Learn why Shale Oil Companies are rushing to drill the Oklahoma STACK Play even at $30 dollars per barrel.
The bottom line is that the economic returns in the STACK Play remain very attractive. Devon Energy just spent 1.9 billion acquiring an additional 80,000 acres from Felix Energy in the STACK bringing their total up to 430,000 net surface acres. According to the Oil and Gas Financial Journal, Felix Energy was generating 40% first year returns even at $40 per barrel. Newfield Exploration announced last quarter that it has “shifted both people and capital resources to our highest return asset – the Anadarko Basin” with a priority of “holding our economically resilient STACK acreage by production.”
According to the Motley Fool “what makes the STACK so economically lucrative even at weaker oil and gas prices is the sheer volume of hydrocarbons packed in each section, which, when combined with strong pressure leads to wells that spew out robust initial production and that produce a lot of oil and gas over their lifetime. That combination leads to a faster initial payback and a long tail of income that pushes up the well return.
To put it another way, a producer will get more oil and gas out of a STACK well over its lifetime than from a well that costs a similar amount, but it is drilled into a reservoir with less concentrated hydrocarbons or less pressure. That makes a huge difference when it comes to drilling returns. Further, while the economics are compelling right now, they’ll get even better as commodity prices improve, which could lead to strong value creation in the future for drillers that have a position in the STACK.”
In addition to the superior production capability seen in the STACK, the operating and lift cost per barrel is much lower than other plays. The production taxes in Oklahoma range from 2% to 7% versus 11.5% in North Dakota. The cost of disposing formation water is significantly less due to wells in the STACK producing very little water. The transportation costs are also much lower due to the Cushing Facility being located in within very close proximity in the same state as the production. All factors that an investor should consider when deciding where to place capital in drilling investments suggest that the STACK has quietly become the most desirable area for investors to participate in.