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Granite Wash Shale Stocks

Brian Hicks

Written By Brian Hicks

Posted September 26, 2013

Here’s another play to keep on your investment radar.

It’s called the Granite Wash shale, and it is a bit more unconventional than your standard play because of its sandy and granite composition. It’s a large area covering the North Texas panhandle, Southwest Kansas, and Western Oklahoma. Depths of the play range anywhere from 300 feet to 19,000 feet, and thickness can be up to 4,000 feet.

shaleThe unevenness of the terrain makes it more conducive for drilling in some areas but unpredictable in other parts. The reserve makeup of the Granite Wash is uncertain, since individual fields have been examined instead of the overall region.

The Granite Wash is better than other shale areas in some regards, particularly since the sandy composition tends to produce greater production results, but decline rates are high, and drillers have to contend with excess water.

The area is still in the process of being fully assessed, but what is known is that the play contains large pools of natural gas, along with natural gas liquids (NGLs) and oil. And while there are not many companies in the area, it could be a major play in the coming years.

Production has been going on in this region since the early 1970s, but serious interest did not come about until recent years due to improved techniques in horizontal drilling and higher natural gas prices. Prices in natural gas have suffered as of late, but producers have been able to keep up operations.

According to Halliburton (NYSE: HAL), the most profitable area for natural gas is the Stiles Range field. Several horizontal wells in the region produced over 20 million cubic feet per day.

Granite Wash Status

As of now, there aren’t that many interested parties in the Granite Wash, but this does not mean it is a dead area. Since this is mostly a natural gas play, operations have slowed down in wake of slumping natural gas prices.

But because of higher oil prices, many companies are shifting attention toward shale oil in smaller plays with shallower depths.

The Granite Wash has been adding to the national oil rig average, helping it move up to 1,388 in the last week of August, Bloomberg reports. The surge in oil rigs can be attributed to a steep decline in natural gas prices and the rising price of oil stemming from growing conflict in the Middle East. In the Granite Wash, horizontal oil rigs shot up to 64, but natural gas rigs slid to six.

We may have seen a bit of a slowdown in natural gas drilling in the Granite Wash, but shale oil is the name of the game currently and something to pinpoint if you’re interested in investing in the region.

We haven’t seen major international companies delving into the region just yet, but there have been a slew of familiar companies that have chosen to stick with the area.

Chesapeake Energy (NYSE: CHK), for example, is mostly known for its natural gas endeavors, but it has recently placed more of a focus on oil in the Northern Texas area, stretching up into the Anadarko Basin. Chesapeake will add 11 new rigs in the Granite Wash.

Go or No Go?

The natural gas aspect of the Granite Wash has slowed down, but there is more potential in its shale oil territory. Companies in the region are worth looking into.

And there is still promise in the natural gas aspect of drilling in the Granite Wash as prices begin to rise. Companies with a focus on natural gas in the region have still been able to keep operations afloat despite higher operations costs and low prices.

But tight oil in shale formations is the thing to watch out for, and it is something that smaller, independent companies have been drilling for throughout these new plays.

Granite Wash is no small play, but it is fairly new on the national energy map, and it is something to keep your eye on in the future.


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