This little-known play offers plenty of output growth, but some investors may not be giving it enough credit. Investors should always look at the sum of the parts, not just the shiniest one.
The Granite Wash is on the western side of Oklahoma, and Apache (APA +0.23%) owns ~418,000 net acres in the area.
Oklahoma
Apache produced 31,687 boe/d in the second quarter, which was made up of 48% liquids. With 22,800 potential drilling locations and the possibility for 4.5 billion barrels of oil equivalent in recoverable resources, this play will be providing Apache with growth for years.
Right now Apache is running 11 rigs in the play (as of May 2012) to keep pushing production up. While some may look at 48% liquids as inadequate, keep in mind that each well's average ultimate recovery rate is ~793,000 boe, which is higher than the 400-700,000 boe range other plays see.
Apache has plans to drill appraisal wells in the area to see if its reserve estimates are true. If it turns out that there is that much oil and gas in the area then this play is much bigger than many are pricing into Apache.
Apache was able to bring a couple of wells online that had EURs significantly above the average, with Ramp 26 #7H posting an EUR of 1,131,000 boe. Two other wells, Stiles 3 #20-3H and Jill 54 #4-54H, also posted EURs that were above 1 million boe.
As Apache keeps drilling in the area, it has the potential to find more recoverable resources and utilize better drilling techniques to increase EUR per well.
Apache isn't alone in the Granite Wash: Devon Energy (DVN +0.89%) has a ~66,000 (net) acre stake in the play.
Liquids potential
Devon has four rigs in the area with a plan to focus on liquid rich plays. While this play is a small part of Devon, it still will provide some production growth over the next few years.
For 2013 Devon wants to complete roughly 50 wells to tap into the 220 million boe of risked resources in the area. Overall Devon sees 350 potential drilling locations in the area, which will add to its 22,000 boe/d output in the second quarter of 2013.
Woodford
Devon also owns ~400,000 net acres in the Woodford Oil Shale with over 1,000 potential drilling locations. That number is steadily rising as its 15 rigs operating in the region are actively looking for new recoverable reserves.
Devon is using more than just rigs to find new locations to drill, it's also integrating 3D seismic imaging. Devon is primarily utilizing 3D seismic imaging in the Mississippi portion of the play, where it has a ~250,000 net acre stake.
Combined, both plays were only producing 7,000 boe/d at the end of June, which is why Devon is running 15 rigs in the play to quickly increase production and utilize each of its 1,000+ potential drilling locations.
While many invest in Devon for the Permian growth story, the Granite Wash and the Woodford-Mississippi Trend can't be overlooked. Combined there are 19 rigs operating in the area, which comes pretty close to the Permian's 27 operated rigs.
Apache is also invested in the Permian Basin and sees 37% of its potential recoverable reserves, all 11.7 billion boe, coming from the Permian Basin.
Final thoughts
It's best to look at the whole picture of a company instead of just the play it has the highest interest in. Both Apache and Devon are looking toward the Permian Basin for growth, but that shouldn't cloud over its other acreage. The Granite Wash has the potential to wash over investors' heads, instead of making investors awash in returns.
