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Oil companies encouraged, but not certain of Kansas oil boom

  • The Wichita Eagle
  • Published Tuesday, Nov. 27, 2012, at 3:23 p.m.
  • Updated Tuesday, Nov. 27, 2012, at 9:31 p.m.

— Several of the state’s largest horizontal oil and gas drilling companies stopped short of guaranteeing a long-term oil boom in Kansas, but at a state-sponsored conference in Hutchinson on Tuesday they said they were encouraged by their results after more than a year of drilling.

That disappointed the scores of companies, local governments and nonprofit groups represented at the gathering who sought insight on what to expect from the increased drilling activity. Still, the overall mood remained upbeat because of the prospects for long-term economic growth in rural southern and western Kansas.

Horizontal drilling accounts for less than 4 percent of the number of drilling permits approved in Kansas this year, but it’s rapid growth and potential for high production per well are creating excitement.

Kansas won’t see anything like what is happening in North Dakota, said Ed Cross, president of the Kansas Independent Oil and Gas Association.

“But it doesn’t have to be to have a significant impact on the state of Kansas and the nation,” he said.

Representatives of Shell Exploration, SandRidge Energy, Tug Hill Operating, Woolsey Operating and Osage Resources apologized for not having more definitive answers on how much and how long they will drill in the state’s Mississippian Limestone formation, which stretches through much of southern and western Kansas. They are still learning how to drill consistently profitable horizontal wells.

Woolsey Operating owner Wayne Woolsey, who has drilled in southern Kansas for more than 40 years, said his first three horizontal wells – at about $3 million apiece – weren’t profitable. But he learned, and the fourth one is pumping enough oil to more than pay for the first three wells.

To those worried that the boom could peter out in a year, David Todd, vice president of production for Shell Exploration, and the others said they were optimistic that wouldn’t be the case.

“It will be an oil producer for decades, but we don’t exactly where, exactly how much and exactly when,” Todd said. “But if anybody out there is wondering if this thing is for real: We already know enough to say this thing is for real.”

“I think you should take some solace that there will be longevity to this because the resource is there and people are deadset on understanding and getting it out of the ground,” added Robert Murdock, CEO of Osage Resources, a Hutchinson-based exploration company.

The oil companies representatives said they face several shortages in their plans to ramp up production, most importantly the electricity and water needed for the high-tech horizontal hydraulic fracked wells.

In response, a representative of Sunflower Electric, which supplies power in parts of western Kansas, said his company needs a better sense of where and how big electrical needs there will before building expensive electrical lines.

But Matt Grubb, chief operating officer of SandRidge, said its drilling program is set for nine to 12 months, and it can’t predict where it will find oil.

The state has sped up most oil drilling permits, so that’s not a big problem, oil representatives said. Longer term is a shortage of skilled labor and, for the rural towns, housing for that labor.

Reach Dan Voorhis at 316-268-6577 or dvoorhis@wichitaeagle.com.

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