EIA's Drilling Productivity Report initiates coverage of the Anadarko Basin

To provide more complete coverage of U.S. crude oil and natural gas production, the EIA has expanded its Drilling Productivity Report (DPR) to cover the Anadarko Region, which encompasses most of the production from the Anadarko Basin in 24 counties in Oklahoma and 5 counties in Texas. The Anadarko Region has a long history of hydrocarbon production and, in recent years, has seen an increase in activity, mainly from two areas commonly known as the STACK (Sooner Trend Anadarko Canadian and Kingfisher) and SCOOP (South Central Oklahoma Oil Province) plays.

The Anadarko Region covers a large portion of Western Oklahoma and the northeast corner of the Texas panhandle (Figure 1). The new DPR region was defined by identifying the most prolific oil-producing counties in the area. In 2010, the U.S. Geological Survey completed an assessment of the Anadarko Basin and estimated a mean technically recoverable undiscovered resources of 495 million barrels of oil, 27.5 trillion cubic feet of natural gas, and 410 million barrels of natural gas liquids.

Prior to including the Anadarko, the DPR reported on 73% of all active onshore rigs in the United States: 680 of the 931 onshore rigs nationwide, based on averaged Baker Hughes data for the weeks ending July 7 through July 28, 2017. Including the 129 rigs now active in the Anadarko region will increase the report’s coverage to 87% of all of the active U.S. onshore rigs. As of July 2017, the Anadarko region accounts for approximately 437,000 barrels per day (b/d) of oil production, as well as 13% of national new wells drilled and 13% of national drilled but uncompleted wells.

Production in the Anadarko Region mainly comes from shale and limestone layers of the Meramec, Osage, and Woodford formations. These formations are deep but offer thick layers of shales—thicker than those in the Bakken formation and similar to those in the Eagle Ford. Other producing formations in the region include the Granite Wash, Cleveland, Tonkawa, and Marmaton, which are mainly located in Texas. The region’s most prolific counties to date, however, are in Oklahoma.

The new-well production per rig in the Anadarko Region was 372 b/d in July 2017, which is lower than in other oil producing DPR regions. For example, production per rig in the Permian and Bakken were 609 b/d and 1,166 b/d, respectively. However, EIA expects productivity in the Anadarko Region to continue to increase in the near future.

Drilling in the region appears to be attractive as the rig count has increased from 84 in January to 129 as of July. The associated rate of increase is second only to that in the the Permian Region in 2017. Because Oklahoma has historically been an oil- and gas-producing state, the Anadarko Region has established infrastructure for oil development, transportation, and storage. The maturity of the oil industry in the region and its proximity to the trading and distribution hub in Cushing, Oklahoma should allow producers to increase output using existing takeaway capacity, with relatively low transportation costs from the wellhead to Cushing providing higher netbacks that allow producers to operate in a low-price environment (Figure 2). Trade press also indicates several planned and recently completed pipelines are expanding transportation capacity in the region.

Within the Anadarko Region, oil production increased by 112,000 b/d from July 2013 to July 2017, hitting a peak of 498,000 b/d in March of 2015. Production as of July 2017 was 437,000 b/d. The Anadarko Region is expected to contribute to U.S. production growth, given anticipated market conditions over the next 16 months. EIA forecasts production in the Anadarko Region to grow to 500,000 b/d by the end of 2018, while the WTI spot price is forecast to increase from $47 per barrel (b) to $53/b over the same period.

U.S. average regular gasoline and diesel retail prices climb

The U.S. average regular gasoline retail price rose less than 1 cent from the previous week, remaining at $2.38 per gallon on August 14, up 24 cents from the same time last year. The Rocky Mountain price rose four cents to $2.43 per gallon, the West Coast price increased over two cents to $2.87 per gallon, and the Midwest price increased almost two cents to $2.30 per gallon. The East Coast price fell nearly one cent to $2.33 per gallon, while the Gulf Coast price also fell nearly one cent but remained at $2.15 per gallon.

The U.S. average diesel fuel price rose 2 cents to $2.60 per gallon on August 14, 29 cents higher than a year ago. The West Coast, Rocky Mountain, and Midwest prices all increased nearly three cents to $2.88 per gallon, $2.70 per gallon, and $2.57 per gallon, respectively, while the East Coast price increased one cent to $2.62 per gallon. The Gulf Coast price remained unchanged at $2.41 per gallon.

Propane inventories gain

U.S. propane stocks increased by 1.6 million barrels last week to 69.2 million barrels as of August 11, 2017, 24.5 million barrels (26.1%) lower than a year ago. Gulf Coast and Midwest inventories increased by 1.3 million barrels and 0.4 million barrels, respectively, while Rocky Mountain/West Coast inventories decreased by 0.1 million barrels. East Coast inventories were virtually unchanged. Propylene non-fuel-use inventories represented 4.0% of total propane inventories.

Weekly fuel ethanol production

Starting with today’s report, the U.S. Energy Information Administration (EIA) will publish fuel ethanol production statistics for all U.S. regions each week, making the weekly publication of that data consistent with EIA’s statistics published in the Petroleum Supply Monthly (PSM).

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.

Tags: crude oil , drilling , Oklahoma , production/supply , Texas