Oklahoma's Mississippi Lime excites oil producers

BY ROD WALTON World Staff Writer
Thursday, November 29, 2012
11/29/12 at 3:57 AM

Low overhead and deep historical data are making northern Oklahoma's Mississippi Lime one of the nation's hottest oil plays, industry experts said Wednesday.

In fact, production from the geological area has grown so big that it has merited its own conference - the Mississippian Formation Summit, running Wednesday and Thursday at the Renaissance Tulsa Hotel and Convention Center.

The event is focused on the shallow, cost-effective limestone trend that has attracted companies such as SandRidge, Chesapeake, Devon, Marathon, Doxa and Tulsa-based Eagle Energy LLC.

Industry consultant Don Warlick, president of Houston-based Warlick Energy, touted the Mississippi Lime's bottom-line benefits that are gaining top-dollar attention throughout the U.S.

"The economics of this are so good," he said. "It's an opportunity for the independent operator."

The depth of the Mississippi Lime's production area is only about 5,000 feet, compared with 10,000 feet for the Bakken Shale of North Dakota and Montana. The typical Mississippi Lime well costs about $3.3 million to drill, while a Bakken well's expense comes in at about $8 million, Warlick estimated.

Leasing acreage also is cheaper, sometimes at around $3,000 an acre in the Mississippi trend, he said. Other leases in the highly publicized and documented Bakken or Marcellus shales can fetch up to $20,000 an acre.

And the Mississippi is hardly a mystery to oil and gas producers. Some 15,000 vertical wells drilled there dating back to the 1950s offer priceless data points for the horizontal drilling and hydraulic fracturing now unlocking oil-rich reserves.

"That's a plus with all that downhole information," Warlick said.

The Mississippi keeps drawing new companies every year, and leases are expanding into southern Kansas. Eagle Energy recently sold itself to Midstates Petroleum, while Doxa Energy CEO John Harvison three months ago expressed optimism about his Canadian company's 20 percent stake in 18,000 acres of Oklahoma drilling opportunities.

"We are excited that our early results continue to confirm our belief that Doxa's acreage is favorably positioned within the defined core area of the Mississippian Lime play," Harvison said in a company release, "and that this play represents years of potential growth for Doxa in what is considered by some to be one of the most attractive plays in the United States today."

The biggest players in the Mississippi are two Oklahoma City-based companies - SandRidge Energy and Chesapeake Energy. SandRidge CEO Tom Ward was a co-founder of Chesapeake along with its CEO, Aubrey McClendon.

"Tom Ward and Aubrey McClendon are two common souls," Warlick said. "They have a land man's mentality: go out and get the land first."

The Mississippi Lime acreage may be cheaper to lease and the well less expensive to drill, but the play comes with its cost complications. The limestone reservoirs come with a vast amount of water and require one saltwater disposal well for every four to seven production wells.

Oklahoma and Kansas operators currently are allowed to drill their own disposal wells, which can cost $200,000 apiece. Warlick does not know if environmental regulations will allow that forever.

"It produces a heck of a lot of water," he said.

Nonetheless, Warlick believes the Mississippi Lime has decades of life left in it. He said its production volumes hold their own with the Eagle Ford Shale, Permian Basin, Marcellus Shale and, if not equal, at least close to the Bakken Shale.

"It's not a Bakken, but it wants to be," Warlick quipped. "I think it's a solid investment, if you're able to handle the saltwater conundrum. It's a Top 5 play, easily."

Wednesday's portion of the Mississippian Formation Summit also featured talks by Charles Wickstrom, managing member of Tulsa-based Spyglass Energy Group, and Baker Hughes' Tom Whalen, who directs water management efforts for the well services company. A panel discussion scheduled Thursday will look at the needs for midstream construction to help store and move the oil coming out of the limestone plays.

Tulsa-based SemGroup Corp. recently announced a joint venture with Gavillon LLC to build the Glass Mountain Pipeline, which would transport Mississippian crude to the Cushing storage hub.

Caballo Energy LLC, another Tulsa-based energy company, plans to build a cryogenic processing plant near Enid to handle natural gas from the region.

Original Print Headline: Mississippi Lime formation creates excitement

Rod Walton 918-581-8457
rod.walton@tulsaworld.com

Associated Images:

Don Warlick: The president of Houston-based Warlick Energy touted the benefits of Northern Oklahoma's Mississippi Lime