $5.9 million for the Parkman Formation and $7.5 million for Turner wells.

Operators have established Turner/Frontier economics. To date, those tight sand formations have provided the low-hanging fruit in the Powder River. E&Ps are now seeking economically sustainable productivity from the region’s source rock shales through optimized completions, which increase productivity, while reducing well costs through water infrastructure and hydrocarbon takeaway capacity.

What’s not to like? The Powder River is joining the Permian, the Midcontinent and Appalachian as a top-tier tight formation stacked pay target.

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