Rising activity in the Oklahoma Resource Plays west of Oklahoma City is stimulating demand for well-stimulation services. Activity increases are occurring in the SCOOP and Meramec plays with regional rig count now approaching 70 units. The area is second only to the high-flying Permian Basin in terms of rig additions nationally in 2014 as the SCOOP, or South Central Oklahoma Oil Province, moves into the optimization phase of resource development.

Meanwhile operators continue to drill to capture acreage in the Meramec while pushing the exploration and delineation phase for the SCOOP south into the Arkoma Basin. Operators are also delineating the Springer Shale, the latest in a regional stacked play that features seven different stratigraphic targets.

The Granite Wash features more stacked targets further north, though activity has slowed in 2014 because of the large gas component to Granite Wash production.

The Oklahoma Resource Play encompasses the Granite Wash, Cana Woodford, Meramec, southern Mississippi Lime and the Woodford Shale, which remains the main target for operators. The region has seen recent acquisitions and divestiture activity as operators rebalance portfolios. QEP Resources Inc. (NYSE: QEP) divested $772 million in Granite Wash and Cana Woodford assets in the first half of 2014 as the company sought to develop a liquids rich portfolio. In late October, the U.S. division of SK E&S Co. Ltd., a South Korean utility, entered a $360 million joint venture, including a $270 million drilling carry, for a 49% stake in Continental Resources Inc.’s (NYSE: CLR) Cana Woodford acreage.

Hart Energy’s Market Intelligence program canvassed operators and service providers about Midcontinent activity in October, focusing specifically on western Oklahoma.

“We are seeing so much new activity in and around the SCOOP play,” a completions specialist told Hart Energy. “The STACK and Springer Shale are continuing to grow in activity as well. Oklahoma is getting very busy now.”

The SCOOP is approaching critical mass as a resource play with more than 400 wells drilled to date. Operators such as Continental Resources Inc. are moving into optimization of the play while others, such as Marathon Oil Corp. (NYSE: MRO) are still delineating the SCOOP and capturing acreage through drilling programs.

Continental has also been exploring density development pilot projects using multiple wells targeting different levels of the Woodford Shale for development. Those efforts, plus early attempts to delineate the Springer Shale and the Hunton Limestone, are providing the foundation for increased regional activity.

Survey participants say the addition of new pressure-pumping fleets has kept supply even with growing demand. Regional fleet capacity is greater than the 2.1 million in hydraulic horsepower (HHP) reported previously, but no hard numbers were available in this survey because of capacity additions were occurring in a dynamic market.

“I know we have added fleets and others are doing so as well, but I have no idea how to estimate the area fleet until the dust clears on all the new additions,” a top-tier service provider told surveyors.

Well metrics for the SCOOP include vertical depth of 10,850 feet and average horizontal length of 8,900 feet. Operators are averaging 35 stages per well at an injection rate of 69 barrels per minute with service companies completing five stages daily on a 24-hour schedule. The July 2014 survey found average lateral lengths of about 5,000 feet with 18 to 25 stages per well.

Operators are adapting enhanced completion techniques including longer laterals, more stages packed more closely together, and greater volumes of proppant. Stage spacing has narrowed from previous surveys and ranges between 200 feet to 285 feet, averaging 230 feet, which is similar to other tight formation oil plays as the era of enhanced completions takes root. This is a reduction in spacing from the July 2014 Midcontinent survey when respondents said stage spacing averaged 275 feet. Respondents in July 2014 also noted a pause in the move to enhanced completions since production results vs. standard completions were not materially different at the time. The July survey canvassed the Midcontinent in general whereas the current survey focused on the SCOOP.

Apparently the tide has turned when it comes to enhanced completions for operators in the Oklahoma Resource Play. Sand volume is growing, and has reached an average 8.7 million pounds per well among survey respondents, which means longer pump times per stage and more wear and tear on fluid ends. In July, sand use averaged 2.6 million pounds per well. Enhanced completions are also underway in the Cana Woodford.

Further north, metrics for Cleveland Sand wells average 7,650 feet vertically and 6,750 feet in horizontal length. Operators are using a coiled tubing frac with sliding sleeves for completion in the Cleveland Sand.

Pricing for well stimulation services ranges from $40,000 per stage on sliding sleeves completed with coil tubing fracs with two to three sliding sleeve stages replacing one larger stage in traditional plug and perf. Pricing for plug and perf is at $89,000, very close to the composite national average. All respondents in Hart Energy’s Market Intelligence survey expect pricing to increase through year-end.

“There is a wide variety in designs across the region and, based on design and proppant quantity, the cost can range from $50,000 to $100,000 in the play,” a top-tier service provider told Hart Energy.

Although plug and perf with large volumes of natural sand in a slickwater treatment is the most common strategy in the Midcontinent, a number of respondents anticipate gel use will grow over the next six months since operators have expressed openness to the boost in proppant distribution provided through gels.

Pad drilling is rising as operators move deeper into the optimization process with the average number reported as three wells per pad, similar to prior surveys. The difference in the fourth quarter 2014 is that pad drilling occupies a larger share of the horizontal market. However single well drilling is still common as operators move to capture acreage, both in the SCOOP and in the Meramec or STACK plays.

Zipper fracs represent 50% of horizontal completions among survey respondents, though there are still a large number of wells that were drilled to hold acreage and rigs have not yet returned to drill additional wells on the original pads. Zipper frac market share actually saw a slight erosion from 56% of horizontal completions among respondents in the July 2014 survey.

One in four drilling contractors reported rising activity levels versus the second quarter 2014 Hart Energy survey.

“When we spoke back in early July, I had a well I was going to drill and I called my contractor in May and told him we would need a rig in July,” one mid-tier operator told Hart Energy surveyors. “He said, ‘no problem, call me when you’re ready.’ I did, but the rig was not available. Things went in May from available to tight in July. For moderate depth and deeper wells, the inventory has gotten tighter, particularly for 1,500 horsepower rigs. I spoke with a large drilling company that said they have 18 of their 19 rigs on contract with big independents.”

Roughly half of fourth-quarter survey respondents noted that newbuild rigs are being ordered for the area to meet a rise in demand and the higher-spec requirements of extended length horizontal laterals. Rig rates for 1,500 horsepower newbuild units were cited at $27,000 per day. Existing higher spec 1,500 horsepower Tier 1 units are currently running $24,000 daily.

“Our day rate went up $100 from last quarter, but not a big difference,” one mid-tier operator said.

The survey was conducted during the recent pride drop for crude oil. The impact had not yet surfaced in the Midcontinent, but one drilling contractor sounded a note of caution.

“I think there is pressure to slow things down with oil prices where they are,” the mid-tier driller told Hart Energy surveyors. “However I’m hearing rumors that by 2016 companies are going to pick up natural gas drilling again out here.”

Contact the author, Richard Mason, at rmason@hartenergy.com