Oil prices

[Plutonic Panda]

And to answer PluPan's question, not at all. Just saying we knew this would happen. Tying our funding to a highly volatile and cyclical revenue source is dumb. People will always have income or own property. That is where we should have focused our revenue sources. But no, we tied it to a highly fluctuating thing like oil prices.

Okay I agree with that. We got lucky last time it seems. There was some suffering but it lasted a few years and this time it could be much longer. Hopefully Stitt can do better than Fallin.

[Pete]

Regarding the diversified OKC economy, keep in mind that Chesapeake and Devon alone have shed thousands of high-paying jobs over the last decade and it's caused hardly a blip.

Then there is SandRidge and AEP and Marathon and a bunch of others who have also cut a ton of big compensation jobs.

The fact that no one has hardly noticed says a lot about our economy.

[onthestrip]

Tying our funding to a highly volatile and cyclical revenue source is dumb. People will always have income or own property. That is where we should have focused our revenue sources. But no, we tied it to a highly fluctuating thing like oil prices.

We didnt tie our funding to GPT, we simply raised it to a reasonable level. At least when production or prices go down this time, we will still be in a better position than if we had the previous rates.

Doesnt make much sense to argue that "since we pay a lot of taxes, we should drop our rate lower than every other state so Oklahoma wont lose 'as much' money when things go south." With this argument, only 0% GPT would not tie our hands to oil, and that would obviously be ridiculous for the state to do.

[Plutonic Panda]

The fact that no one has hardly noticed says a lot about our economy.

Can the same thing be said for Tulsa if the state economy takes a crap? That place should be more worried as their growth has been embarrassing. I think that is due to the local government. Hopefully the new mayor turns that around. Tulsa has the potential to become a boom town but squanders their potential. No doubt this would have an effect on OKC as more cities in Oklahoma doing better is all the more good for the state as a whole obviously.

[shavethewhales]

Can the same thing be said for Tulsa if the state economy takes a crap? That place should be more worried as their growth has been embarrassing. I think that is due to the local government. Hopefully the new mayor turns that around. Tulsa has the potential to become a boom town but squanders their potential. No doubt this would have an effect on OKC as more cities in Oklahoma doing better is all the more good for the state as a whole obviously.

Tulsa has been badly hurt by O&G consolidation over the past few decades. We used to have tons of companies headquartered out of Tulsa, but as they are bought up or merged they always move south... Tulsa is more dependent on O&G than OKC I think, but both cities will re-awaken once again to how much the O&G sector contributes to our city and state economies in the next down turn.

Tulsa's growth isn't really "embarrassing", nor is its mayor new. Tulsa's growth has been pretty flat, which is not bad considering the headwinds we have faced with major companies leaving and the challenges of being a small fish in a big pond between OKC, KC, and Dallas. The new WPX HQ, American Airlines expansion, and other things are bringing a lot of new jobs.

Pete, I'd love to find some data to back this up, but my inclination is that while some of the bigger, well-known O&G companies in OKC have shrunk, there are a lot of newer and smaller companies that have grown and absorbed many of the jobs that have been shed. This is based mostly on word-of-mouth from talking to people at professional mixers. It just feels like there have been a ton of opportunities in various start ups and smaller gigs down there over the past few years. I'm guessing a lot of those will be acquired or consolidated soon.

I still think O&G is the third leg of Oklahoma's economy, ultimately we aren't as diversified as we would like to think. The world is growing ever more competitive, and we need healthly oil companies here to keep everything else plodding along.

[Plutonic Panda]

Tulsa has been badly hurt by O&G consolidation over the past few decades. We used to have tons of companies headquartered out of Tulsa, but as they are bought up or merged they always move south... Tulsa is more dependent on O&G than OKC I think, but both cities will re-awaken once again to how much the O&G sector contributes to our city and state economies in the next down turn.

Tulsa's growth isn't really "embarrassing", nor is its mayor new. Tulsa's growth has been pretty flat, which is not bad considering the headwinds we have faced with major companies leaving and the challenges of being a small fish in a big pond between OKC, KC, and Dallas. The new WPX HQ, American Airlines expansion, and other things are bringing a lot of new jobs.

The reason I used the term embarrassing is due to the fact Tulsa has the state's only inland water port, fairly busy airport(including businesses and AA hub), a very generous philanthropic billionaire, natural beauty, lots of old wealth, a treasure trove of Art Deco buildings, expansive trails network, good music scene, good civic pride, and a great freeway network(though many improvements are needed, it is indeed expansive and much more than many other cities its size). It sits close to NWA which is booming on incredible levels, the Ozarks, a major interstate, and close to OKC, another booming city. All of that and the city is still stagnant.

I don't know what can be done but a few ideas is Tulsa establish a citywide light rail network(NOT STREETCAR), cap and remove a leg of its ring freeway network downtown, remove tolls on I-44 entirely, expand long distance passenger rail through there, expand the navigable water system further north to connect with Colorado, extend I-45 north of Dallas to Tulsa and northward through Bartlesville, and the state/OkDOT invest more in NE OK. Once the Gilcrease expressway is built it needs to be extended to connect with its other end and Tidsdale PKWY interchange into a five stack.

Bearing more gifts from GK an investment in a world class medical center district expanded and an amusement park to compete with Six Flags over Texas. Tulsa Vision just isn't that impressive to me.

I would also like to see a nuke plant for energy built which would be good the economy in Tulsa area. This could supply much of the state's energy and get rid of the wind farms.

PS, in the long term Tulsa might be better off with oil companies gone forcing them to look elsewhere for business and it would be better for the state. It would be nice for Tulsa to land a major car manufacturing center like BMW. Other opportunities will come and Tulsa should be more aggressive with more of the state's help. Maybe Stitt being from Tulsa will be good for them.

PPS, I just realized after typing all of that(lol) I am way off topic.

[gopokes88]

We didnt tie our funding to GPT, we simply raised it to a reasonable level. At least when production or prices go down this time, we will still be in a better position than if we had the previous rates.

Doesnt make much sense to argue that "since we pay a lot of taxes, we should drop our rate lower than every other state so Oklahoma wont lose 'as much' money when things go south." With this argument, only 0% GPT would not tie our hands to oil, and that would obviously be ridiculous for the state to do.

I wouldn’t call 5% reasonable given how poorly shale wells are performing here. Almost all of the tier 1 acreage has been drilled through. And for now it is generating more, but let’s see in a year if this slow down lasts.

[Teo9969]

If Oil takes another major hit like it did mid-decade and OK Oil Fields go on a hiatus, I'd be interested to see how that affects state politics given that small towns will begin to dry up and many will likely opt to leave for other oil-field or at least more economically viable states. If the end result can be OKC and Tulsa gaining control of state politics, I would be fine with a difficult decade for the state as a whole.

[BG918]

If Oil takes another major hit like it did mid-decade and OK Oil Fields go on a hiatus, I'd be interested to see how that affects state politics given that small towns will begin to dry up and many will likely opt to leave for other oil-field or at least more economically viable states. If the end result can be OKC and Tulsa gaining control of state politics, I would be fine with a difficult decade for the state as a whole.

I agree, it will be painful in the short-term but the long-term gain will be a positive for the state. I don't see any reason to believe rural Oklahoma will have any kind of renaissance in the near or distant future with the following exceptions:
- Towns near active O&G drilling areas (Chickasha, Crescent, Watonga, etc)
- Towns with military bases (Lawton, Enid)
- Towns with universities (Stillwater, Weatherford, Durant, Ada, Tahlequah) - I expect to see some consolidation however with universities like Panhandle State in Guymon, NWOSU in Alva and EOSU in Wilburton closing
- Towns with lakes/outdoor recreation (Broken Bow, Grove, Vinita, Eufaula, etc)

[gopokes88]

If Oil takes another major hit like it did mid-decade and OK Oil Fields go on a hiatus, I'd be interested to see how that affects state politics given that small towns will begin to dry up and many will likely opt to leave for other oil-field or at least more economically viable states. If the end result can be OKC and Tulsa gaining control of state politics, I would be fine with a difficult decade for the state as a whole.

Not “going” on a hiatus, the hiatus is starting. Right now. They’re even putting it out to investors that capital is being redeployed outmoded the stack elsewhere.

https://s2.q4cdn.com/462548525/files...ion_083019.pdf

2020 the stack gets 0 capital. They aren’t the only ones shrinking capital.

[mugofbeer]

Not “going” on a hiatus, the hiatus is starting. Right now. They’re even putting it out to investors that capital is being redeployed outmoded the stack elsewhere.

https://s2.q4cdn.com/462548525/files...ion_083019.pdf

2020 the stack gets 0 capital. They aren’t the only ones shrinking capital.

Maybe I'm missing something but DVNs report seems to me to say they are redeploying $50mm capital to the Delaware basin down to a level of $275mm ish in 2020 . It also seems to indicate 75 new wells being brought into production in STACK this year. It does confirm reduced investment but far from $0 capital. Where am l wrong?

[gopokes88]

Maybe I'm missing something but DVNs report seems to me to say they are redeploying $50mm capital to the Delaware basin down to a level of $275mm ish in 2020 . It also seems to indicate 75 new wells being brought into production in STACK this year. It does confirm reduced investment but far from $0 capital. Where am l wrong?

They haven’t announced the 2020 piece yet, but it’s coming. And phrases in there allude to it, “prioritizing cash flow over production growth”

Q3 ends at the end of this month. They’ll report earnings first week of November and that’s when they’ll lay out 2020 plans.

[The Shadow]

A few things to consider...

Oklahoma, Texas and the U.S. industry as a whole, just hit an all time high for daily oil production, right before the EIA chart he's basing his argument was produced.

Monthly Rig Count and Monthly Oil Production aren't the same thing. Not to mention, we're able to extract more oil in a shorter time period with fewer rigs when you drill horizontally.

There are still plenty of DUC's (drilled but uncompleted wells) throughout Oklahoma and Texas.

When you drill a single horizontal wellbore in a section, chances are you now hold the entire section by production, and since the fractures from a horizontal wellbore don't extend very far from the radius of the wellbore, you can drill several wells in a section before it is completely drained of oil.

As for the GPT argument, it was at 7%, before any of this horizontal drilling started. It was lowered to provide an incentive to companies to drill horizontally. Here is the actual law currently in effect. not quite sure I see the argument the poster is making about why we should have never raised, considering the historical GPT was always at 7% prior to being lowered.

HB 1010XX – Effective June 28, 2018

Sections 7 and 8 amend the gross production incentive tax rate levied at two percent (2%). The measure increases this incentive rate to five percent (5%).

Previously, the incentive levy of two percent (2%) was applicable to the production of oil and/or natural gas produced from wells that were drilled beginning July 1, 2015. The two percent (2%) rate was effective for the first thirty-six (36) months of production. Thereafter, the rate increased to seven percent (7%).

The measure increases the incentive levy to five percent (5%) for all new and existing wells that qualified for the reduced incentive rate of two percent (2%). The amendment becomes effective with the production month of July 2018, resulting in increased revenue collections occurring in September 2018. The measure does not change the thirty-six (36) month term period.

[gopokes88]

A few things to consider...

Oklahoma, Texas and the U.S. industry as a whole, just hit an all time high for daily oil production, right before the EIA chart he's basing his argument was produced.

Monthly Rig Count and Monthly Oil Production aren't the same thing. Not to mention, we're able to extract more oil in a shorter time period with fewer rigs when you drill horizontally.

There are still plenty of DUC's (drilled but uncompleted wells) throughout Oklahoma and Texas.

When you drill a single horizontal wellbore in a section, chances are you now hold the entire section by production, and since the fractures from a horizontal wellbore don't extend very far from the radius of the wellbore, you can drill several wells in a section before it is completely drained of oil.

As for the GPT argument, it was at 7%, before any of this horizontal drilling started. It was lowered to provide an incentive to companies to drill horizontally. Here is the actual law currently in effect. not quite sure I see the argument the poster is making about why we should have never raised, considering the historical GPT was always at 7% prior to being lowered.

HB 1010XX – Effective June 28, 2018

Sections 7 and 8 amend the gross production incentive tax rate levied at two percent (2%). The measure increases this incentive rate to five percent (5%).

Previously, the incentive levy of two percent (2%) was applicable to the production of oil and/or natural gas produced from wells that were drilled beginning July 1, 2015. The two percent (2%) rate was effective for the first thirty-six (36) months of production. Thereafter, the rate increased to seven percent (7%).

The measure increases the incentive levy to five percent (5%) for all new and existing wells that qualified for the reduced incentive rate of two percent (2%). The amendment becomes effective with the production month of July 2018, resulting in increased revenue collections occurring in September 2018. The measure does not change the thirty-six (36) month term period.

Yeah they hit a high, then rig count in Oklahoma collapsed. You have productivity per well up but no where near double, drill times are down but not 1/2, and now you have a major Oklahoma stack producer going to 0 rigs. They are at 2 currently and last year they were at 8. Capital is out-flowing and they've said they are going to prioritize cash flow over production growth. Devon is one of 4 companies that have the size and scale to move the needle on Oklahoma's oil production. CLR is still running hot and heavy. Encana went from 8 rigs to 4, and Marathon is holding steady at 7. Roan and Chaparral are fighting off bankruptcy.

It's crazy to think Oklahoma oil production is going to do anything but shrink. It already is.

US Production has been essentially flat since December as well. Tough times are coming for OK.

[Rover]

The doom and gloom prognosticator seems to be very black and white and has a narrow perspective. If we continue this ignorant international trade war then he may be right... at least until we have a more sane President and leadership. International demand is being throttled and keeping prices in check. Everyone is standing down until the dust clears and we see if we are going to keep tariffs and international war threats down, and what the sane climate policy will be and how soon. Til we get stability we can expect oil companies to hedge their bets.

Meanwhile, OKC continues to diversify its economy and isn’t so much held at gunpoint by O&G. The O&G guys can’t believe they are just less relevant.

[RedDollar]

Your getting off track attempting to measure the economic impact of oil and gas by employment numbers.

Producing existing oil and gas wells does not need a lot of employees. And the activities of these companies takes place around the state and even out of state.

The oil field service sector is where the large employment numbers are located, and they're not in OKC proper , for the most part. And the actual jobs are going to be in rural areas. And the oil field service sector is largely dependent upon capex spending by oil/gas producers. Its almost entirely about drilling new wells, which is why the rig count is important.

But , the jobs that are created by oil and gas producers are good paying jobs.

As opposed to ,say , retail jobs that will be higher in number but lower in quality of pay, just for example.

That's why State tax revenue is greatly impacted by oil and gas activity, while seemingly within the OKC city limits, its not felt anywhere but a big drop in the City's sales tax collections, like occurred after the oil price crash of 2014..

Just because OKC's unemployment rate hardly moved when oil prices crashed in 2014, is not a good measure of the impact of oil/gas on the City's economy. Sales tax numbers would be a bit better gauge.

As I was told by the promoters in the campaign for the sales tax increase in the fall of 2017 ( I think that's the year it was ).............that OKC's sales tax revenue had fallen considerably, thus we needed a tax increase. Which I disagreed with , btw.

And obviously, the GPT is a huge revenue source for State govt, even if actual employment by the oil/gas industry may not match other sectors.

[ChrisHayes]

OKC Metro hit a labor force of 700,000 for the first time ever in July. We have a record number of people employed and an unemployment rate of 3.1%. https://data.bls.gov/cgi-bin/surveymost?la+40

[pw405]

For those not familiar with the O&G Industry, a few notes on this matter:

Rig Counts are the best indicator of FUTURE production & production growth. A rig will drill a well, which can take ~10-30 days depending on many, many factors. The well is then frac'd, or "completed", production equipment is installed, pipeline connections are made (if needed), final inspections & instrumentation are installed and finally a well is ready to begin producing O&G. In today's world, this is a coordinated dance between many departments within an E&P, as well as contractors, sub contractors, Midstream companies , and equipment suppliers. Many opportunities for 2-3 day delays to add up. I don't have hard figures at hand, but this whole process takes a few months... likely much more in some cases.

So when we see DVN and CHK dropping to 0 rigs in OK - it doesn't really manifest in the production volumes (and ultimately what gets State of OK paid).

While we don't see massive layoffs in OKC merely due to running less rigs in state of OK, it is estimated that a drilling rig supports ~40 jobs directly. So if OK loses all of the rigs, some of those drilling rig employees can be re-assigned to other rigs, possibly in other states. I imagine most are usually let go. Again, not really a big blip on the unemployment numbers.

At the HQ side, those who work directly with rigs can have their efforts focused to other operating areas if the company owns land elsewhere. Typically won't let go good engineers until the next big layoff round occurs.

One thing we saw a result of the 2015 oil price crash was that the US saw a MASSIVE increase in "Rig efficiency" - basically compares the number of active rigs to overall production. In January 2015, US was running 1,420 oil rigs. Oil production was 9.1 Million bbls/day. Today, there are 738 oil rigs running. Production is ~ 12.5 million bbls/day. The wells that are being constructed by drilling rigs today appear to be producing more O/G than a few years ago.

So while the loss of operating drilling rigs isn't making much of a blip on any radar today, the loss of economic benefit created by spending at the state level will certainly be felt - but often not for another 12+ months after production decline occurs, due to the way the state collects and spends for fiscal years. Especially considering that today's rigs appear to correlate with higher production on a per-rig basis.

[chuck5815]

For those not familiar with the O&G Industry, a few notes on this matter:

Rig Counts are the best indicator of FUTURE production & production growth. A rig will drill a well, which can take ~10-30 days depending on many, many factors. The well is then frac'd, or "completed", production equipment is installed, pipeline connections are made (if needed), final inspections & instrumentation are installed and finally a well is ready to begin producing O&G. In today's world, this is a coordinated dance between many departments within an E&P, as well as contractors, sub contractors, Midstream companies , and equipment suppliers. Many opportunities for 2-3 day delays to add up. I don't have hard figures at hand, but this whole process takes a few months... likely much more in some cases.

So when we see DVN and CHK dropping to 0 rigs in OK - it doesn't really manifest in the production volumes (and ultimately what gets State of OK paid).

While we don't see massive layoffs in OKC merely due to running less rigs in state of OK, it is estimated that a drilling rig supports ~40 jobs directly. So if OK loses all of the rigs, some of those drilling rig employees can be re-assigned to other rigs, possibly in other states. I imagine most are usually let go. Again, not really a big blip on the unemployment numbers.

At the HQ side, those who work directly with rigs can have their efforts focused to other operating areas if the company owns land elsewhere. Typically won't let go good engineers until the next big layoff round occurs.

One thing we saw a result of the 2015 oil price crash was that the US saw a MASSIVE increase in "Rig efficiency" - basically compares the number of active rigs to overall production. In January 2015, US was running 1,420 oil rigs. Oil production was 9.1 Million bbls/day. Today, there are 738 oil rigs running. Production is ~ 12.5 million bbls/day. The wells that are being constructed by drilling rigs today appear to be producing more O/G than a few years ago.

So while the loss of operating drilling rigs isn't making much of a blip on any radar today, the loss of economic benefit created by spending at the state level will certainly be felt - but often not for another 12+ months after production decline occurs, due to the way the state collects and spends for fiscal years. Especially considering that today's rigs appear to correlate with higher production on a per-rig basis.

All of this is true, but I’d argue that Oklahoma’s biggest problem (and the primary reason why the state’s rig count is in free fall) is that the Miss/Woodford are built for $100/oil and $5/NG.

The recent well results in these formations at current prices are a recipe for disaster, which is why you have Roan, Chapparal, Alta Mesa, etc. all on the verge of bankruptcy.

There’s just not a scalable, economic play in the state at the moment.

[gopokes88]

For those not familiar with the O&G Industry, a few notes on this matter:

Rig Counts are the best indicator of FUTURE production & production growth. A rig will drill a well, which can take ~10-30 days depending on many, many factors. The well is then frac'd, or "completed", production equipment is installed, pipeline connections are made (if needed), final inspections & instrumentation are installed and finally a well is ready to begin producing O&G. In today's world, this is a coordinated dance between many departments within an E&P, as well as contractors, sub contractors, Midstream companies , and equipment suppliers. Many opportunities for 2-3 day delays to add up. I don't have hard figures at hand, but this whole process takes a few months... likely much more in some cases.

So when we see DVN and CHK dropping to 0 rigs in OK - it doesn't really manifest in the production volumes (and ultimately what gets State of OK paid).

While we don't see massive layoffs in OKC merely due to running less rigs in state of OK, it is estimated that a drilling rig supports ~40 jobs directly. So if OK loses all of the rigs, some of those drilling rig employees can be re-assigned to other rigs, possibly in other states. I imagine most are usually let go. Again, not really a big blip on the unemployment numbers.

At the HQ side, those who work directly with rigs can have their efforts focused to other operating areas if the company owns land elsewhere. Typically won't let go good engineers until the next big layoff round occurs.

One thing we saw a result of the 2015 oil price crash was that the US saw a MASSIVE increase in "Rig efficiency" - basically compares the number of active rigs to overall production. In January 2015, US was running 1,420 oil rigs. Oil production was 9.1 Million bbls/day. Today, there are 738 oil rigs running. Production is ~ 12.5 million bbls/day. The wells that are being constructed by drilling rigs today appear to be producing more O/G than a few years ago.

So while the loss of operating drilling rigs isn't making much of a blip on any radar today, the loss of economic benefit created by spending at the state level will certainly be felt - but often not for another 12+ months after production decline occurs, due to the way the state collects and spends for fiscal years. Especially considering that today's rigs appear to correlate with higher production on a per-rig basis.

all of that is true except it’s not going take that long for production loss, production loss has already started and it started in June. The state relies somewhat heavily on GPT. Well the amount G in that is falling and will keep failing. It’s gonna surprise some people when the revenue estimates next year come up short.

[mugofbeer]

They haven’t announced the 2020 piece yet, but it’s coming. And phrases in there allude to it, “prioritizing cash flow over production growth”

Q3 ends at the end of this month. They’ll report earnings first week of November and that’s when they’ll lay out 2020 plans.

So your assertion they will spend $0 is just an assumption, not based on fact. Per DVNs own graphic, the spending would be down to the $275mm range. Right now, the Permian is the priority with it's vast, cheap production and easy exporting potential. You may prove to be correct but putting eyeballs on the hundreds of millions in industrial activity just from the hiway and the level of truck traffic, STACK still seems pretty lively. I think we can agree that the near-term outlook for oil prices is pretty low, especially with Permian pipelines to the Gulf opening.

[gopokes88]

So your assertion they will spend $0 is just an assumption, not based on fact. Per DVNs own graphic, the spending would be down to the $275mm range. Right now, the Permian is the priority with it's vast, cheap production and easy exporting potential. You may prove to be correct but putting eyeballs on the hundreds of millions in industrial activity just from the hiway and the level of truck traffic, STACK still seems pretty lively. I think we can agree that the near-term outlook for oil prices is pretty low, especially with Permian pipelines to the Gulf opening.

My assumption they’ll spend $0 next year, is because Devon is telling vendors they are going to spend $0 next year.

[mugofbeer]

My assumption they’ll spend $0 next year, is because Devon is telling vendors they are going to spend $0 next year.

As l said, we'll see.

[RedDollar]

For those not familiar with the O&G Industry, a few notes on this matter:

Rig Counts are the best indicator of FUTURE production & production growth. A rig will drill a well, which can take ~10-30 days depending on many, many factors. The well is then frac'd, or "completed", production equipment is installed, pipeline connections are made (if needed), final inspections & instrumentation are installed and finally a well is ready to begin producing O&G. In today's world, this is a coordinated dance between many departments within an E&P, as well as contractors, sub contractors, Midstream companies , and equipment suppliers. Many opportunities for 2-3 day delays to add up. I don't have hard figures at hand, but this whole process takes a few months... likely much more in some cases.

So when we see DVN and CHK dropping to 0 rigs in OK - it doesn't really manifest in the production volumes (and ultimately what gets State of OK paid).

While we don't see massive layoffs in OKC merely due to running less rigs in state of OK, it is estimated that a drilling rig supports ~40 jobs directly. So if OK loses all of the rigs, some of those drilling rig employees can be re-assigned to other rigs, possibly in other states. I imagine most are usually let go. Again, not really a big blip on the unemployment numbers.

At the HQ side, those who work directly with rigs can have their efforts focused to other operating areas if the company owns land elsewhere. Typically won't let go good engineers until the next big layoff round occurs.

One thing we saw a result of the 2015 oil price crash was that the US saw a MASSIVE increase in "Rig efficiency" - basically compares the number of active rigs to overall production. In January 2015, US was running 1,420 oil rigs. Oil production was 9.1 Million bbls/day. Today, there are 738 oil rigs running. Production is ~ 12.5 million bbls/day. The wells that are being constructed by drilling rigs today appear to be producing more O/G than a few years ago.

So while the loss of operating drilling rigs isn't making much of a blip on any radar today, the loss of economic benefit created by spending at the state level will certainly be felt - but often not for another 12+ months after production decline occurs, due to the way the state collects and spends for fiscal years. Especially considering that today's rigs appear to correlate with higher production on a per-rig basis.

These guys trying to say that the OKC city limits is some kind of economic island, that's unaffected by oil/gas activity statewide , are dreaming. Its like attempting to declare a smoking section in a restaurant, or a de-chlorinated section of the swimming pool.

[PhiAlpha]

So your assertion they will spend $0 is just an assumption, not based on fact. Per DVNs own graphic, the spending would be down to the $275mm range. Right now, the Permian is the priority with it's vast, cheap production and easy exporting potential. You may prove to be correct but putting eyeballs on the hundreds of millions in industrial activity just from the hiway and the level of truck traffic, STACK still seems pretty lively. I think we can agree that the near-term outlook for oil prices is pretty low, especially with Permian pipelines to the Gulf opening.

Yeah I’ve heard from several very reliable sources that, while it hasn’t been made public yet, they are dropping all their STACK rigs which would effectively reduce their drilling budget to zero. Not sure what their DUC count is so if they have any DUCs left they may complete them next year but if the past is any indication, they will likely sell at least the wellbore rights to those uncompleted wells to other operators who will complete them. I would imagine that they’ll still expend some capital in Oklahoma to maintain what they operate, they have to, but the budget for expansion of their position or operations will be reduced to near nothing.

All that said, Devon isn’t the only company drilling in Oklahoma and the STACK isn’t the only play. There are even companies that are starting to explore vertical prospects again as they are less capital intensive and more economic right now. There will be drilling activity in OK next year but I would guess that horizontal drilling activity will still be reduced across the board which is a good thing long term. The drilling reduction isn’t going to be a phenomenon unique to OK as operators in other areas, even the Permian, are experiencing some of the same parent-child well spacing issues that we are in OK.