Post-COVID-19 recovery in US Scoop Stack shale play will not be able to match 2019 production

Source: press release, 22 February 2021

Scoop Stack shale, crude oil and natural gas production, 2018-2020 (source: GlobalData, Oil and Gas Intelligence Center)
Scoop Stack shale, crude oil and natural gas production, 2018-2020 (source: GlobalData, Oil and Gas Intelligence Center)

The Scoop Stack, located in Oklahoma, accounts for 4.5% of oil and 7.2% of natural gas production in the United States Lower 48. This play recorded its highest month of production in September 2019, with 604 thousand barrels of oil per day (mbd) and 7.9 billion cubic feet per day (bcfd). After September 2019, the Scoop Stack has experienced a slow decline that was exacerbated by the effects of the COVID-19 pandemic, says GlobalData, a data and analytics company.

GlobalData’s latest report, Scoop Stack Shale in the US, 2021, forecasts that in February 2021, production will be 342 mbd and 5.8 bcfd, which is a 43% decline in oil and 27% for natural gas from its peak in September 2019. This sharp decrease in production is linked to the drastic drop and rig count with companies reducing capital expenditure (capex), as well as focusing capex in other plays.

Andrew Folse, Oil & Gas Analyst at GlobalData, comments, “The Scoop Stack averaged 84 drilling rigs in 2019 and decreased to an average of 20 drilling rigs in 2020 – which is a 75% drop. Since commodity prices have stabilised from the COVID-19 pandemic rig count has increased a small amount in the Scoop Stack. With West Texas Intermediate (WTI), future prices are averaging US$51.37 per bbl for the remainder of 2021. GlobalData expects an uptick in the rig count, but not to the level that was present in 2019.”

In addition, a rise in production will depend on the capital allocation for the major operators in this region. The largest producers are Continental Resources, Devon Energy, Cimarex Energy, and Ovintiv. These companies all have active operations in other plays where strategy and return to capital can be better than in the Scoop-Stack. Companies are going to deploy the capital to the acreage with the best economics.

Folse concludes, “With the current futures prices, GlobalData expects oil production in Scoop Stack to average 373 mbd and 5.8 bcfd for 2021. GlobalData builds three different production scenarios based on three different future average prices: US$44, US$49, and US$54 per barrel. In all current scenarios, production from the Scoop Stack continues to decline before growing in the second half of 2022. Even in the high price case, production would not get back to the peak levels seen in 2019.”