I got an Corporation Commission order in the mail advising that Continental Resources vacated their proposal for a well on Sections 22 and 27 in township 14 north. They leased these 2 sections twice and even built a location for the well. Does this mean another company could come in and lease the minerals? The lease would have went out September of 2019 if not for the site. Why would a company put that much expense into an area but never drill?
I also heard a hypothesis that CR is not drilling so Invenergy can start putting up windmill towers in the area. Why would CR care what Invenergy does?
Looking at Continental’s recent activity in that area and their investor presentations, looks like they changed their strategy and pivoted to “full field development”. Most of the SCOOP/STACK players are doing this now. Rather than drilling one or two wells per section to test the reservoir or hold the lease, leasing is slowing down and the companies are trying to prove they can actually drill 4/8/16 wells per section (or whatever they’re telling investors).
Full field development means drilling all the wells in one section at once, since that’s the most effective way to drain a reservoir, but you can only do it when you’re REALLY certain that the section is good and you know how many wells to drill.
As far as why they’d spend all that money and not do anything with it, the location and leasing is in the $200-$400k range. Drilling a well is $4-6 million. It’s expensive to not have a location ready to send the rig to (can be 10’s of thousands depending on the day rate) and takes a bit of time, so companies will build out the locations several wells ahead of the rig in the schedule. It happens quite often that the reservoir engineers get some new data and decide they don’t want to drill that area after all (so the company only loses $300k rather than potentially millions if the well is a bad performer). Or executives decide to switch from proving the extent of a play to developing the acreage, but word got to ops after the locations were built (most likely what happened here).
Based on activity, looks like they’re doubling down in Blaine county.
(image filtered to just CLR wells >2015, with darker wells being newer wells)
