Press Release

Chaparral Energy

New Play Concept ‘Merges’ SCOOP And STACK Trends In Red-Hot Central Oklahoma

Originally published by The American Oil & Gas Reporter: May 2018
By Al Pickett Special Correspondent

Long before it became the 46th state, oil was discovered in Oklahoma by happenstance while drilling for brine to extract salt–a fundamental necessity of pioneer life. Nearly 160 years later, the Sooner State’s geology continues to surprise with a rich endowment of the oil and gas essential to the modern American way of life.

In fact, oil production and proved reserves have both more than doubled since 2005, when oil output had ebbed to its lowest level since shortly after Oklahoma was granted statehood in 1907. By year-end 2016, U.S. Energy Information Administration estimates indicate, Oklahoma had grown proved oil reserves to 1.7 billion barrels and proved gas reserves to 34.4 trillion cubic feet, 70 and 220 percent higher, respectively, than in 1981.

Pure STACK Player
Chaparral Energy Inc. is all about the STACK play. Since emerging from Chapter 11 financial restructuring in March 2017, the company has sold its enhanced oil recovery business and transitioned to a pure-play STACK producer. Its operations focus solely on its 117,000-acre lease position in the play that includes the Merge area where the STACK and SCOOP intersect.

“We consider STACK all one oil fairway down into the SCOOP in Grady County,” says Chaparral Chief Executive Officer K. Earl Reynolds. “The two plays come together in Canadian County.”

The company has 23,000 acres in Canadian County, most held by production. Reynolds adds that Chaparral has 32,000 net acres in the STACK core in Kingfisher County, and the company also is expanding the play to the northeast into Garfield County, where it has another 40,000 acres. Chaparral’s remaining acreage is in an expansion of the play to the west and northwest into Blaine, Dewey, Major and Woodward counties.

 

Figure 3: Update on Chaparral Energy's Recent Meramec and Osage Operated Wells

Chaparral has drilled 85 wells in the STACK over the past five years, but Reynolds says that number will grow significantly as it ramps up drilling activity (Figure 3). “We plan to drill 61 wells this year,” he states. “We are running three rigs, primarily in Canadian and Garfield counties and a bit in Kingfisher County. These wells are in the normal pressured black oil window, and have an outstanding rate of return.”

With more than 3,000 potential drilling locations identified on its leasehold and a low-operating cost structure, Reynolds says Chaparral is positioned to generate significant returns over the long term with its focus on the STACK strategy. “This is a new and prosperous time in Chaparral’s storied history,” he says. “We are a rapidly growing company.

“With a deep inventory of STACK locations and robust well economics, our wells generate 40 to 80 percent internal rates of return. We have grown at a 79 percent clip over the past two years,” he says. “Our vision, however, is to not only to be a pure STACK player, but to be the lowest-cost producer in the play.”

Joint Venture
Chaparral entered into a 30-well joint venture agreement with Bayou City Energy in late 2017. In total, the company says the program consists of 17 wells in Canadian County and the rest in Garfield County. Bayou City will invest $100 million and pay 100 percent of the well costs. Chaparral will receive a 15 percent upfront working interest. Once the program’s return requirements are met (14 of the wells have been drilled, with four wells now on production), Chaparral will have a 75 percent working interest in the 30 wells. In addition, the company retains all acreage and reserves outside the wellbore.

Reynolds points out that the Woodford formation is the source rock for the STACK’s multiple pay zones. “You learn what rocks work,” he states. “These plays expand until you hit the boundary.”

As Chaparral first began delineating its position in Kingfisher County, Reynolds says, the company drilled single, two- and four-well pads, depending on the target and where they were in the cycle of delineation.

“We are not at full-scale development yet, but when we get there, we will drill eight-16 wells a pad and potentially up to the 21-well pads,” he says. “We have drilled in every quadrant of our acreage. When we get into full-section development, there probably will be as many as 16 wells a section.”

He maintains that most of the company’s 117,000 surface acres have stacked-pay potential in the Oswego, Meramec, Osage and Woodford formations. To date, Chaparral has drilled 20 wells in the Oswego.

Reynolds also notes that technology has evolved as the company continues to develop its leasehold. For example, he says Chaparral has gone from 15 to 30 stages per one-mile lateral and has increased proppant loading from 300 to 2,500 pounds a linear foot in the Meramec. Reynolds adds that the company also is using cutting-edge chemicals as part of its fracture fluid to get good diversion.

Overall, Chaparral continues to focus on one-mile laterals, although it has tried a 1.5-mile lateral and has participated in a well that employed a two-mile lateral. Reynolds says well costs for a one-mile lateral are $4 million in Garfield and Kingfisher counties and about $4.5 million in Canadian County.

As a result of its continuous optimization of its drilling and completion designs, Reynolds reports that Chaparral has increased EURs by 20 percent in its Meramec wells in Kingfisher County and 40 percent in the Osage in Garfield County.