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Last edited by onthestrip; 05-14-2014 at 02:32 PM. Reason: duplicate
You know, if were in charge of a multi-billion dollar oil company, I'd support it because I'd want the state I live in to be better than it is, but that's just me.
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Regarding the gross production tax, some things have been said how its more costly to drill in Oklahoma and is not as great as a return as other states that have higher drilling taxes like Texas and ND. Well it appears these companies dont say this to investors. Read section 2 in this article to see a report showing that certain plays in Oklahoma have a better return than other states. So so much for that "bad rock" argument.
It's time to end the horizontal drilling tax break » Oklahoma Policy Institute
Here is the actual report that I am referring to.
https://dl.dropboxusercontent.com/u/...Statements.pdf
I have discussed in another thread with onthestrip. In that thread I said the Woodford/SCOOP compared favorably with some of the more well known plays, ie Bakken & Eagleford and will be drilled regardless of what the legislature does with the tax rate. I believe the production tax should be higher than 1%. However, I explained that it will have a real impact on activity while others who have no real understanding of the industry and how decisions about allocations are made are more focused on punishing prosperity.
http://www.okctalk.com/politics/3742...e-capitol.html
Regardless of what any of them say, increasing the production tax at all will hurt smaller energy companies a lot more than it will hurt any of the large or well funded companies that these guys represent. Smaller energy companies have much thinner margins for success and any increase in costs will have a negative effect on them.
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Are that many small companies drilling horizontally? I believe if you are drilling horizontal wells you arent considered all that small of an operation.
If you are worried about the smaller guys then maybe we lower the vertical well tax from its current 7%, which is made up of more smaller operations due to way cheaper drilling costs. But horizontal drilling tax can definitely go higher than 2% without hurting the industry or state.
I have no idea what their angle is, I just know it will have a larger impact on smaller companies than it would on them.
Also, as far as I know George Kaiser (or at least Kaiser-Francis) isn't even actively drilling that much anymore; Stacy Schusterman sold her ownership in Samson to KKR and her new company doesn't even operate in Oklahoma (for now); and nearly all of Tapstone's (Tom Ward) acreage is in Kansas.
By contrast, one of Continental's two key plays is located in Oklahoma (and while they say the SCOOP shows potential to be the next bakken, with similar drilling costs, it hasn't proven that yet), and CHK is a very active driller in ok as is Devon.
Who do you think has more skin in the game, 3 people that aren't that active in OK anymore or 3 that are very active here? I can't tell you why those three support an increase in the production tax, but I have a feeling that their lack of activity here has made them less opposed to it.
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Good for Tom Ward. These are our state's resources, so we shouldn't just give them away. The tax credit for horizontal drilling is an anachronism that only exists because, at the time, horizontal drilling was expensive and exotic. Now it is commonplace. These companies need to pay their fair share to do business here.
More talk about the drilling tax. More comments that contradict the claims that Oklahoma's rock isnt the best and drilling is too expensive here.
Fourth Reading: Oil industry isn?t going away | The Journal RecordSchusterman, chairwoman and CEO of Tulsa-based Samson Energy Co., questions those statements. In an email to The Journal Record, Schusterman pointed to statements made by Continental Resources’ then-Senior Vice President Richard E. Muncrief, now head of WPX Energy. During a 2013 conference call, Muncrief was asked about Oklahoma rock, specifically, the economics of the South Central Oklahoma Oil Province, or SCOOP, its oil play in southern Oklahoma and how it compared to North Dakota’s Bakken oil field.
“From an economics standpoint, we think that the SCOOP economics are – range from the high 30s up to 80-percent type rate of return,” Muncrief said. “And you compare that with the Bakken. In a lot of cases, it compares quite favorably to the Bakken’s. And so we’re just real excited about what we’re seeing down there.”
Schusterman said that recent investor updates from Continental, Chesapeake, Devon and Newfield clearly show that drilling costs in Oklahoma are modest and that rates of return are equal to or greater than in North Dakota.
The SCOOP is in its infancy, and is dominated from an acreage standpoint by a few select companies. I don't know a lot about it myself but I would also say that just because a company drills a few successful wells in a certain area doesn't mean that the entire formation is going to yield those kind of results. In these tight oil and gas plays the rock can vary significantly from area to area.
I'm not saying that is a reason to be against a tax increase, it just seems like you're putting all your eggs in one basket based on a few quotes from Continental. CHK said the same thing about the Utica being a monster oil formation and it turned out to yield more wet/dry natural gas than oil.
I remember the same things said about the Mississippi Lime back in 2009. Not that its a bad area but many of our clients at my previous employer were not pleased with the production level on their wells and had to deal with a massive amount of saltwater. Quite a few were actively looking to get rid of their acreage by the time I left. So anything can pop up over time as a field is developed more.
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