Oklahoma Oil and Natural Gas Components and Long-Term Outlook

GEOL 4233 Lecture January, 2008

Oklahoma Oil

Crude Oil Reserves (1-1- 2001)

6,000

5,000

MMBO

4,000

3,000

2,000

1,000

0 Texas Data From World Oil

Alaska

California

New Mexico

Oklahoma

Wyoming

Lousiana

Kansas

Geological Provinces of Oklahoma

Map of Oklahoma Oil and Gas Fields; Distinguished By GOR and Coalbed Methane Production. From Boyd (2002) (GOR Cutoffs: Oil 20,000)

Schematic Cross-section of the Anadarko Basin Modified from Witt and others (1971).

DIVISIONS OF GEOLOGIC TIME Eon Era

Period

Cenozoic

Quaternary

Tertiary

Mesozoic

Cretaceous

Jurassic

Phanerozoic

Triassic

Paleozoic

Carboniferous

Permian

Pennsylvanian

Mississippian

Devonian

Silurian Ordovician

Cambrian

Epoch

Age (approx.) in millions of years

Holocene Pleistocene Pliocene Miocene Oligocene Eocene Paleocene Late Early Late Middle Early Late Middle Early Late Early Late Middle Early Late Early Late Middle Early Late Early Late Middle Early Late Middle Early

Geologic Time Scale Modified From Harland (1990) and Hansen (1991).

0.010 1.6 5 23 35 57 65 97 146 157 178 208 235 241 245 256 290 303 311 323 345 363 377 386 409 424 439 464 476 510 517 536 570

Oil seep in Stanley Fm. (U.Miss) 20 miles south of McAlester. Photo by Jock Campbell.

The Nellie Johnstone #1, drilled in 1897 just south of Bartlesville, established the first economic production in the State. Photograph taken from Franks, 1980.

P o s tle

R in g w o o d S ooner T rend H o ld e n v ille

F itt s Edm ond W est G o ld e n T r e n d

2000

O k la h o m a C ity C r e s c e n t- L o v e ll

B o w le g s E a r ls b o r o L it t le R iv e r

S e m in o le S t. L o u is

B urbank E o la - R o b b e r s o n S tr o u d

H e a ld to n C em ent H e w itt

C u s h in g A lle n

Avant G le n n p o o l S h o - V e l- T u m

B a r tle s v ille - D e w e y

C u m u la t iv e P r o d u c t i o n ( M M B O )

Major* Oil Fields in Oklahoma * Cumulat ive product ion > 10 0 M M BO t hrough 1/ 1/ 2 0 0 0

Fro m Internatio nal Oil Sco uts As s o ciatio n

1500

1000

500

0

Major Oklahoma Oil Fields (> 100 MMBO Recovery)

1904 1908 1912 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

A n n u a l T o ta l

Oklahoma Well Completion History (All Wells)

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

Data From Oklahoma Corporation Commission

Average Oklahoma Crude Price (Not Inflation Adjusted) 70.00

60.00

Dollars / Barrel

50.00

40.00

30.00

20.00

10.00

Year Data From Oklahoma Corporation Commission

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

1966

1964

1962

1960

1958

1956

1954

1952

1950

0.00

Selected Oklahoma Oil Fields: Ten-Year Change in Production 1994-2003 (> 500 MMBO Recovery or 4,000 BOPD) From IHS Energy, 2004 5,000

0

B O PD

-5,000

-10,000

P o s tle

S o on e r T re n d

G o ld e n T re nd

F itts

B u rb an k

C u s h in g

S h o- V e l-T u m

B a rtle s v illeD ew e y

-20,000

O k la h o m a C ity

-15,000

Sho-Vel-Tum Field Oil Production

Postle Field Oil Production

Oklahoma Crude Oil Production (Including Condensate)

800,000 700,000 600,000

B b ls /D a y

500,000 400,000 300,000 200,000 100,000 -

Data From OK Corp Comm, 2007

Year

Oklahoma’s Major Reservoir Classes Blanket Sandstone (BS):

Carbonate Shelf (CS):

Fluvial-Dominated Deltaic (FDD):

Oklahoma Oil Production By Reservoir Class Where reservoir recorded by operator

BS Reservoirs 17.5%

CS Reservoirs 18.5%

FDD Reservoirs 64.0%

BS - Blanket Sandstone CS - Carbonate Shelf FDD - Fluvial-Dominated Deltaic Sandstone

Blanket Sandstone (BS) Oil Creek Sandstone

Carbonate Shelf (CS) Hunton Limestone

Fluvial Dominated Deltaic (FDD) Hartshorne Sandstone

Depositional Environments In Idealized Tidal Delta

Idealized Incised Valley

Major Factors Impacting Recovery Reservoir Complexity

Poor Reservoir Management

Cushing Field Blowout (circa 1914)

Two Possible Oil Futures

Projected Oklahoma Oil Production Decline (Through 2040) 250

3.0% Decline (Incremental) 4.5 % Decline Actual Production

150

Cumulative Production (1-1-2006): 14,745 MMB Remaining Recoverable Reserves: 3.0% Decline - 1,238 MMB (203 MMBO Incremental Recovery) 4.5% Decline - 1,035 MMB

100

50

2039

2037

2035

2033

2031

2029

2027

2025

2023

2021

2019

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

0 1967

Million Barrels / Year

200

Oklahoma Original and Remaining Oil In-Place Volumes (MMBO) By Reservoir Class

Reservoir Class

% of Cum Prod

E.U.R. (Max)

Average Recovery Factor

1/RF%

OOIP

Rem OIP

BS

17.5%

2,806

44.1%

2.27

6,370

3,564

CS

18.5%

2,949

10.0%

10.00

29,490

26,541

FDD

64.0%

10,245

21.2%

4.72

48,356

38,111

Total

100.0%

16,000

>

84,216

68,216

(1-1-2006 Cum = 14,745)

Oklahoma's Oil Endowment (In Billions of Barrels)

Oil Produced Through 1-2007 Incremental Oil Through ~2040 Remaining Oil In-Place

68.2

81%

18%

14.7

1.3 1%

Estimated Original Oil In-Place 84.2 BBO

Oklahoma Natural Gas

The Source of Oklahoma Coal

Wyoming

Excluding Federal OCS Gas State

C a lifo r n ia

A la s k a

A la b a m a

Kansas

C o lo r a d o

W y o m in g

N ew M e x ic o

O k la h o m a

L o u is ia n a

T exas

B C F /Y e a r

Natural Gas Production in 1999

5000

4000

3000

2000

1000

0

Map of Oklahoma Oil and Gas Fields; Distinguished By GOR and Coalbed Methane Production. From Boyd (2002) (GOR Cutoffs: Oil 20,000)

Major* Gas Fields of Oklahoma From International Oil Scouts Assoc.

C u m u la tiv e P ro d u c tio n (B C F )

7,000 6,000 5,000 4,000 3,000 2,000 1,000

h ic k a-C to n g

te r

1970

pen

as h

a

nam

1965

C ar

1959

Put

C i ty

1947

Elk

den

Tr e

nd

1945

G ol

nd ner Soo

v e rn -La ane M oc

Tr e

e

n u rt o

ug o n -H mo G uy

1945

Wa

* Cumulative Production > 1TCF through 1/1/2000

1930

1929

W i lb

to n

ta

r r is R ed

O ak

-N o

1927

1916

Kin

1912

Disc. Date -

Major Oklahoma Gas Fields (> 1 TCF Recovery)

* - 2006 Estimated 2006*

2005

2004

2003

2002

2001

12,000

2000

14,000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

1971

1970

N umber of C ompletions

Oklahoma Drilling Results 1970-2006 (Data from IHS Energy 4-2007)

16,000

Dry Gas Injector Oil

10,000

8,000

6,000

4,000

2,000

0

Oklahoma Gas Drilling & Price Since 1970 Drilling data from IHS Energy(4-2007) / Prices from O.C.C.

$8.00

3,000

Gas Completions 2,500

$7.00

Gas Price

2,000

1,500

$4.00

$3.00 1,000 $2.00 500 $1.00

0 2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

1971

$0.00

$/MCF

$5.00

1970

Number of Completions

$6.00

Mocane Laverne Field Gas Production

Strong City Field Gas Production

Cement Field Gas Production

Some types of subsurface natural gas accumulations

Oklahoma Coalbed Methane Production (Estimates from Cardott, 2004 and IHS Energy)

100

90

80

70

BCF

60

50

40

30

20

10

0 1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Oklahoma Gas Well Production Rates (1999) 12000 N u m b e r o f W e lls

10000 8000 6000 4000 2000 0 0-50

Data From E.I.A.

50-100 100-200 200-400 400-800 8001600

16003200

Rate Class (MCF/D)

32006400

6400- 12800- >25600 12800 25600

1900 1904 1908 1912 1916 1920 1924 1928 1932 1936 1940 1944 1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

M M C F /D

Oklahoma Natural Gas Production

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

From Oklahoma Corporation Commission Year

Oklahoma Proved Dry Gas Reserves 18 16 14

TCF

12 10 8 6 4 2 0

Data From EIA

Year

Data From O. C. C. 2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

1966

1964

1962

1960

1958

1956

1954

1952

1950

M u lt ip lie r N e c e s s a ry T o E q u a t e G a s T o O il P ric e

Oklahoma Gas Price Undervaluation Relative To Oil (6 MCF / Barrel)

8

7

6

5

4

3

2

1

Working gas in underground storage compared with 5-year range (From E.I.A.)

Current Year

5-Year Range

Contributions To Oklahoma Gas and Oil Production Based on Well Age (For January 2007) 80% 71%

P e rc e n ta g e o f P ro d u c tio n

70%

Gas Oil

60%

58% 54% 48%

50% 39%

40%

30%

26% 18%

20%

10%

6%

8%

10%

11%

13%

0% Data From IHS Energy

1 Year

2 Years

3 Years

4 Years

5 Years

10 Years

9

9

8

8

7

7

6

6

5

5

State Summary Oklahoma Annual Hydrocarbon Production (6 MCF / Bbl)

600

500

Gas Production (BOE) Oil Production

MMBOE

400

300

200

100

0

Data From Oklahoma Corporation Commission

Conclusions OIL: 1) Undiscovered oil insignificant. 2) Improved recovery only source for significant new production. 3) Long-term prices should remain strong. (Global market) 4) Challenge is identifying enhancement opportunities.

GAS: 1) Will remain State’s primary energy resource. 2) Many sources of new production. 3) Price tied to weather. (Local market) 4) Drilling activity key to maintaining production levels.

BOTH: 1) Price will determine volumes ultimately produced. 2) State/operator revenues dependent on price, not production rate.

Acknowledgements IHS Energy Group

U.S. Department of Energy (E.I.A.)

Oklahoma Corporation Commission

Oklahoma Tax Commission

International Oil Scouts Association

Oil and Gas Journal