The Woodford Shale is seeing a large amount of development, as new technology has unlocked many shale gas areas that previously were not economical to develop. Along with this development, the Woodford Shale is seeing a large amount of infrastructure built to gather, process and transport the increased production expected in the future.
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Although the Woodford Shale has a reputation exclusively as a natural gas basin, the play has several areas where production is composed of wet gas - or natural gas with natural gas liquids - in the gas stream. A look at the economics of drilling in the wet gas area in the Cana Woodford Shale demonstrates why exploration and production companies are attracted to this play. Continental Resources (NYSE:CLR) has approximately 258,000 net acres exposed to this area and will increase its operated rig count from six to eight by the end of 2010. The company estimates that a typical well here will earn a rate of return close to 60%, assuming a $5 per Mcf NYMEX price, a well cost of $7.6 million and an estimated ultimate recovery of 7.1 Bcfe per well.
Devon Energy (NYSE:DVN) is developing the Cana Woodford Shale, where the company added 130,000 net acres during 2010, bringing its total position to 240,000 net acres. The company is building its own facility here to process its production and expects to complete it before the end of 2010. The facility will have capacity to process 200 million cubic feet per day of natural gas.
Devon Energy drilled 110 wells here in 2010, and it reported average production of 117 million cubic feet equivalent per day during Q3 2010. The company may need to expand this new facility further, as it is planning extensive development in the Cana area in 2011.
Expansion At Clyde Mountain System
Copano Energy (Nasdaq:CPNO) is currently building an expansion at the Cyclone Mountain System that serves the Woodford Shale in Oklahoma. The system has a current capacity of 80 million cubic feet per day, and the company expects capacity to reach 120 million per day by the end of 2010. Copano Energy foresees a further expansion to 180 million cubic feet per day in 2011.
Another company active in servicing the Woodford Shale is Atlas Pipeline (NYSE:APL). The company owns the Velma Gathering and Processing system, and it recently completed a 75-mile pipeline from here to Madill, Oklahoma, where the company can access production from the Woodford Shale.
Extensive Infrastructure Required
The development of unconventional resource basins in the United States is growing quickly as companies look for domestic sources of oil and gas. This development requires extensive infrastructure to process and transport this production. (For related reading, see How Does Crude Oil Affect Gas Prices?)
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