Crude Oil Prices

So how does the fact that oil prices are tanking effect the wells and building of wells in and for the STACK play. Is the price of crude oil and the large surplus we hold in the US a good thing or bad?

Depends upon who you talk to. The really efficient companies that run their businesses well can make money in the STACK. Those that have high costs cannot. Lower prices will generally mean less wells. Each company has their own cutoff rate for what is economically good for them. They are also dealing with a larger portfolio than just the STACK, so they make decisions based upon many considerations such as rigs available, return on capital in this play or others, leases expiring, etc. Not a simple answer.

If you are driving a car or motorcycle, etc. , you love lower gasoline prices. Lots of factors to consider in "good" or "bad".

Wow. That is a very complex question stated simply. As an Oklahoma mineral owner would not worry about short term fluctuations in market prices.

I could write a 10 page paper in an attempt to succinctly justify my answer.

Dear Mr Diggs, you ask a very good question. Operators have to take a long-term view of oil and gas prices when they commit to developing a large area. The economics of the STACK play vary from place to place but, in general, are very good. It is a good long-term bet. Operators are drilling up acreage to get control of more land (held by production). Getting control only requires one producing well. The operator can come back sooner or later to drill more wells if the reservoir is good. The higher the oil price, the sooner and faster it will get drilled up. How fast it gets drilled up depends upon the current oil price and the economics of the particular acreage. It is not all the same.

Not good for royalty owners. The STACK appears to be a play where the hope (more than any proven results) is that production will be high (total EUR production) based on the fact that the IP of many wells is very high and it produces less water. There is a real threat that wells in the Mississippian are producing too much water (high water cut) and if injection is curbed to control the earthquakes, then wells may have to be shut in for lack of anywhere to go with the produced water. So a STACK well producing very little water is a real plus and likely is more profitable. For the mineral owner, however, the higher the price, the better it is.