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Shell Oil giving up on Kansas for more lucrative plays

By Bob Downing Published: September 23, 2013

From the Associated Press:

Shell Oil is pulling out of Kansas after its exploratory wells didn’t show enough potential to keep the energy giant around.

The announcement is another in a series of departures by major exploration companies that have given up on the Kansas side of the Mississippian Lime foundation, The Wichita Eagle reported.

Shell, which is selling off its 45 producing wells and 600,000 acres in nine Kansas counties, stopped drilling in July and reviewed results for the exploratory wells, company spokesman Scott Scheffler said.

“As part of that process, in some cases — as in this review — assets are identified that do not meet our targets and the best value option for Shell is to divest,” Scheffler said.

The Mississippian Lime Play is a porous limestone formation in parts of northern Oklahoma and southern and western Kansas. Once thought to have been tapped out by vertical drilling, its future was revived by hydraulic fracturing, or fracking, in combination with horizontal drilling.

Shell will still seek oil in other play locations with a higher payoff in North America, Scheffler said. It is selling off its assets in Barber, Harper, Kingman, Pratt, McPherson, Sedgwick, Sumner, Rice and Reno counties in Kansas.

Chesapeake Energy, Encana and Apache have been gone from the state for more than a year; Tug Hill Operating and Reeder Energy filed their last intent to drill in March; and Midstates Petroleum filed its last in April.

Wichita-based Woolsey Petroleum remains an active driller but hasn’t filed new plans for a horizontal well in more than three months.

Other companies — such as Sandridge Energy of Oklahoma City, Okla., Source Energy Mid-Con of Highlands Ranch, Colo.; and Unit Petroleum of Tulsa, Okla. — have remained active.

Sandridge popularized horizontal drilling in the Mississippian Lime Play starting in 2010. The company is now focused on improving profitability after management turnover and a shareholder revolt last spring, and has narrowed its drilling to six counties: Comanche, Barber and Harper counties in Kansas and Wood, Alfalfa and Grant counties in Oklahoma.

While Shell decided to drill elsewhere, other companies are happy with their results in Kansas.

Unit Corp. of Tulsa has completed seven wells in Reno, Kingman and Pratt counties in Kansas, said Mike Earl, the company’s vice president of investor relations. The company said those wells are exploratory, but Earl says they’re averaging 240 barrels per day of oil equivalent, at 89 percent oil.

Earl said Unit was planning to add a second drilling rig by the end of the year.

Wayne Woolsey, owner of Woolsey Petroleum, said Shell’s move shows that Kansas can’t support some oil companies, but it can support those that keep their costs down.

“It’s a matter of a larger company having economics that are entirely different than mine,” Woolsey said. “But they came in and made a real effort.”

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