The Mississippian Lime formation, which stretches across northern Oklahoma, western Kansas and southern Nebraska, is drawing increased industry interest, thanks to cheaper drilling costs and shallower wells compared to North Dakota’s Bakken Shale, according to the “IHS Herold Mississippian Oil Play Regional Play Assessment.”

“The Mississippian’s highly variable drilling results to date, combined with increasing entry costs, might deter new entrants, but recent drilling reports suggest results could improve as knowledge of the play and technical adjustments increase,” said Paul O’Donnell, energy equity analyst at IHS, and author of the report. “This is a shallow carbonate play with depths ranging from 3,000 feet to 6,000 feet, and since it’s shallower than other U.S. unconventional plays, operators can employ less-expensive, lower horsepower rigs to drill it.”

Using lower horsepower rigs, drillers could see costs as low as $2.9-3.5 million/well, compared with an average $8-11 million/well in the Bakken, according to IHS.

SandRidge Energy Inc. has an early-mover advantage and is most leveraged to the Mississippian, as measured by acreage in the play per million dollars of company enterprise value, according to the IHS report. “SandRidge is driving the play’s development” and recently reported a 2,200 boe/d well (first 30-day average) that could make Alfalfa County, OK, one of the best spots in the play, IHS said.

“Other than SandRidge, no publicly traded company has material leverage to the play; consequently, we believe the play will be a good ancillary asset for most companies, rather than a ‘company-changer,'” O’Donnell said.

During 2Q2012 SandRidge drilled 91 horizontal wells in the Mississippian — 71 in Oklahoma and 20 in Kansas — according to the company, which said Thursday it has drilled 392 of the 872 total horizontal wells that have been drilled in the play. SandRidge said it has an inventory of approximately 8,000 drilling locations on approximately 1.7 million net acres, and has 33 rigs operating in the play: 19 drilling horizontal wells in Oklahoma, 10 drilling horizontal wells in Kansas and four drilling disposal wells. SandRidge plans to drill approximately 380 horizontal wells in the Mississippian play this year and exit 2012 with 33 rigs drilling horizontal wells.

In the closing days of 2011 Oklahoma City-based SandRidge and Spain’s Repsol YPF SA formed a joint venture (JV) to target the Mississippian Lime (see NGI, Jan. 2). SandRidge retained about 1.5 million net acres, making it the largest leaseholder in the formation. SandRidge also has a JV with South Korean investment firm Atinum Partners Co. targeting the Mississippian Lime (see NGI, Aug. 8, 2011).

Apache Corp. recently disclosed that it has built a 580,000 net-acre position in the Mississippian Lime in Kansas and Nebraska with an inventory of 7,200 potential drilling locations and an estimated resource potential of 2 billion bbl. And Range Resources Corp. last month said it expects its oil and liquids output to “rise at an increasing rate” in the second half of this year because of its emphasis on planned drilling in the liquids-rich portion of the Marcellus Shale and its leasehold in the Mississippian Lime (see NGI, July 16).

But Encana Corp. and Chesapeake Energy Corp. say their Mississippian properties are on the market (see NGI, July 30).

In February Plains All American Pipeline (PAA) said it plans to build a 170-mile pipeline between Alfalfa County, OK, and its Cushing, OK, storage facility to service increasing Mississippian Lime crude oil production in northern Oklahoma and southern Kansas. The proposed pipeline, in conjunction with a previously announced Medford, OK-to-Cushing pipeline conversion, would provide approximately 175,000 b/d of crude oil transportation capacity, Houston-based PAA said. The pipeline is expected to be completed in mid-2013. PAA also said that it had entered into a long-term agreement to purchase SandRidge’s production from a multi-county area around the proposed pipeline system.

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