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Out-of-state drillers turn up the heat

10/29/2012

WICHITA (AP) -- An influx of out-of-state horizontal oil drillers into Kansas is driving up land-lease prices so much that some traditional drillers said hundreds of the state's vertical wells could be idled within two years.

WICHITA (AP) -- An influx of out-of-state horizontal oil drillers into Kansas is driving up land-lease prices so much that some traditional drillers said hundreds of the state's vertical wells could be idled within two years.

Oklahoma City-based Sandridge Energy moved its horizontal drilling operations into a few southern Kansas counties two years ago after buying up more than 2 million acres of mineral leases in Oklahoma and Kansas.

The company also has filed intent-to-drill notices for more than 60 horizontal wells in Ford, Finney, Gray, Ness, Hodgeman and Gove counties in western Kansas.

Out-of-state companies EnCana USA, Tug Hill Operating and Apache Corp. all have drilled or filed intent-to-drill notices for dozens of horizontal wells in those same six to eight counties in central and western Kansas.

Cecil O'Brate, a vertical driller who owns American Warrior Energy in Garden City, said drillers like him have another year or two before their existing leases expire. Many won't be able to renew because the out-of-state companies have driven up land-lease prices by 10 times or more, O'Brate said, estimating that in two years 30 percent of the state's drilling rigs will be shut down.

"It's a business," he said. "But they're screwing it up for the rest of us for years to come."

Sandridge senior vice president Kevin White said his company has 14 operating wells in the region that pump an average of about 200 barrels of oil or the equivalent in gas each day. Next year, the company intends to drill about 370 wells in Oklahoma and 200 in Kansas.

Rick Kirby, Sandridge vice president of operations, said the company is finding a higher percentage of oil the farther north it drills, which is good because oil prices are high and case prices are low.

O'Brate said the horizontal drillers will discover as they drill in Hodgeman County and counties farther north and west the Mississippian Limestone changes from thick and flat to thin and undulating, which makes it difficult to keep a drill bore in the formation for 4,000 feet.

While the geology of western Kansas is different from that of southern Kansas, adjustments could help drilling crews be successful there, said Lynn Watney, senior scientific fellow with the Kansas Geological Survey.

White, with Sandridge, said it's too early to say whether results in western Kansas will be similar to those in the southern part of the state. He said the results, on average, have been encouraging, but it's difficult to know for sure at this point.

"We've always said the Mississippian is a statistical play, a combination of good, average and bad wells," White said. "And we expect to see all of that. We don't expect to focus in on one area with monster wells."