It was an autumn day in 2011 in Grady County, Oklahoma, and Continental Resources senior exploration geologist, William Parker, waited with anticipation on location of the Pyle well for a core sample to come to the surface. The Pyle was a vertical well designed to test the Hunton reservoir, but Parker was interested in what he would find from the sample taken out of the Goddard member of the Springer Shale. Over the prior three years, Continental had been developing the Woodford Shale in its Scoop program in Oklahoma, passing through the Springer with each Woodford penetration. And every time the Springer gave a show of gas.

“When we started on our Woodford wells in 2008, the Springer would talk to us as we drilled through it. We’d get this liberated gas coming out of the formation when we went through the zone. That was our first indication,” Parker said.

The Woodford program kicked into gear in 2011, and Parker and his team of engineers monitored the logs as the data set on the Springer grew. Parker, who had first joined Continental in 2005 as an intern while a grad student at Oklahoma State University, also researched petrophysical properties on historical well penetrations, and liked what he saw. Past operators had tried to commercialize the zone conventionally without success, but the Springer had yet to be tested with modern technology.

The developing story reminded Parker of another successful shale that had been penetrated thousands of times over decades without commercial success before its code was cracked: the Bakken. Not by coincidence, Continental was also the operator that opened the world-class reservoir that is the Bakken Shale.

Continental Resources CEO Harold Hamm, left, accepts Oil and Gas Investor’s Best Discovery award, along with Jason Hildebrand, Scott Donnelly, Will Parker, Justin Biggs and Jack Stark.

This evidence in hand, Parker took his case to Continental president and COO Jack Stark, and CEO Harold Hamm, and recommended the company invest several hundred thousand dollars to take a core sample.

“Willie demonstrated that the petrophysical properties were in line with what we look for from a resource play,” Stark said. “The shows indicated hydrocarbons were present, but in the end you don’t know until you get a piece of the rock.”

Waiting on location at the Pyle well, Parker wondered what the core would look like when it came up. His best expectations were confirmed. The sample was a dark siliceous shale, and when cut into, it began bubbling with escaping hydrocarbons.

“Whenever you see hydrocarbons actually coming out of the core—especially a shale—that was a good moment. We knew this was going to be really nice,” Parker said.

The core analysis reiterated the visual evidence. In the meantime, Continental perforated the Springer vertical zone in the Pyle well, and on initial production (IP) it yielded about 100 barrels of oil per day (bbl/d), dropping to 20 barrels where it ultimately held for months. Although not commercial as a vertical well, the results were a good indication that the reservoir had oil, and was able to produce. The sustained production rate suggested a bigger tank of resource awaited.

Parker wasted no time in asking Stark and Hamm for more funds to drill a horizontal well to test the Springer. In winter 2013, Continental completed what would become the discovery well—the Wilkerson 1-20H. That initial Springer Shale well began producing at a rate of 2,038 barrels of oil equivalent per day (boe/d), of which 1,587 was oil. More than two years later, the Wilkerson is still producing 225 boe/d.

When Continental Resources senior exploration geologist Willie Parker, top, saw bubbling hydrocarbons coming from the Springer Shale core, “We knew this was going to be really nice,” he said. Below, Jack Stark, president and COO, said, “The Springer competes with the best of the Eagle Ford and the best of the Bakken.”

The Springer Shale footprint overlays Continental's established Scoop acreage.

“We were hoping for solid results, but this one exceeded our expectations,” Parker said.

“You really just don’t know,” said Stark. “That’s the thing about these resource plays; they’re not easily evaluated on logs. You have to put a horizontal well in it and test it.”

Continental debuted its Springer stealth play at its analyst day in September 2014. To date, the company has put into production more than 35 Springer wells, with average IPs around 1,200 boe/d. The success of the Springer Shale is what led Oil and Gas Investor to bestow upon it the 2014 Excellence Award for Best Discovery.

Under pressure

The Springer trend as identified by Continental swoops from northwest Grady County into Stephens and Garvin counties. A member of the Mississippian age of rocks, sitting from 11,000 to 14,000 feet subsurface, the Springer is a siliceous, black shale reservoir very similar to the Woodford Shale, which sits below it. Thickness across Continental’s acreage averages more than 80 feet and closer to 150 feet in its core area.

“It’s brittle, and it wants to fracture,” Parker said. “If you compare all the better resource plays, it has all those characteristics. It’s organic rich.”

One aspect that makes it unique to other shales is its confined nature—the Springer shales that sit above and below the central Goddard member are more clay-rich and clastic in nature, thus trapping the hydrocarbon within the rock.

“It’s isolated from other zones,” he said, “meaning that once it started generating oil, the oil didn’t have any place to go. It’s trapped within the reservoir.”

That resource confinement results in another positive—high pressure. “The pressure component is extraordinary to other plays. The overpressure allows these rocks to deliver hydrocarbons at an attractive rate and more efficiently to the wellbore, so we get high recoveries,” he said.

Following the Wilkerson well, Continental stepped out 25 miles to the south and drilled the Ball 1-19H. The location was chosen based on subsurface control from prior Woodford drilling. The Ball did not disappoint. It flowed 1,037 boe/d at IP, with a shallow decline. “It was another very nice well,” said Stark. Birt 1-13H followed, an offset to Wilkerson, at a rate of 793 boe/d. Repeatability was established.

Continental already held 480,000 net acres in its Scoop region, an acronym for South Central Oklahoma Oil Province, and referencing the vast data from its Woodford drilling program—all of which identified the Springer—the company had essentially delineated the Springer reservoir before drilling it.

“We had a good picture of where the Springer was distributed,” Stark said. “Usually after drilling the discovery well, you have to drill a lot of delineation wells to find the extent of the reservoir before you go into development drilling, but we’re fortunate to already have well control. That allowed us to bypass the delineation phase and move quickly into development.”

Within its Scoop holdings, the Springer is prospective on 200,000 net acres, of which 123,000 acres are in the oil window, the remainder gas-weighted. Continental declares 46,000 acres as derisked, stepping out from two core areas around the original Wilkerson and Ball wells.

Unlike the Woodford, however, Stark said the Springer is more locally developed. “It does have a more limited footprint than the Woodford.”

While Continental did add acreage specific to Springer prospectivity, and continues to do so, in essence the entire play overlaps with its Woodford prospectivity. “We got a two-for-one,” Parker said. “We got a double Scoop.”

“It’s not that there is a relationship between the two, but we have been fortunate to find good Springer sitting on top of good Woodford production,” said Stark.

Above, Continental’s Springer Shale results are exceeding the type curve based on an EUR of 940 Mboe. Below, Springer economics excel even in the current price environment, especially considering already realized well cost reductions.

Second to none

Most of Continental’s Springer wells, drilled with 4,500-foot laterals, IP between 1,000 and 2,000 boe/d, although the recent K.L. Fulton peaked at 2,122 boe. “The K.L. Fulton shows we can repeat this. All the outcomes show this is pretty darn repeatable,” Stark said.

Continental is for now focusing on the oil window of the play, in which wells produce 75% oil and 85% liquids. The play trends gassier going west. Why not focus more on the gas and condensate?

“We’ll get there as we continue to step out our drilling. We’re working out from our knowns and are quite happy with the oil production we’ve got. Somewhere we’re going to have a condensate window, but right now, it’s not clear where the dividing line is,” said Stark.

In February, research firm Wood Mackenzie identified the Springer as one of the three most economic sub-plays in the U.S.—along with the Karnes Trough in the Eagle Ford Shale and the Nesson Anticline in the Bakken Shale—as generating at least a 10% rate of return at $50/bbl of oil. In fact, the Springer topped even these sub-plays with a breakeven price of $41 WTI/bbl, making it the most economic play in the nation, per Wood Mackenzie.

Stark noted that Continental’s model of 940,000 boe estimated ultimate recovery per well is based on a 4,500-foot standard lateral and a year-end 2014 well cost of $9.7 million. Already, the company has seen a 15% reduction in costs this year, and expects that to reach 20% by year-end.

“The economics are great,” he said. Assuming a 15% reduction in well costs, “you’re looking at a rate of return at $50 oil of 40%. At $60, you’d see a 60% rate of return. Clearly, we have some strong economics even at today’s prices. The Springer competes with the best of the Eagle Ford and the best of the Bakken.”

The company began drilling its first 7,500-foot lateral Springer well in April.

Continental conducted downspacing tests last year as well, with four wells per 640-acre unit, or 160-acre spacing. IPs averaged 1,185 boe/d on 24-hour flows with 4,500-foot laterals. “Based on initial rates, the production is in line with the averages we’re seeing out there, which is why we’re encouraged,” Stark said. “Given our history in resource plays, we recognize the value of knowing this early.”

Teamwork

Continental figures a net unrisked resource potential of 127 MMboe on just the 46,000 acres it deems derisked. That is aside from the 77,000 acres additional upside being tested, and another 77,000 in the gas fairway. The company currently has three rigs deployed to Springer drilling, with 18 wells targeted for 2015, although Stark said the company is in no hurry to harvest the bounty.

“We could be more aggressive with the development of the Springer, since it does have the best economics at this time, but we choose not to because we’re not interested in selling some of this great oil into this low price environment. We don’t have to. It’s an asset we want to save for a better day.”

Continental budgeted $144 million for Springer development this year, about 20% of its total Scoop capex.

CEO Hamm, accepting the Best Discovery award at Oil and Gas Investor’s Energy Capital Conference in Austin in April, noted that the Scoop and Springer plays came about in the tough times following the 2008 downturn.

“We’ve got a great team that continues to deliver for us,” Hamm said. “In 2008 through 2010, we kept our team together and kept looking for the next play. That’s what people need to do today, and have faith it will come back.”

Part of the team, Parker credits drilling manager Jason Hildebrand, completions manager Scott Donnelly, senior landman Justin Biggs and many others for making the Springer viable.

“This is another example of excellent work done by our technical teams identifying new opportunities of growth for the company,” Stark said. “This is a classic grassroots exploration effort by our team of geologists, engineers and landmen that saw this could be a producing reservoir. Through good science and execution, they demonstrated it would produce vertically and justified to take it horizontal.”