STACK INVESTMENT CENTER
America's oil boom has undergone a lot of changes over the past few years. What started out as a North Dakota-focused boom quickly spread to Texas, and then to the Rockies and Oklahoma. And, while the downturn in oil prices has clearly slowed the boom in many of those places, low oil prices haven't completely extinguished the enthusiasm over what's still to come. That's pretty clear by listening to oil executives' comment on the latest oil play that's catching their eye: The Sooner Trend Anadarko Basin Canadian and Kingfisher Counties, more commonly known as the STACK play of Northern Oklahoma.
Who's Investing in STACK?
The key takeaway here is that what makes the STACK so economically lucrative even at weaker oil and gas prices is the sheer volume of hydrocarbons packed in each section, which, when combined with strong pressure leads to wells that spew out robust initial production and that produce a lot of oil and gas over their lifetime. That combination leads to a faster initial payback and a long tail of income that pushes up the well return. To put it another way, a producer will get more oil and gas out of a STACK well over its lifetime than from a well that costs a similar amount, but it is drilled into a reservoir with less concentrated hydrocarbons or less pressure. That makes a huge difference when it comes to drilling returns.
Investor takeaway
Investors should expect to hear a lot more about the STACK in 2018 because it's one of the few economic plays a driller can invest in right now. That's why we're seeing companies like Devon Energy pay up to bulk up on their position, while others like Newfield Exploration, Continental Resources, and Chesapeake Energy are shifting capital to this play because it's yielding the most lucrative returns in their portfolios. Further, while the economics are compelling right now, they'll get even better as commodity prices improve, which could lead to strong value creation in the future for drillers that have a position in the STACK.