STACK/SCOOP Production Doubles -- Filloon -- April 10, 2018

Huge news for Harold Hamm.

Over at SeekingAlpha.

• production per well almost doubled from 2016 to 2017
• lateral lengths have increased slightly, but most of the increase is on a production per foot basis
• there are wide differences in productive by operator, indicating either a small core sweet spot, or a relatively large difference in well design

Well design continues to improve across the unconventional US. We have analyzed this across the Permian, Eagle Ford and Bakken confirming the presupposition as true. Enhanced completions work was implemented by EOG Resources  in the Eagle Ford. It moved sand heavy fracs to the Bakken's Parshall Field next. Both were unbelievably successful.

The implementation meant operators would need to use massive volumes of sand. This was cost effective, and frac sand is cheaper than ceramics. Other operators have started using this design, and implemented to a large degree. This isn't the case for all operators, but all are using more than 50% of the time. This is why production per foot should improve in 2018. This is without further stimulation improvements.

We don't know if operators can improve stimulation from here, but recent EOG completions in New Mexico are showing promise. We have also seen some excellent work by Concho across the Delaware Basin. There is upside to implementing design this year, with the possibility of further stimulation improvements as a variable difficult to assess.

Mike Filloon predicted this (massive amounts of sand to be used) several years ago but he was a bit early. Perhaps it was only because the Saudi Surge and the subsequent plummet in oil prices slowed things down -- temporarily. I don't know. Regardless, but we are now seeing at least one operator in the Bakken move to massive amounts of sand as routine (or at least it appears). See the Monroe wells with commentary here.

More from Mike at the link above:

Well design improvements have improved economics and decreased payback times. This should put a ceiling on oil prices, but not in a bearish fashion. The reasons for this is the decrease in world inventories. The removal of the glut has allowed prices to move higher, but more importantly stabilized downside. We should see a gradual increase in oil prices long term as better geology is completed. Shorter term we see WTI hitting a high between $70/bbl to $75/bbl. We may see this before the 4th of July holiday. This could push the US Oil ETF to $15/share in that time frame. Demand seems to be the catalyst, and could surprise to the upside.

Compare to the Bakken, the laterals in Oklahoma are short: only about a mile long compared to 2-mile laterals in the Bakken.