Sure Bet: Simple geology and CHK experience make drilling in the Cleveland a smart play

Oct

04

The Play: Cleveland

Sure Bet

By Laura Bauer

Simple geology and CHK experience make drilling in the Cleveland a smart play
Rolling prairies, brilliant sunsets and oil have long been staples of Northwest Oklahoma. The Anadarko Basin, potentially the largest nonshale resource play in the Mid-Continent, stretches across approximately 50,000 square miles in Oklahoma, Texas, Kansas and Colorado.

Sitting fairly shallow in the basin, the Cleveland Play covers six counties in Oklahoma and the Texas panhandle. The history of this play started in the 1960s and 70s with traditional vertical drilling. But when companies began drilling horizontally in the early 2000s, a whole new world of reserves opened up according to Ted Campbell, Northern Mid-Continent District Manager.

“As verticals, they were marginal, but as horizontals, these wells are extremely prolific,” he explained.

 Chesapeake developed its first well in the Cleveland Play in 2005 and has drilled 57 since, with the average well developing 139,000 barrels of oil and 1.9 million cubic feet/day (mmcf) of natural gas. The company has approximately 500,000 net Cleveland leasehold acres.

From an investment perspective, this play is a sure bet. The tight gas formation is rich in liquids and has low finding costs, giving it a strong rate of return.

“It’s simple geology,” said Campbell. “There aren’t a lot of underground structures. The formations are stacked like pancakes, making it predictable and tame, especially compared to many of our other operating areas.”

The play is considered conventional because it is a thick marine-shelf siltstone and sandstone sequence at a relatively shallow depth of about 7,800 feet. It also helps that much of the operating area is flat and easy to access.

But where Chesapeake gets the real bang for its buck is in its completion methods, especially when compared to its peers.

“On average Chesapeake spends about $4 million to drill and complete a Cleveland horizontal well while our peers spend about $3 million,” explained Campbell, “But you get what you pay for, and we end up getting about twice the reserves.”

He says it boils down to the completion method, which the company has learned through experience in shale plays and other unconventional horizontal targets and has transferred to the Cleveland Play. Chesapeake uses a “perf and plug” method of hydraulic fracturing, which ultimately creates more cracks in the formation and generates a greater volume of reserves. Through more stages, more water and more sand, Chesapeake is accessing more rock.

“Completion methods on Chesapeake-operated wells are more productive,” Campbell said.

For example, on average a Chesapeake well in the Cleveland Play will generate 455,000 barrels of oil equivalent (boe) using 2.5 million pounds of sand, while a peer gets 220,000 boe and uses less than 750,000 pounds of sand. Chesapeake’s finding costs are $1.44 per mcfe compared to peers that have an average of $2.32 per mcfe. Their methods may be quicker and cheaper, but they are shortchanging what they could get over the life of the well.

 To add to the simplicity of geology and terrain, another major factor that makes this a sure bet is that the Cleveland Play is in the heart of oilfield country.

“This is a very mature gas field, and the infrastructure is in place to support drilling operations,” Campbell said. From drilling service companies to pipeline infrastructure to local communities, it’s very easy to operate in this part of the country and finding quality local help is easy too.

“Many of Chesapeake’s operations people and Nomac drilling employees are working in their own backyards,” Campbell added.

Thanks to the talent of homegrown employees, readily available infrastructure and technological advantages, Chesapeake’s Cleveland Play will keep fueling Oklahomans for many generations to come.

 

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