Could This Oil Field Be the Next Bakken?

In the back of every investor's mind is the big opportunity missed. 

Take Continental Resources (CLR) for example. Through application of new technologies, the company was one of the first to unlock massive new quantities of oil and gas from the North Dakota Bakken. This has created a fortune for investors who got in early on the development. 

But the U.S. shale oil revolution isn't limited to North Dakota. In fact, many Bakken pioneers are turning their attention to a new field. And investors should expect this name to become a regular part of their vocabulary in 2014.

I'm talking, of course, about the Southern Central Oklahoma Oil Province, or SCOOP. 

Could this oil field be the next Bakken?
According to Continental, SCOOP is a "world-class resource." The field straddles the Woodford Shale and the Anadarko Basin and covers an area about 3,300 square miles in size. And at its thickest, the pay-zone is 400 feet deep, twice as thick as the Bakken. 

Continental believes the 330,000 net acres it operates in the area will produce 1.8 billion barrels. To put that into perspective, that's equal to more than half of the oil recovered in 100 years of conventional drilling in Oklahoma. And the company estimates that those wells will generate returns on investment of between 40% and 55% based on $3.50 gas and $90 oil.

In total, the company estimates SCOOP could hold 70 billion barrels of oil in place. Considering the upside in this play, other operators are rushing in to get a piece of the action. 

Eagle Rock Energy Partners (NASDAQ: EROC) has 16,000 net acres right in the heart of the SCOOP oil fairway, which is a large position for a company of this size. The firm saw a 31% year-over-year jump in production this summer after its nine horizontal wells went on line. 

After missing most of North America's oil boom, ExxonMobil (XOM 0.39%) is racing to catch up. The company's subsidiary, XTO Energy, paid $147 million to BNK Petroleum to expand its shale production in the state. 

And Marathon Oil (MRO 0.61%), the second largest landowner in the region, has 220,000 net acres under lease. However, the company cut its capital budget in in the area last year and is still producing mostly natural gas from this play.

Can we really trust these reports? 
Of course, Continental has an obvious incentive to talk up these numbers. And energy investors should be skeptical of extravagant claims. However, it's worth remembering that the company's optimistic estimates for the Bakken, once considered absurd, have proven remarkably accurate. 

Continental's drilling reports also back up its claims. The company's total output from these wells hit 20,070 boepd in the second quarter, up more than 390% year-over-year. Today, the company is busy de-risking its acreage and identifying the most productive areas of the field. 

Other companies have also reported impressive drilling results. During the third quarter Newfield Exploration (NFX) wells in the liquid-rich SCOOP fairway averaged gross initial production of more than 1,500 boepd. And oil accounted for more than 50% of this production. For context, anything above 1,000 barrels per day is considered exceptional. 

Foolish bottom line
These results definitely suggest the SCOOP could join the ranks of other shale plays like the Bakken and the Eagle Ford. This is yet another reason to avoid broad bets on higher oil prices and instead stick with the companies that are making major discoveries.