A Focus on Exploration & Production Activities
2016 High-graded Harvest of Mid-Continent Plus Initial Development in North Park Niobrara
Running one drilling rig for most of 2016 in the Mid-Continent and one rig through August in the North Park Niobrara, SandRidge is allocating capital across both of its active areas, generating cash flow stability while advancing drilling and completion innovations.
SandRidge plans to invest $225 to $255 million of capital expenditures in 2016, with $56 million spent during the second quarter and $110 million during the first half of 2016, excluding acquisitions and abandonment liabilities. Full year total production is estimated to be between 18.9 -19.3 MMBoe, with 5.0 MMBoe produced during the second quarter and 10.5 MMBoe during the first half of 2016. Thirty seven horizontal laterals are planned to be spud during the year, with 26 in the Mid-Continent and 11 in North Park. These lateral counts include four extended laterals, one dual extended lateral, and two full section development projects in the Mid-Continent, and one extended lateral in North Park.
In the Mid-Continent, encouraging development and testing of additional zones, notably the Chester overlying the Mississippian, has grown the existing multiyear drilling inventory, taking full advantage of existing leasehold and infrastructure. The Mid-Continent continues to benefit from improved reservoir characterization and primarily multilateral and extended lateral drilling is planned.
Extended laterals and multilaterals are also envisioned as part of the North Park Niobrara development. The Company recently drilled and is currently completing a Niobrara extended lateral which is expected to be online in the fourth quarter of 2016. Optimized well spacing, multiple initiatives to further lower costs per lateral, and incremental productive zones are all targeted upsides.
North Park Basin
Niobrara Asset in North Park Basin, Jackson County, Colorado
SandRidge acquired its oil rich Niobrara properties in December 2015 and began development in January 2016. The Niobrara is located at vertical depths between 5,500 and 9,000 feet with gross pay thickness of 450 feet to 480 feet. The Company holds 129,000 net acres in the Niobrara play, 55% of which is held by production or held by federal unit. This land position comprises a dominant footprint in the North Park Basin where the Niobrara shale is geologically similar to but thicker and oilier than that of the actively developed Denver-Julesburg or “DJ” Basin. The Company is preparing applications for two additional federal units and plans to shoot additional 3D seismic surveys in early 2017 to extend and complement the existing 54 square mile 3D survey.
Initial development plans include 1,300 Niobrara drilling locations. The properties averaged approximately 1,200 barrels of oil per day during the second quarter of 2016, impacted by pad drilling and some planned shut-ins of existing producers while new wells were being drilled and completed on the same pad.
At year end 2015, 16 Niobrara wells already delineated a large contiguous producing area, supporting 108 PUD locations at SEC prices. At the end of 2015, 28 million barrels of oil equivalent were booked as proven reserves (81% oil).
During the first six months of 2016, the Company drilled eight horizontal laterals, bringing online five laterals. While horizontal drilling with single laterals has been the standard to date, a two mile extended lateral was successfully drilled in July 2016 and is currently being completed. In addition, other Niobrara benches will be appraised and optimal well spacing tests will be conducted in 2016 and 2017. Also in 2017, the Company will expand application of extended laterals.
Multiple cost reduction and efficiency efforts have steadily reduced well costs in the early development of our Niobrara asset. Drilling optimization efforts include improving drilling mud and bit systems, presetting surface casing and drilling extended laterals. Numerous fracture stimulation enhancements are also underway. Efforts to optimize completions have included the refinement of water and sand volumes, number of frac stages, stage length, and cluster spacing. The Company now has line of sight to achieving drilling and completion costs below $4 million per lateral.
Mid-Continent Assets in Oklahoma and Kansas
SandRidge has been actively developing the Mississippian and adjacent oil and gas reservoirs since 2010, drilling over 1,600 horizontal producing wells in Oklahoma and Kansas. While the Company has a combined 1.1 million acres in all of Oklahoma and Kansas, its current drilling activity is concentrated within its 462,000 acres of focus area leasehold in Oklahoma, 64% of which is held by production. The Company’s Mid-Continent assets averaged approximately 52,000 barrels of oil equivalent per day (25% oil, 24% NGLs, and 51% natural gas) during the second quarter of 2016.
SandRidge pioneered the use of multilaterals in the Mississippian, where typically two to four laterals are drilled from a single vertical wellbore. This approach reduces the average drilling and completion cost per lateral, while further reducing expenses by utilizing shared surface facilities and artificial lift systems.
During the first six months of 2016, the Company continued to develop its Mid-Continent asset by drilling 18 laterals and bringing 26 laterals online. The Company successfully completed its first ever dual extended lateral in the Mississippian formation, currently producing from 18,426 feet of completed lateral. The Dettle 2408 1-29 20H was drilled and completed for just under $1.7 million per lateral and produced a 30-Day IP of 1,099 Boepd (60% oil). Separately in the Chester, an extended lateral development project, the Earl 2414 1-11H 14H, yielded a 30-Day IP of 560 Boepd (62% oil) with a drilling and completing cost of $2.16 million per lateral.