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Plenty of companies drilling in Oklahoma

by Adam Wilmoth and Paul Monies Modified: March 11, 2014 at 11:05 am •  Published: March 11, 2014

NewsOK energy reporters chatted with readers Tuesday morning about various companies drilling in Oklahoma. Below is an unedited transcript of the chat.

Paul Monies 9:53 a.m. Hello, thanks for joining us. We'll get started in about 5 minutes.
Paul Monies 10:00 a.m. OK, let's get started. We've already got a few questions in the queue.
Mark 10:00 a.m. Is this chat just about Oklahoma based companies or any company that's exploring in Oklahoma? You did a story on Newfield Exploration a few months ago, is there anything new with them in the areas they are drilling?
Jay F. Marks 10:01 a.m. Newfield is pretty active in Oklahoma's Anadarko Basin, which the company identified last month as its fastest growing region.
Jay F. Marks 10:02 a.m. The company holds 225,000 acres of leasehold in the area, which includes multiple play zones.
Jay F. Marks 10:03 a.m. Newfield said it will increase its activity there soon once another company completes its gathering system there.
Ansel 10:03 a.m. With life cycle included studies are pointing to gas having nearly the same carbon footprint. What effect will this have on industry?
Adam Wilmoth 10:05 a.m. Burning natural gas produces far less carbon than oil. There have been some studies with older numbers that show larger amounts of methane escaping from the drilling process. The industry has focused on that over the past several years and has reduced that amount.
John D. 10:06 a.m. Besides immediate profit, oil and has can do so many amazing things, doesn't just burning it seem like the stupidest thing we should be doing versus saving for later when prices are higher?
Jay F. Marks 10:06 a.m. What are we going to use for energy in the mean time?
Jay F. Marks 10:07 a.m. We use oil and gas because we need a lot of energy to run our society.
Jay F. Marks 10:07 a.m. Nothing else is ready to fill that gap yet.
Adam Wilmoth 10:07 a.m. Oil is used for many things. It is used to create gasoline and diesel, but it also is used for plastics, chemicals and many other products we use every day.]
Vladimir 10:08 a.m. What are you hearing about where the current 1% tax will rise to?
Paul Monies 10:08 a.m. Keep your questions coming.
Jay F. Marks 10:08 a.m. You're assuming the gross production tax will go up.
Jay F. Marks 10:09 a.m. Former House Speaker T.W. Shannon was in favor of leaving it at 1 percent.
Adam Wilmoth 10:09 a.m. The gross production tax rate continues to be a big issue at the Legislature.
Jay F. Marks 10:09 a.m. I have not heard new Speaker Jeff Hickman state a position on this yet.
Adam Wilmoth 10:10 a.m. Several plans have been proposed, including leaving the rate at 1 percent and setting a sliding scale based on how many Oklahomans a company employs and returning the rate to 7 percent.
Smiana Smailey 10:12 a.m. How are things panning out for Continental in the Scoop play?
Adam Wilmoth 10:12 a.m. There is still plenty of time for discussion on this issue.
Jay F. Marks 10:12 a.m. CLR is still high on the play.
Jay F. Marks 10:12 a.m. It accounted for about 25 percent of the company's oil production last quarter, even though it is still a developmental play.
Jay F. Marks 10:14 a.m. Continental intends to add 3 more rigs in the play, pushing its total to 17 by the end of the year.
Adam Wilmoth 10:14 a.m. Newfield also is excited about the SCOOP and the nearby Stack. Both areas appear to offer several layers of oil-rich rock for companies to explore.
Adam Wilmoth 10:15 a.m. Companies are still trying to determine the best part of the area and how far it extends in each direction.
Jay F. Marks 10:15 a.m. Continental will spend more than $1 billion this year in its southern region, which includes the SCOOP.
Jay F. Marks 10:16 a.m. Continental is moving to two-mile laterals in the play as well.
Paul Monies 10:16 a.m. Are you allowed a two-mile lateral in Oklahoma?
Jay F. Marks 10:16 a.m. I'd imagine Continental wouldn't be talking about it if it wasn't allowed...
Gary T 10:17 a.m. Any new plays in the US you could see taking off in the next five or so years?
Jay F. Marks 10:17 a.m. Hard to tell.
Jay F. Marks 10:18 a.m. Most of the recent growth is in Texas, but companies typically play it close to the vest when new plays are being developed.
Jay F. Marks 10:18 a.m. Devon describes northern Oklahoma's Mississippian-Woodford as one of its emerging plays.
Jay F. Marks 10:19 a.m. Former SandRidge CEO Tom Ward used to compare the Mississippian to North Dakota's Bakken Shale, although many companies have backed away from the play.
Adam Wilmoth 10:19 a.m. Companies are always looking and exploring new areas. Those announcements generally are not made until the companies have secured leases in the area.
Jay F. Marks 10:19 a.m. Ward is getting back into the region, buying Shell's Mississippian assets in Kansas for his new company, Tapstone Energy.
Gary T 10:20 a.m. What do you see happening with all the excess land CHK bought between Classen and the train tracks? Are they still working on the lake in that area?
Jay F. Marks 10:21 a.m. We'll cede to our colleague, Brianna Bailey on that one. She's done a lot of work on that topic.
10:22 a.m.
Paul Monies 10:22 a.m. Here's the lake that was under construction, courtesy of Google Maps.
Brianna Bailey 10:23 a.m. It looks like Chesapeake is wrapping up all of the construction that has already started before all of the leadership changes at the company. But I haven't seen any new construction permits issued in over a year. The number of construction workers I have seen around campus has dwindled over the past several months. I wouldn't be surprised if we saw more real estate sales.
Gary T 10:24 a.m. Have you heard where Ward's new company will be officing out of? I have heard the Rock Island Plow building.
Adam Wilmoth 10:27 a.m. Tapstone has been in Oklahoma Tower. That's the address listed on the company website. Tapstone has hired a few people and has announced plans to buy leases in the Mississippian. But there has been no announcement on new offices.
Karl 10:28 a.m. Have you heard if any of the industry players were involved in funding the secret anonymous group OKC United / Catalyst. supporting Mick?
Jay F. Marks 10:29 a.m. We tend to stay out of politics.
Jay F. Marks 10:29 a.m. And if there was a secret deal, no one told me about it.
Paul Monies 10:29 a.m. We haven't heard anything, but if you know, we'd be interested.
Ted 10:30 a.m. What's Marathon Oil up to these days? Heard they had a few rigs in the SCOOP?
Jay F. Marks 10:32 a.m. I haven't heard much from Marathon.
Jay F. Marks 10:32 a.m. From the company's website: Marathon Oil has been an active participant in the emerging Anadarko Woodford resource play in western Oklahoma. As of year-end 2012, the Company held approximately 163,000 net acres in the Anadarko Woodford resource play, with a working interest of approximately 55 percent in its operated assets, which are mostly held by production. Marathon Oil holds approximately 46,000 net acres in the Mississippian Lime and 60,000 net acres in Granite Wash, Tonkawa, Cleveland and Marmaton.
Adam Wilmoth 10:33 a.m. The company's position in the area grew 20 percent in 2013.
Bob 10:33 a.m. There seems to be a lot of activity in Payne County. Are companies currently drilling or intending to drill horizontally in the Mississippi Lime formation? Is this primarily for natural gas or do they expect to produce oil from horizontal drilling?
Adam Wilmoth 10:34 a.m. Devon is active in Payne County. The company is looking both at the Mississippian and the Woodford Shale.
Adam Wilmoth 10:35 a.m. Devon drilled about 350 wells in the area last year.
Jay F. Marks 10:35 a.m. Horizontal drilling is pretty much the norm these days, especially for larger companies.
Jay F. Marks 10:35 a.m. Most drillers are targeting liquids-rich areas, searching for oil and natural gas liquids that are more valuable than natural gas.
John 10:37 a.m. Why do you keep using the term "energy independence", when oil and gas are sold on a global market?
Paul Monies 10:38 a.m. Energy independence is more of a political talking point. A lot of folks in the industry prefer the term energy security, since it's almost impossible for the U.S. to be energy independent. It's important to note that the fuels for our electric generation are almost entirely from U.S. sources: coal, natural gas, nuclear, hydropower and renewables.
Paul Monies 10:41 a.m. Energy security is more about adding to the existing U.S. energy development, as well as getting imported oil from countries friendly to the U.S. or outside of geopolitical hotspots.
Jay F. Marks 10:41 a.m. The gist of energy independence is being able to phase out exports from the Middle East and Venezuela as domestic production increases.
Gary T 10:42 a.m. What do you see happening to the price of NG over the next few years?
Jay F. Marks 10:43 a.m. Most industry observers expect prices to remain stable for the next several years.
Adam Wilmoth 10:43 a.m. I don't see it changing too much.
Jay F. Marks 10:44 a.m. Demand has risen as manufacturers and other industrial users take advantage of low prices, but that likely won't impact the price too much because the U.S. has such an abundant supply of natural gas.
Adam Wilmoth 10:44 a.m. There is plenty of supply. Demand is growing gradually, but supply is keeping pace.
Jay F. Marks 10:44 a.m. Even exports, which are still a few years away, aren't expected to result in higher natural gas prices for domestic consumers.
Adam Wilmoth 10:45 a.m. A pipeline is under construction that would connect the natural gas-rich Marcellus Shale in Pennsylvania to markets in New York and other East Coast markets.
Adam Wilmoth 10:45 a.m. A big question is what will happen with natural gas exports.
Adam Wilmoth 10:45 a.m. Export facilities have received permits, but are still a few years from being operational.
Adam Wilmoth 10:47 a.m. Natural gas prices in Europe and Asia are two to four times U.S. prices. If exports pick up, there could be some increase in domestic prices. That likely would lead to increased domestic production.
Bob 10:47 a.m. Is a section line still considered a "hard line" that companies cannot drill beyond? When they drill horizontally, how long (on average) is the horizontal hole and how many holes will they drill from one site?
Adam Wilmoth 10:48 a.m. The Oklahoma Corporation Commission is working on rule changes that could address those issues. The commission is scheduled to discuss the rule changes Thursday morning.
Adam Wilmoth 10:49 a.m. In most cases, drilling in Oklahoma is limited to one section. There are some exceptions with horizontal drilling in certain shales. Continental Resources and others have drilled across two sections in western Oklahoma.
Jay F. Marks 10:51 a.m. We recently visiting a Devon site, which contained 5 different wells, as the company explored its holdings near Perry.
Adam Wilmoth 10:51 a.m. Continental Resources recently completed a test with 14 wells on one pad in North Dakota. The company has said it plans to experiment with how many to drill one a pad in the SCOOP.
Terry 10:52 a.m. With all this talk about forcing coal fired power plants to install expensive carbon capture devices, could they actually recoop enough of this cost by selling this CO2 for use in the oil patch for carbon dioxide enhanced oil recovery (CO2 EOR) to keep themselves in operation?
Jay F. Marks 10:52 a.m. That's the key question.
Jay F. Marks 10:52 a.m. The issue, I think, is bridging the gap between what it costs to capture CO2 and the price that can be changed to sell it for EOR operations.
Jay F. Marks 10:53 a.m. Proximity is also a concern, since you'd probably need to have an EOR operation close to a power plant so the CO2 could easily be moved between the sites.
Adam Wilmoth 10:54 a.m. Chaparral Energy recently built a 68-mile pipeline to connect its field in Osage County to a chemicals plant in Coffeyville, Kan.
Paul Monies 10:54 a.m. The technology in CCS for power plants is still in the early stages, and is very expensive right now.
Gary T 10:55 a.m. Do you think the mayoral election had an affect on oil and gas companies staying in OKC or possibly other companies moving to OKC due to Mick's reelection?
Jay F. Marks 10:55 a.m. Probably not.
Paul Monies 10:56 a.m. The city's job incentives for new companies remain in place, no matter who is mayor.
Gary T 10:56 a.m. What do you say to people who think the Oklahoma earthqueakes are caused by drilling?
Adam Wilmoth 10:57 a.m. That is possible. The US Geological Survey and Oklahoma Geological Survey are both looking into what is causing the earthquakes.
Adam Wilmoth 10:58 a.m. One USGS study linked the quakes to water injection wells, but the OGS has been more cautious. The Oklahoma seismologists point out that there have been cases of earthquake swarms far away from any human activity, including in Idaho.
Adam Wilmoth 10:59 a.m. All sides say more information is needed.
Paul Monies 10:59 a.m. We've got a couple more questions that we'll get to, and then wrap this up in a few minutes.
Frank 10:59 a.m. Leased our family land approx 5 years ago to a company and they gave us a very good price with the option to continue the lease in 3 year if no activity was done in first 3 year. We never heard from them again. Is that normal because they gave us alot of money first 3 year?
Adam Wilmoth 11:00 a.m. Companies buy leases early on when a field is being explored. There are many reasons why leases would not be continued. It could be that your minerals have oil and gas, but that it will be a while before the company has a chance to get there. Or it could be that there are better locations elsewhere in the area.
Preston 11:02 a.m. What would Oklahoma's tax be if we matched Texas or North Dakota structure?
Jay F. Marks 11:03 a.m. That's a complicated question.
Jay F. Marks 11:03 a.m. Both of those states are churning out a lot more oil than Oklahoma, giving producers better margins for profit.
Adam Wilmoth 11:04 a.m. It's difficult to compare. Each state has a different gross production tax rates, but they have different tax structures in general, including state income tax.
Paul Monies 11:04 a.m. OK, thanks for joining us today. Our next chat will be at 10 a.m. April 8.
by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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by Paul Monies
Energy Reporter
Paul Monies is an energy reporter for The Oklahoman. He has worked at newspapers in Texas and Missouri and most recently was a data journalist for USA Today in the Washington D.C. area. Monies also spent nine years as a business reporter and...
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