In the Mississippian play in northern Oklahoma, the question of early mover SandRidge Energy Corp. was not whether it would find oil in place--more than 7,800 historical vertical wells proved that point--but what to do with the vast amounts of water produced with the oil, according to chairman and chief executive Tom Ward.

"Dealing with the water was as important as finding the oil," he said, speaking to attendees of IHS' NAPE Conference in Houston about challenges in the play. "If you can dispose of the water effectively, you can make a play of it."

While the top of the Mississippian formation produces oil relatively water-free, he said, the company chose instead to target the meat of the zone and encourage water production. It pumps 40,000 barrels of water into eight to 10 hydraulic fracture stages, resulting in a water cut of 90%. It then skims the oil off the top.

SandRidge uses a series of saltwater-disposal wells, each surrounded by a cluster of 10 producing wells, to dispose of the water. Some 30,000 barrels of fluid per day per disposal well are pumped into the Arbuckle formation, a 1,500-foot thick zone immediately beneath the Mississippian with tremendous porosity. The disposal wells cost $2 million including gathering lines, adding about $200,000 to each producing well.

"The key to the play was having high enough oil prices to deal with moving a lot of water. At today's oil price, you can make tremendous rates of return."

That return: about 94%. SandRidge's Mississippian wells, producing a 50-50 mix of gas and oil, cost $3 million with an estimated ultimate recovery (EUR) of 409,000 barrels of oil equivalent (BOE). Peak 30-day rates have averaged 297 BOE over 92 wells.

"We anticipate having a higher relative EUR over time," he said.

Another key to the success of the play, he emphasized, is vertical well control—SandRidge's 900,000 acres in the play are situated around vertical wells that have shown production during a 30-year history.

The company is now producing almost 16,000 BOE from the play and has 4,000 potential locations remaining. It has 15 rigs running in the play, but "we're going to have to move our rig count up to 24 to 30 rigs to be able to have a 10-year inventory."

SandRidge's other focal area is the Central Basin Platform of the Permian Basin, another low-risk, shallow conventional oil target core to its mission. At 7,000-foot total depth, an average well costs $760,000. A typical San Andres initial production rate is 65 barrels per day.

"We have the least expensive horizontal wells of any play," he said. "We don't fine the most oil; we just find it more efficiently."

Ward said the company purposefully avoids plays that require high horsepower drilling and fracing equipment.

"We think the more horsepower it takes to frac a well, the more ultimate risk there is to that type curve. We like to deal with more permeable rock that has a history of production and uses a lower horsepower that keeps our costs low."

Unlike the heavy duty 15,000-horsepower rigs drilling other resource plays, all of SandRidge's equipment clocks in under 10,000 horsepower--and just 5,500 horsepower in the Permian. "When you get into high-horsepower rigs and fracing equipment, your costs move up in lockstep with the efficiencies you're gaining. The easiest way to keep costs lower is to drill carbonate reservoirs."

A side benefit is an ample supply, as the rigs and crews are not in demand by the high-horsepower plays.

The company holds 200,000 acres here with 7,900 locations. It has a 92% internal rate of return. "We don't think any play in the U.S. today is better on a rate-of-return basis," he said. SandRidge has 82% of its production locked into those rates through hedges.

Contact the author, Steve Toon, at stoon@hartenergy.com.

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