Woodford Shale Stocks

Brian Hicks

Written By Brian Hicks

Posted December 2, 2013

Despite the ravages of the Depression and the Dust Bowl, Oklahomans managed to discover a shale treasure in 1932 known as the Woodford Shale.

Though producers could do little with this play at the time, production to some extent has been going on since the 1930s.

shale boomBut in the wake of horizontal drilling technologies and higher natural gas prices, we saw a surge of drilling activity from this area in 2005.

The Woodford is primarily a natural gas play, holding 4 trillion cubic feet. But you may also want to look at this play if you’re a shale oil investor, since this region is said to contain 70 billion barrels of oil in the Golden Trend Field alone.

And although you may not have heard of the Woodford, the region encompasses most of Oklahoma. Highly productive counties include Hughes, Cola, Pittsburg, and Atoka.

But the Woodford may prove to be one of the harder shale areas to drill. Due to its thick composition, penetration rates will be slower, and it will require ever-evolving technologies to maintain successful operations.

To date, 2000 wells have been drilled in the Woodford, and since this region is close to the Barnett of Texas, more producers are making a smoother transition into Oklahoma.

This will surely benefit more residents of the state, since Woodford drilling bumped up the average salary from $26,000 to $34,000 in some parts, and landowners are becoming millionaires just by allowing producers to work on their land!

Woodford Success Recipe

When we’re talking about natural gas in the Woodford, there is the risk of production slowing down in the wake of low prices.

Currently, prices are $3.89 mm/Btu, a better price compared to a few years ago, but not exactly enough to inspire greater exploration.

If we saw prices rise to $4 or above, there could be more interest in gas-rich sections of the Woodford. One of the most direct ways of boosting natural gas prices would be to create an atmosphere conducive to liquefied natural gas exports or domestic consumption.

LNG facilities are slowly being approved by the Department of Energy, but more infrastructure approval has been long overdue.

LNG is in high demand in the Asian market, especially in Japan and South Korea.

The U.S. could also take a cue from China by upgrading its manufacturing and industrial capacities. We could use more LNG to fuel heavy-duty vehicles for wide-scale construction projects. And aside from electric and heating, natural gas can be used to a greater extent for energizing factories and making products.

But as long as U.S. manufacturing is at its bare minimum, demand for natural gas will also suffer on the domestic front.

And with natural gas prices falling short of the mark, shale oil is the current focus of energy producers, particularly among domestic companies.

The Woodford will face hurdles, but the state of Oklahoma is worth your investment.

Oklahoma Investing

Texas and Oklahoma underwent turbulent cycles in conventional oil production, but things have changed with tight oil. Oil prices have risen over the years, and we’re seeing a greater incentive to invest in Oklahoma.

Production has doubled since 2010 to 320,000 bpd, Reuters reports. This is nowhere near production levels in Texas and North Dakota, but the state is showing signs of future growth that could play a role in propelling the U.S. shale boom forward. Oklahoma has contributed to national oil production by nine percent, and the Woodford can be credited for the state’s success.

One of the heaviest operators in the Woodford i Continental Resources (NYSE: CLR), an operator that has been heavily interested in the south-central portion of Oklahoma, where the region is known for its oil-rich resources.

This region is one of the more historically profitable locales, going all the way back to 1905. Rich counties include Carter, McClain, Murray, and Cleveland. Continental is scouting for 1.8 billion barrels of oil and has already locked in 63 billion barrels of oil in the region.

Marathon Oil (NYSE: MRO) is another company venturing into the Woodford, particularly in the Cana portion of the south-central area. At one point, CEO Clarence Cazalot even said the Woodford was a superior investment to the Bakken.

And Marathon is not the only international company in the region. Exxon Mobil (NYSE: XOM) has been in the Ardmore portion of the Woodford, and even Exxon’s XTO Energy showed interest in Woodford assets concentrated in the south-central area.

The Woodford has been pegged as a natural gas play, but with oil and NGLs already being extracted at promising levels, you don’t have to wait for natural gas prices to inch up further. We’ll be hearing more from this play in the future.


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