OKC based oil companies companies are exiting the city and state for Houston Texas. Ovintiv has divested Anadarko holdings. 10 years ago the investment world couldn’t get enough of the SCOOP and STACK. Now the investment community is far less interested in any OK investment. What factors are at play and what will OK oil industry look like in the near future.
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@h3 perfectly described. The other factor is that OKC does not welcome entry to people from other areas. It feels insular and a tough market to crack.
An Oklahoma based company bought the Ovintiv acreage…. Sooo
Key factors reducing the attractiveness of the SCOOP/STACK include:
High Gas-to-Oil Ratios (GORs): Many areas within the SCOOP/STACK have experienced disappointingly high gas-to-oil ratios, which, during periods of low natural gas prices, severely damaged the economics of the play.
Declining Productivity and "Child" Well Performance: Significant issues have emerged with "child" wells (subsequent wells) producing much lower volumes than "parent" wells (original wells). This, combined with variable geology, has led to lower-than-expected returns.
Competition from Other Basins: The Permian Basin's rapid growth has caused capital to flow away from the SCOOP/STACK, as the Permian offers more favorable, consistent returns.
Operational and Regulatory Challenges: Increased taxes on oil and gas production in Oklahoma, raising the rate from 2% to 5% for the first three years, have hurt operator margins.
Reduced Rig Counts and Capital Allocation: Major operators have significantly cut their capital expenditure in the area, with companies like Encana reducing their rig fleet in the STACK from 10 to four in 2019