American Oil and Gas Reporter - May 2017 - 86

ConventionSection: Oklahoma Independent Petroleum Association

Market Uncertainties Cloud Oil Futures
OKLAHOMA CITY-Oil field technological developments continue to serve
as the foundation for U.S. operators, but
Jeffrey McDougall, chairman of the Oklahoma Independent Petroleum Association,
warns that price stability threatens to undercut the promises offered by tech trends.
The global fiscal conditions that
squashed national economies and drove
down oil prices the past two years forced
producers to cut back operations and learn
how to survive lean times, conditions that
are likely to remain for the near future,
predicts McDougall, president of JMA
Energy Company LLC in Oklahoma City.
"The service companies that survived
this downturn are getting back to profitability, and most are in much better
shape," he says. "The biggest threat is
the continued chance that world oil markets
will be manipulated by outside market
forces. We cannot predict some voluntary
act, like say, the Organization of Petroleum
Exporting Countries flooding the market
with oil. When the market went to $26 a
barrel, reactions were swift. Prices were
down for 18 months after the summer of
2014. It is hard to run businesses and
plan around things like that."
One concern as oil prices recover is
what economic conditions will set the
price boundaries, he reflects. There is
no lack of oil prospects for future developments, the technology and infrastructure are mostly in place for future
needs, and at least in the United States
the regulatory climate is becoming more
favorable, he lists.
"A price correction itself resets price
cycles. The oil and gas industry is a
cyclical business, and the next seveneight years could see a reasonable uptrend
and recovery of prices," McDougall reasons.
Service Companies
As part of that recovery, McDougall
says he expects the service sector will
boost prices after a period of thin-tononexistent margins. "That really helped
incentivize producers to come back and
look at the economics of their deals.
From September of last year to now,
prices have tightened. But you still see
the rig count going up, and people having
more confidence in the market," he says.
Operators and service companies continue to struggle to find oil field workers,
86 THE AMERICAN OIL & GAS REPORTER

McDougall points out, an ongoing challenge made harder by the large number
of personnel laid off during the past two
years. "It is tougher to find people, but
we will find the workers. Having to adjust
staffs during downturns is part of the
business," he says. "Some people simply
like being in the oil and gas industry."
OIPA President Mike Terry says while
staffing levels remain a concern, most
service companies have enough equipment
either on hand or stacked in their yards
to support more activity.
"The service companies have enough
equipment mothballed that they can bring
it back. But it is definitely a problem to
find workers," Terry describes. "Some
left the oil and gas industry, and you
always are trying to find those people
who can weather the storm. There are
great opportunities for young people in
the oil and gas industry, because it is an
aging industry. There will have to be replacements of those older workers; the
hard part of those retirements is you lose
a lot of experience and wisdom."
SCOOP And STACK
McDougall notes that many in the industry refer to Oklahoma's South Central
Oklahoma Oil Province and Sooner Trend
Anadarko Basin Canadian and Kingfisher
Counties plays as the "Little Permians."
"My company participates in the
STACK, and it is every bit as good as the
Permian," he asserts. "I don't know how
they compare in terms of area, but well

performances in the STACK and SCOOP
are every bit as good as those in West
Texas. We are on the front end of these
wells getting better as we apply fracture
treatments. Some of the technology used
in the Permian has not been completely
employed in Oklahoma yet, but the
SCOOP and STACK plays keep getting
better and bigger."
According to Terry, some companies
are investing more in those two plays
than any other play in the country.
"We are seeing a tremendous amount
of capital coming into the state," he offers.
"Oklahoma's tax preferences are very
positive, and there are many new companies with private equity backing popping
up everywhere. That is a very positive
thing for the state as it is seeing new
companies, more jobs and more economic
vitality in its rural sections. Oklahoma is
very fortunate to have rock as good as
this."
From a geological and geophysical
standpoint, Terry says the hearts of the
SCOOP and STACK plays have been
found, but operators continue to venture
out and still are drilling good wells.
McDougall recalls the years he has
gone to trade shows and listened to operators from other states describe their hot
plays-one year it was the Barnett Shale,
another the Hayneville and then it was
the Marcellus play. "You are hearing
about STACK and SCOOP now," he says.
"There always will be another hot play
somewhere."
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Contango Ups Leasehold Across Delaware Basin
HOUSTON-Since completing its July
acquisition of 12,100 gross acres (5,000
acres net) in Pecos County, Tx., Contango
Oil & Gas Company has increased its
leasehold footprint to 6,250 acres, net to
Contango. With the additional acreage,
Contango says it has almost 200 gross
drilling locations, with the Wolfcamp A,
Wolfcamp B and Second Bone Spring
formations the initial targets.
According to the company, after it
completed its first well's drilling phase,
in the northwest section of the Pecos
County acreage in November, it moved
the drilling rig to the center of the leasehold
for the next two wells.
Contango's initial well, the LonestarGunfighter No. 1H, was drilled to a total

depth of 20,800 feet, with a 10,500-foot
lateral. The company says it is being
completed with 50 stages of fracture
stimulation.
The second and third wells, the Rude
Ram No. 1H and Ripper State No. 1H,
also are targeting the Upper Wolfcamp
with drilling and completions details similar to the Lonestar-Gunfighter, Contango
says. Completion operations on the two
wells, using a zipper fracture strategy,
are scheduled to begin in mid-March,
with initial production expected in midApril.
Contango adds that it expects to drill
five more Southern Delaware Basin wells
in 2017.
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American Oil and Gas Reporter - May 2017

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