Granite Wash Rolls On In Third Quarter

By Eric Fox | November 11, 2010 AAA

The rush to oil and liquids development by the exploration and production industry has brought operators to the Granite Wash plays, a series of formations present in the Texas and Oklahoma panhandle regions. Wells in these plays produce a mix of hydrocarbons but contain high amounts of liquids, making leases here sought after by the industry due to the added value these wells provide.

IN PICTURES: Learn To Invest In 10 Steps

The Players

Unit Corp. (NYSE: UNT) is active in the Texas Panhandle area of the Granite Wash. The company added a fourth rig to its development program here in the third quarter of 2010, and it completed three horizontal wells during the quarter. A typical well in this area produces about 40% natural gas with the balance consisting of oil and natural gas liquids.

Although the Granite Wash is not a shale play, wells here are also drilled horizontally and are hydraulically fractured by operators. This boosts the productivity and cost of the wells. One of the wells reported by Unit Corp. was completed with a 3,700-foot lateral and 11 fracturing stages at a cost of approximately $4.8 million.

Another operator in the Granite Wash is Plains Exploration & Production (NYSE: PXP), which currently operates five rigs in the play. The company has 19,100 net acres and estimates that it has 152 locations to drill. Plains Exploration & Production has ambitious plans for the Granite Wash over the next few years, and it will put over $900 million in capital here through the end of 2014. The company hopes that this will increase its production from here to nearly 30,000 barrels of oil equivalent per day by 2014.

Newfield Exploration (NYSE: NFX) has 46,000 net acres that are prospective for the Granite Wash, and it has drilled 31 horizontal wells targeting the Marmaton and Atoka formations. Newfield Exploration said that the company has at least nine producing formations on its acreage, and it reported current net production of 115 million cubic feet of natural gas equivalents per day.

Forest Oil (NYSE: FST) has a large holding in the Texas panhandle region and drilled seven wells into the Granite Wash during Q3 2010. The company reported that these wells had an average production rate of 27 million cubic feet of natural gas equivalents during a 24-hour period.

Forest Oil prefers development in the Granite Wash to a dry gas area, because a typical well here produces more than twice as much revenue once the condensate and natural gas liquids are marketed and sold.

Yielding Increased Revenue And Higher Returns

The Granite Wash continued to attract more capital during the Q3 as operators hunted for oil and wet gas properties in North America. These wells yield more revenue and higher returns for operators in the exploration and production industry. (Find out how to invest and protect your investments in this slippery sector. See Peak Oil: What To Do When The Wells Run Dry.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus
Related Analysis
  1. India Remains An Emerging Market Bright Spot
    Stock Analysis

    India Remains An Emerging Market Bright Spot

  2. Still More Gains Ahead For Semiconductor Makers
    Stock Analysis

    Still More Gains Ahead For Semiconductor Makers

  3. Unconventional Drilling Still Has Room To Boom
    Stock Analysis

    Unconventional Drilling Still Has Room To Boom

  4. Finding An Alternative With Currency ETFs
    Stock Analysis

    Finding An Alternative With Currency ETFs

  5. Commodities: Has Their Time Come Again?
    Stock Analysis

    Commodities: Has Their Time Come Again?

Trading Center