Oklahoma is poised to cash in from the ongoing U.S. oil boom, according to one of the nation’s foremost experts on the topic.
Continental Resources Inc. CEO Harold Hamm said tax incentives meant to encourage horizontal drilling have done their job, as Oklahoma’s oil production is steadily increasing.
Oklahoma produced 388,000 barrels of oil a day in March, marking its highest output in 25 years, according to the U.S. Energy Information Administration
That is up 17 percent over March of last year, 49 percent over March 2012 and 80 percent over March 2010.
“That’s the whole horizontal drilling story right there,” said Warren Henry, Continental’s vice president of research and policy.
Hamm said it took some time for drillers to learn the best techniques for horizontal drilling in Oklahoma, but they now are applying those methods in more than a dozen different resources plays around the state. He estimated that many more remain to be explored.
He said he is pleased state lawmakers adopted a gross production tax proposal little changed from the plan put forth by Hamm and two other Oklahoma City energy leaders, Devon Energy Corp. Executive Chairman Larry Nichols and Chesapeake Energy Corp. CEO Doug Lawler.
They suggested a 2 percent tax on the first 48 months of production from all wells drilled in Oklahoma, while opponents wanted a return to 7 percent. The Legislature approved and Gov. Mary Fallin last week signed into law a rate of 2 percent for the first 36 months of production. It will go into effect next summer, replacing an expiring incentive program.
The state historically has assessed a 7 percent gross production tax, but lawmakers created an incentive for horizontal drilling in 1994. The incentive initially lowered the tax rate to 1 percent for the first two years or until costs were recovered. It was extended to up to four years in 2002.
“It worked out like everybody hoped,” Hamm said. “We’re drilling very expensive wells, but overall we’re seeing a nice increase in production for Oklahoma.”
He said the new tax program will not hinder Oklahoma’s participation in the nation’s ongoing “oil and gas renaissance.”
Oklahoma currently is the nation’s No. 5 oil producer, according to Energy Information Administration numbers, but Continental officials predict the state could leapfrog California and Alaska in the next year of so. That would leave it behind only oil titans Texas and North Dakota.
“We’re so lucky that Oklahoma is an oil and gas state,” Hamm said, a day after state officials announced tax collections on oil and natural gas production in May rose almost 28 percent over last year.
He said producers are finding oil in plays that are spread across Oklahoma.
“It’s not just one play like the Bakken (Shale in North Dakota),” Hamm said.
Oklahoma is nearing production of 400,000 barrels of oil a day, a threshhold not seen since June 1986.
Top U.S. oil producers in February
•Texas: 81.9 million barrels
•North Dakota: 26.6 million barrels
•California: 15.5 million barrels
•Alaska: 14.4 million barrels
•Oklahoma: 9.2 million barrels