Strong oil prices deliver profit from difficult wellsites.
Powder River Basin permit prices have skyrocketed over the past year.
Select Energy provides solutions for unconventional, exploratory sites.
With oil prices hovering around three-year highs, investors are scrambling to enter the market. Shale oil continues to grow in popularity, and prices are, in turn, bolstering that growth. Stronger oil prices make many wells profitable that would not be so in a weaker market.
Along with increased prices, the production slowdown led by OPEC and Russia has reinvigorated the discussion of energy independence. Domestic oil is a big winner right now. Under these conditions, exploration is taking off.
Last year we mentioned the Denver-Julesburg Basin as an oft-overlooked shale oil play. Drillers in the D-J Basin find that they recover their costs when the price of oil is $40 a barrel or higher. With oil prices presently sustaining much higher prices than that, production is at an all-time high.
Staying in the Niobrara Formation, Wyoming’s Powder River Basin is quietly becoming a leading shale play. It was one of the fastest growing regions before the 2014 downturn, and many people now are returning to the area. EOG Resources, Chesapeake and Devon Energy are all producing in the region and pipeline operators are responding.
The Niobrara Region is nearing 600,000 barrels a day. That is nearly triple its 2013 production.
What is next?
While the Niobrara Formation may not be as famous as the Permian, Bakken, or Eagle Ford Basin, it is still a known producer. Bloomberg’s Alex Nussbaum reported that drilling permits last year were selling for $1,000 an acre. Prices now ask 15-17 times as much.
The next frontier of shale oil is anyone’s guess. East of the Mississippi could be a possibility, as exploration is happening in Chattanooga and Floyd-Neal in the Valley & Ridge Province, and in Tuscaloosa in the Salt Basin near the Haynesville-Bossier Play. In the west, there is interest from the Bend Arch to the edge of the Palo-Duro Basin, and the shale plays in Montana: Heath and Cody. While prices are strong, exploration and removal of tougher hydrocarbons will continue. This will likely continue through the end of this year.
Select Energy Services provides services to customers in every major unconventional basin throughout the United States and Canada. We are geographically positioned to provide customized solutions to the unique requirements of exploring these unexplored plays.