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 $220 to $240 million of capital expenditures in 2016, with $52 million spent during the third quarter and $61 million during the first half of 2016, excluding acquisitions. Full year total production is estimated to be between 19.0 -19.4 MMBoe, with 4.6 MMBoe produced during the third quarter and 15.0 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 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 133,000 net acres in the Niobrara play, 56% 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 3.3 MBopd the second half of October, 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 nine months of 2016, the Company drilled eleven horizontal laterals, bringing online eight laterals. While horizontal drilling with single laterals had been the standard through the first half of 2016, a two mile extended lateral, the Castle 1-17H20 was successfully drilled in July 2016. The Castle 1-17H20 is currently supporting drilling and completion capital projections of less than $7 million, or $3.5 million per lateral. 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.
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 1.0 million acres in all of Oklahoma and Kansas, its current drilling activity is concentrated within its 458,000 acres of focus area leasehold in Oklahoma, 72% of which is held by production. The Company’s Mid-Continent assets averaged approximately 46,200 barrels of oil equivalent per day (24% oil, 25% NGLs, and 51% natural gas) during the third 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.
In the first nine months of 2016, SandRidge drilled and completed 17 laterals using multi and extended lateral designs in the Mid-Continent, including 100% Mississippian multi and extended lateral drilling. The previously reported Dettle 2408 1-29 20H, the first Mississippian dual extended lateral (two two-mile laterals), produced a 30-Day IP of 1,099 Boepd (60% oil) and was drilled and completed for $6.8 million ($1.7 million per lateral)
Another example, the Earl 2414 1-11H 14H, a Chester extended lateral development well, was drilled for $4.3 million ($2.1million per lateral), and produced a 30-Day IP of 560 Boepd (62% oil), matching expectations. In the third quarter, the Richey 2407 1-21H, a Mississippian full section development well exceeded expectations with a 30-Day IP of 688 Boepd (66% oil) and was drilled and completed for a total of $5.3 million ($1.8 million per lateral).