America's oil boom has turned parts of Texas and North Dakota into boom towns. It's starting to do the same thing in Oklahoma, which is one surprising winner of this energy upturn.
Oil production in the state has actually doubled since 2005, with daily output at more than 300,000 barrels as of this year. However, the state's best days could still be ahead as not one but three new oil discoveries have been announced over the past year.
The latest discovery comes from Newfield Exploration (NYSE:NFX), which already has a strong presence in this overlooked oil-producing state. The company is calling its latest discovery the Stack play, because it's stacked with potential production zones. Encouraging Initial results have shown rates of return of more than 35%.
The Stack play combines the Meramec and Woodford shales. Both are liquids-rich at 70% of production, of which 40% of overall production is oil. That's yielding compelling initial economics that can be improved over time as the company becomes more efficient at drilling the play. The following slide details the new play:
As that slide shows, the Stack play is in the vicinity of Oklahoma's other two most recent oil discoveries: the SCOOP and the Cana-Woodford. The three plays, as well as others like the Mississippian and portions of the Granite Wash, have the potential to really drive Oklahoma's oil production in the years ahead.
The SCOOP has really caught the attention of Continental Resources (NYSE:CLR). The Bakken's top producer is investing an increasing amount of its capital into the SCOOP to fuel the next phase of its growth. Next year Continental Resources will invest a quarter of its capital budget on the play. That capital will be used to grow its rig count from 10 to 18, which will provide a big boost to production. Overall, the SCOOP is a critical component of Continental Resources' plans to triple its production and reserves by 2017.
The other key new play is the Woodford oil shale play that Devon Energy (NYSE:DVN) is targeting. Devon is focused on the Cana-Woodford and the Mississippian Woodford. Both are rich in natural gas liquids and oil and will be key components of Devon Energy's continued shift from a natural gas producer to one with a much more balanced commodity mix. With thousands of future drilling locations, Devon Energy has a future that's fueled in part by growth in Oklahoma.
The oil boom is already having a big impact on the state. For example, it's fueling a housing boom in downtown Oklahoma City, where more than 1,000 apartments are set to be built over the next year. The city also rates as one of the highest in the nation for job creation. This is due in part to the fact that every energy job created necessitates the creation of additional indirect and induced jobs to support the industry. Development of these three new plays will only further fuel the state's surprising oil boom.