Dewey County SITREP

(This post originally appeared on www.oklahomaminerals.com on July 11, 2017)

All,

Oklahoma Oil and Gas Mineral Owners, as companies are consolidating their positions in the SCOOP and STACK, Dewey County appears to be one of the next counties on the frontier for explorationists. While some consider it a part of the NW STACK Extension, we should consider ourselves fortunate that it hasn’t been branded with another absurd acronym.

In the past 12 months, there have been 6,601 leases filed at the courthouse in the county seat of Taloga by numerous operators and brokers. Even with few well completions in the county, lease bonuses have continued to accelerate through the first half of 2017. While there are portions of Dewey that were heavily promoted during the deep gas days, in general, both the mineral and leasehold title chains are not as difficult to decipher as they are in the SCOOP or the Arkoma Basin. This is plus for landmen who can acquire leases quickly without squandering time and their land budgets on complicated title work.

There are two distinct plays being pursued in Dewey County. The first is a Pennsylvanian system play. Leading the charge is Mewbourne Oil Company with 11 pooling orders, and eight completions in a mix of both Cottage Grove and Cleveland wells. Other notable operators pursing similar targets are Arnold Oil Properties and JMA Energy Company. These companies have been active in Dewey County for a few years with little competition from private equity backed or publicly traded companies.

The reason for the increased activity in Dewey County however, is the hope that well results from the STACK Mississippian and Woodford wells will translate into similar results further to the West. In the past 12 months, there have been 11 applicants granted Pooling Orders from the Oklahoma Corporation Commission for the Mississippian and/or Woodford common sources of supply in Dewey County. For this discussion, Pooling Orders will be our metric to measure presence and activity level in Dewey County. The companies, the number of Pooling Orders issued and leases and/or assignments taken are detailed below.

It is clear from the data above that the four leading companies into the county are Tapstone, Continental, Council Oak (who purchased the Wolf Bend leases), and Carrera. The numbers deserve more analysis. Both Council Oak and Carrera have the same rich father (Encap Investments). As in the case with most private equity backed companies, once the sponsor deems that the company will achieve certain metrics with a sale, they will begin a process. It will be interesting to see if Carrera and Council Oak will be marketed together or separately.

Tapstone announced in April that the company will go public with the goal to raise $100m in the initial public offering. While Tapstone claims to own approximately 400,000 acres across the Anadarko Basin, most of its recent activity has occurred in Dewey and Woodward Counties. With an IPO on the horizon, one should expect prolonged activity in the area by Tapstone.

As always, Continental is the wild card. With a seemingly endless budget for leasing and exploration, your correspondent believes that 12 Pooling Orders and 563 leases is just the beginning and that Continental, despite its reputation for higher than average well costs, will be the development leader going forward in Dewey County.

More to follow,

Berlin