The exploration and production industry moved forward on the development of a Mississippian age oil play in the Mid Continent area during the second quarter of 2011, as operators continue to scour the United States for oil and liquid plays. (For more on oil and gas, read Oil And Gas Industry Primer.)

TUTORIAL: Earnings Quality

Mississippian Oil Play
The latest oil play that has captured the attention of the industry is located in Oklahoma and Kansas, an area that has a long history of production from vertical wells. The region also has a well-developed infrastructure system to support development.

The play is at a relatively shallow depth of approximately 5,000 to 6,000 feet, and consists of Carbonate rocks that have high permeability. The industry is developing the area using the horizontal drilling that has proven effective in shale plays across North America.

The Players
PetroQuest Energy
(NYSE:PQ) is a new player here and recently added to its acreage through the purchase of a position from a private oil and gas company. After this deal closes, the company will have 40,000 net acres under lease in Oklahoma and Kansas that is prospective for the Mississippi Lime play.

PetroQuest Energy will start drilling on the leasehold in the fourth quarter of 2011 and is looking for a partner to assist in development.

Range Resources (NYSE:RRC) is at an early stage of development of the Mississippi Lime in Oklahoma and has drilled four wells in 2011 on its acreage. The company has 45,000 net acres exposed to this play with 900 drilling locations.

A closer look at the economics of the Mississippi Lime demonstrates why this area has attracted many industry players. Range Resources believes that the average Mississippian well will have an estimated ultimate recovery (EUR) between 400,000 and 500,000 barrels of oil equivalent (BOE), with 70% composed of oil and other liquids. The company will spend $3.1 million to drill and complete a typical well, yielding a rate of return from 75 to 86%, assuming oil prices of $90 per barrel. (To help you invest in oil, check out A Guide To Investing In Oil Markets.)

SandRidge Energy (NYSE:SD) is one of the largest operators involved with the Mississippian play, with 900,000 net acres under lease. SandRidge Energy drilled 61 horizontal wells during the first six months of 2011, and has budgeted for a total of 172 wells for the year.

SandRidge Energy has grown production rapidly along with that development and reported production of 8,400 BOE per day during the second quarter of 2011. The company has plans to accelerate activity next year and will increase its operated rig count from the current level of 14 rigs to an average of 24 rigs in 2012.

Chesapeake Energy (NYSE:CHK) has a ubiquitous presence in nearly every onshore basin in the United States and has been at work developing the Mississippian play. The company recently reported a completed well here with an initial production rate of 770 BOE per day.

Devon Energy (NYSE:DVN) includes the company's Mississippian acreage in its New Ventures group, and is acquiring seismic information and conducting initial drilling in the play in 2011.

The Bottom Line
The industry has found yet another oil play in the onshore United States that can be economically developed using horizontal drilling. While caution is warranted on any new oil and gas play, the industry's long experience of vertical development in the same area will probably increase the chance of success here. (To give you a better idea on how you can invest in oil and other commodities, see How To Invest In Commodities.)

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