Technological innovation and reservoir knowledge have revived the decades-old Granite Wash, a tough-to-wrangle and, as the name suggests, weathered Mid-continent oil and gas resource play that has produced since the late 1950s.

As a horizontal exploitation target, the tight sands conglomerate is kicking up dust in the unconventional arena, spurring higher output from its operational areas in the Panhandle region of northern Texas and western Oklahoma as a result. A number of high-rate horizontal wells are keeping the Granite Wash on pace to deliver large volumes of condensate and natural gas liquids (NGLs), making the play a core driver of growth for many operators in an uncertain gas-pricing environment.

The wild one

Pennsylvanian in age, the Granite Wash is an alluvial wash consisting of 610 m (2,000 ft) of stacked sandstones formed some 350 million years ago as the sediments eroded from the ancestral Wichita/Amarillo uplift. Its multifaceted sequence is traditionally found in the Anadarko basin – one of the deepest US basins with more than 12,190 m (40,000 ft) of Paleozoic sediments.

The greater Wash package comprises a series of sands, shales, and siltstones. As a composite, Granite Wash occurs in Beckham, Roger Mills, Custer, Washita, and Greer counties in Oklahoma and Gray, Wheeler, Roberts, and Hemphill counties in Texas.

An underlying characteristic is numerous stacked intervals that can range anywhere from three to more than 20 intervals from 2,680 m to 4,175 m (8,800 ft to 13,700 ft) depths. Gas can be found in multiple zones between 2,895 m and 3,960 m (9,500 ft and 13,000 ft) and, in some sections, even deeper to 5,180 m (17,000 ft). The play also has a deposition thickness of 460 m to 1,070 m (1,500 ft to 3,500 ft) and consists of as many as 70 different sandstone or conglomerate sections. This extreme variation in mineral content historically has made finding sweet spots in such a complex system of heterogeneous rock a challenge for prospective drillers.

Despite its low permeability and porosity as a tight sand play, reservoir quality and porosity buck the trend and can be superior to those in most shale plays; reserves can also be bigger. High condensate yields from the preferred multistage, slickwater fracture treatments used in unconventional completions also lend favorably to producer economics.

Workers look over a rig site in the Granite Wash. (Images courtesy of Ken Childress/ Linn Energy LLC)

But the Granite Wash is hard to define because of its extreme variations. Categorizations vary across a number of company schemes, with designations including the Marmaton, Des Moines, Strawn, Cherokee, Red Fork, Cleveland, and Atoka washes.

"Geologically, I think of [Granite Wash] as a garbage pail term for a lot of tight formations out there," Dr. Randy Keller, AAPG member and director of the Oklahoma Geological Survey at the University of Oklahoma, said in February's AAPG Explorer. "The structures are big and the geologic histories therefore complex."

Better understanding of these structures should usher along E&P efforts to exploit the play and potentially discover new fields, Keller noted separately in a 2010 webinar hosted by Hart Energy's UGCenter.com.

Considering its variability, the Granite Wash may be an unconventional wild card, but its merit as a premier hydrocarbon resource play in the heart of E&P friendly communities continues to draw both oil- and gas-leveraged companies.

Chasing liquids

Since the play was tapped more than 50 years ago, more than 4,200 wells have been completed in various Granite Wash reservoirs, which have produced a high volume of hydrocarbons over the years. While exploiting the Wash has proven to be well worth the effort in areas that contain significant gas-in-place, interest in the longtime target has gone through cycles.

Earlier wells were aimed at deeper Morrow and Hunton vertical targets, which yielded huge quantities of producible gas. With advances in horizontal drilling techniques driving the recent uptick in unconventional E&P, enthusiasm has piqued and players are now ponying up for more oil-prone and liquids-rich gas targets in the 257-km (160-mile) long, 48 km (30-mile) wide area.

Adding to its appeal, the play has a strong NGL and oil component within the Upper Granite Wash zones, although upper and lower zones can vary wildly in oil and gas pay quality. This saturation of liquids makes it one of the more attractive and economic unconventional plays today as ethane prices trend higher and the oil commodity reigns supreme.

In early 2010, nearly 60% of the economics of Granite Wash wells derived from their liquids content. Today, Granite Wash wells continue to exhibit encouraging results, and drilling and completion costs continue to range anywhere from US $5 to $7 million.

Among the top Granite Wash operators are US independents Chesapeake Energy Corp., Forest Oil Corp., Apache Corp., Penn Virginia Corp. and SM Energy Co.

As activity in the region accelerates, the Granite Wash also can be viewed as a midstream infrastructure opportunity. Gas gathering and treatment and processing services are expected to continue experiencing rapid growth as operators struggle to harness new take-away capacity to move mounting gas and liquids production to either the Conway or Mont Belvieu hubs in Kansas and Texas, respectively.

ONEOK Partners of Tulsa, for example, plans to spend up to $240 million by 1H 2012 on midstream projects in the Granite Wash and nearby Cana-Wood-ford shale plays. Citing increasing liquids growth in the midstream, Eagle Rock Energy Partners LP plans to forge ahead as a leading Granite Wash player with significant investment in the pipeline.

CEO Joseph Mills said at the National Association of Publicly Traded Partnerships MLP Investor Conference in June that much of the Houston-based MLP's focus will be on the Granite Wash. "This is an area that we think we can spend $50 to $100 million per year for the next two to four years building additional processing," he said, adding that Eagle Rock has one of the best gathering footprints in the play, particularly in the Texas Panhandle.

Linn Energy LLC

Upstream MLP Linn Energy LLC, also based in Houston, has zeroed in on what it considers to be a cash cow in terms of encouraging operating results, a gamechanging organic growth opportunity, and quick pay out: acquiring and reworking mature assets.

The Granite Wash is one such area in the Midcontinent where the company is maximizing this strategy and horizontal drilling technology has significantly improved well results and returns.

According to Linn, the high concentration of liquids in the Granite Wash makes it one of the most economic plays in the US. Here, the company cites an ROR close to 70% at an oil price around $90/bbl and more than 80% at $100/bbl.

The company entered the Granite Wash in mid-2007 after it purchased 38,000 net acres in the trend as part of a $2.05 billion Midcontinent package from Dominion Resources Inc. It now holds nearly 170,000 gross acres in the prolific play.

Linn announced in a recent investor presentation that it had identified some 200 high-potential, low-risk horizontal drilling locations in the Texas Panhandle Granite Wash alone.

In 2010, Linn drilled eight locations in the play and had initial production ranging from 18.5 to 60.2 MMcfe/d.

The company's second operated well drilled in the Greater Stiles Ranch area, where it has a large concentrated acreage position, reported an initial production rate of more than 60 MMcfe/d. CEO and president Mark E. Ellis believes the Black 50-1 well is the highest initial production rate reported in the Granite Wash trend.

"The liquids content of more than 6,700 bbl/d represents more than 65% of the production stream," he said.

LINN is currently running a four-rig drilling program focused on the Texas Panhandle portion of the Granite Wash, where the company plans to drill 35 horizontal wells in 2011. At the end of 1Q 2011, the company had 15 operated horizontal wells and 10 nonoperated wells producing.

Initial production rates from the operated wells averaged approximately 21 MMcfe/d, exceeding Linn's expected average initial production rates of 15 MMcfe/d. At the end of 1Q 2011, LINN also had 10 additional operated wells and eight additional nonoperated wells drilling, completing or awaiting completion.

The company is on pace to complete two to three new operated horizontal wells each month throughout 2011 and believes the high concentration of liquids in the Granite Wash will continue to be a core component of its organic growth.

Newfield Exploration Co.

Houston-based Newfield Exploration Co. is one of the most active operators in the Granite Wash play and continues to see strong returns from its upstream assets, which the company said stack up very favorably in its portfolio. Newfield's inventory consists of 300 locations on which it has identified around 30 prospective target zones from the liquids-rich Marmaton to the dry-gas Atoka. So far it has successfully tested 10 of these geologic intervals.

From an initial entry in 2002 via the acquisition of EEX Corp., Newfield drilled around 140 vertical wells before taking on its first horizontal test in late 2008 in the Stiles Ranch asset – the company's largest producing Granite Wash field and one of the most prolific in the play.

The #27-7H well came online in December 2008 at an initial rate of 1,900 bbl/d of condensate and 25 MMcf/d of gas and averaged 27.1 MMcfe/d during its first 60 days of production.

Since transitioning to a horizontal strategy, Newfield has drilled 40 wells with an average 24-hour initial rate of 16 MMcfe/d. It currently averages 175 MMcfe/d from a position that encompasses more than 44,000 net acres in the play.

Over the last year, Newfield added 13,000 net acres in the Granite Wash, most of it in the core area of Wheeler County. Through 2011, the company intends to keep four rigs running in the play and expects to drill between 28 and 35 wells this year to meet targeted production growth of more than 20%.

Newfield's focus will remain on the wet Marmaton sections of the play, which promises returns in the 25% range at $5 gas and $75 oil and greater than 30% at today's oil prices, said Danny Aguirre, investor relations lead. Since 2009, it has completed 21 wells in the high Btu Marmaton formations with gross 24-hour IP rates averaging 17 MMcfe/d.

Recent Marmaton completions include the Dupont 1-1H and the Britt Ranch G44W-14H, each initially producing at a gross rate of 22 MMcfe/d.

Meanwhile, Newfield continues to hone in on its horizontal drilling technique in the Granite Wash. A "best in class" 1,433-m (4,700-ft) lateral well was drilled and cased in 25 days, according to the company's 1Q 2011 financial and operating results.