The Cana Woodford shale development is found in west-central Oklahoma, just west of Oklahoma City. Its wells produce condensate and natural gas liquids (NGLs) in addition to natural gas. The play extends from southeast to northwest through Canadian County with the majority of development to date in the central and northwest portions of the play. Canadian County is the nucleus, thus the "Cana" designation. This development is also referred to as the Anadarko Woodford.

In contrast, other eastward portions of the Woodford shale, specifically the Arkoma Woodford, generally represent a more-traditional drier gas play, and drilling and ongoing development there has slowed in recent periods as operators have focused to oilier and liquids plays.

Originally thought to be concentrated primarily in Canadian County, exploration efforts have now extended the condensate and rich-gas play on a southeast-to-northwest diagonal encompassing more than 100 miles. Though smaller geographically than many other shale plays, it is an oilier play and operators have been pleased with their successes to date, indicating the play has sufficient scope to merit their continuing attention and investment.

A typical Cana well is generally 11,000 to 16,000 feet deep, with a horizontal extension creating the pay zones. According to operators, hydraulic fracturing at these depths, pressures and temperatures has definitely been a learning curve.

Naturally, associated costs per well are high, thus expected production results must cover these initial development costs. Ongoing cost reduction and optimization are as essential here as they are in most unconventional plays. Fortunately, the Cana Woodford pay zones contain condensate and hydrocarbon-rich gas which cover upstream development costs and have provided generous upstream returns, even in a lower overall natural gas price environment.

Produced condensate can be tendered into the Plains All American Pipeline LP oil pipeline, Occidental Petroleum Corp.'s Centurion oil pipeline, or can move via truck into numerous local markets or into the Cushing, Oklahoma, hub. As condensate quantities increase and a transportation bottleneck remains at Cushing, some quantities have also begun to move via regional rail facilities. These same short-haul regional rail facilities have been active in providing frac sand, drill pipe and other needs to support the upstream operations.

Oklahoma-based Continental Resources Inc. is a top leaseholder in the Cana Woodford. Continental is credited with extending the play northward into Blaine and Dewey counties—referred to as the Northwest Cana—and more recently has had some success in extending the play southeastward into Grady County.

Similarly, Denver-based Cimarex Energy Co. is a very active developer in the play; Cimarex's activities generally include downhole development and provide midstream services for itself and others. These services include gathering, compression, treating and processing.

Other recently active operators in the Cana Woodford region include Chesapeake Energy Corp., Marathon Oil Corp., Newfield Exploration Co. and Range Resources Corp. Bucking the trend somewhat, in late 2011 QEP Resources Inc. announced that it would be rationalizing its Cana Woodford assets by offering for sale 49,000 net acres and associated developments from those assets. QEP's remaining portfolio still includes additional Cana Woodford development opportunities.

New midstream infrastructure

For many years, much of the area's existing midstream infrastructure has supported oil and gas conventional wells in Central Oklahoma. However, Cana Woodford operators are finding that in many cases infrastructure must now be enhanced or new facilities must be built to meet the character of the deeper, higher temperature and higher-pressure Cana production. Those gathering systems and processing plants which endured the decline for many years now find potential opportunities.

One such system is Hiland Partners Matli system in Blaine County, which gathers and processes 25 million cubic feet (MMcf) per day from vintage sources and now the Cana Woodford.

Recently, Caballo Energy LLC acquired Eagle Chief Midstream LLC, which owns a 600-mile gas gathering system and processing assets straddling the boundary between the nearby liquids-rich Mississippi Lime and the Cana Woodford plays in northern Blaine County. The existing gathering system consists of low-pressure and high-pressure gathering facilities with the Eagle Chief gas plant capable of processing 35 MMcf per day. Caballo plans an additional 60 MMcf per day processing plant on the system. Depending upon specific gas dedication to its gathering system and plant, some of the Cana Woodford volumes may indeed be processed at these facilities.

After significant success in the Barnett shale in Texas, Devon Energy Corp. moved northward and is also one of the Cana Woodford's earliest and most-active producers and midstream players. With developments in the central part of the play in Canadian, Blaine and Caddo counties, Devon has implemented rich-gas gathering pipelines in support of its numerous completions. Although significantly damaged by a tornado in late-May 2011, Devon's 200 MMcf per day Cana gas processing plant is restored, and Devon has announced that it will expand the plant's capability to 350 MMcf per day and 30,000 barrels (bbl.) per day of NGL and liquids capability by fourth-quarter 2012.

Also, OneOk Partners LP is an active midstream provider in the Cana area. OneOk is currently constructing more than 230 miles of NGL pipelines that will expand its existing Midcontinent NGL gathering systems in the Cana-Woodford and Granite Wash areas. To accommodate that, OneOk is planning a variety of projects.

First, by connecting to three new third-party natural gas processing facilities under construction and to three existing third-party natural gas processing facilities that are expanding, OneOk expects NGL production to ramp up to 75,000 to 80,000 bbl. per day. As a result, OneOk will increase its Midcontinent region NGL gathering capability by expanding its existing Arbuckle NGL Pipeline from 180,000 bbl. per day to 240,000, with a mid-2012 startup date.

Downstream, a new 75,000 bbl. per day fractionator will be installed at its Mont Belvieu, Texas, facility and will complement its currently owned and contracted fractionation capabilities. Start up for the new fractionator is mid-2013. The new facility can be expanded to 125,000 bbl. per day if developing upstream NGLs require that.

To accommodate more regional raw mix and NGL purity products, a reconfiguration of its existing Sterling I and Sterling II NGL products pipelines will provide the ability to continue to deliver those same NGL purity products to end-users or, alternatively, transport unfractionated NGLs.

OneOk will build a new 570-mile Sterling III NGL Pipeline by late 2013. The line will be a second dual-purpose pipeline with the capacity to transport 193,000 bbl. per day of liquids, with purity products originating at OneOk's Bushton, Kansas, or Medford, Oklahoma, fractionators, or with unfractionated NGLs from other NGL pipelines or the Conway hub.

Various OneOk NGL transportation systems are focused on the Midcontinent, Rockies, and Bakken NGLs. These systems provide substantial regional NGL aggregation and productdistribution capacities.

Elsewhere, DCP Midstream LLC has extensive facilities in its Midcontinent operating region with more than 29,000 miles of gas gathering facilities, including facilities in Blaine and Canadian counties. DCP is adding additional facilities, including the Okarche processing plant, which will process up to 160 MMcf per day of rich gas, with residue (i.e., dry) gas deliveries into the Enogex LLC system.

DCP's Kingfisher plant (165 MMcf per day) and its Mooreland plant (135 MMcf per day) bring its total capacity to 460 MMcf per day. DCP Midstream purchased the Seaway Products Pipeline and is converting it and extending it to provide NGL raw mix service from the Midcontinent region to the Gulf Coast, specifically to the Mont Belvieu Hub in Texas.

The renamed Southern Hills Pipeline will aggregate NGLs from the existing Conway NGL hub, expected NGLs from the Granite Wash and Mississippi Lime unconventional plays, and those from existing and developing plants in the Cana Woodford shale and will transport those liquids to Mont Belvieu for fractionation and further handling. This pipeline will have an initial capacity of 175,000 bbl. per day, and is proposed for mid-2013 startup.

As elsewhere in Oklahoma, Enogex, working through a number of affiliates, is also active in the Cana Woodford area, not only via its Enogex Gathering LLC affiliate and its Enogex Products LLC gas processing and liquids management affiliate but also via its Enogex LLC intrastate pipeline affiliate.

Enogex Gathering operates existing gas gathering facilities in the Cana Woodford area and has been implementing new facilities to gather and manage the higher-pressure Cana Woodford receipts. Enogex Products has recently started its new 200 MMcf per day South Canadian plant to process these rich-gas receipts. This new plant will have inlet and outlet compression, ensuring that existing lower pressure regional receipts can be integrated with the newer higher pressure Cana Woodford volumes. Also, in the immediate area is Enogex' 250 MMcf per day Calumet plant, an older-design lean-oil gas processing plant, which can provide additional local processing capability if required.

Atlas Pipeline Partners started a new 120 MMcf per day processing plant in western Dewey County in mid-2009. NGLs from this facility are tendered to the OneOk NGL system. Other midstream operators in the area include Centerpoint Energy Field Services and Chesapeake Midstream Services.

Hub constraints

Historically, many of the NGLs processed in the area have been routed to local markets for fractionation or, in some cases, were routed via a third-party pipeline to the Conway or Belvieu NGL hubs. With local markets becoming overwhelmed by the substantial amount of developing liquids available from the Cana Woodford and other nearby liquids-rich Midcontinent plays, liquids from the new developments will need to be exported from the region.

The OneOk Sterling pipelines and the Southern Hills pipeline will provide added NGL pipeline capacity to minimize any future constraints between the Conway NGL hub, the various Midcontinent unconventional gas developments and their targeted destination, such as the downstream Mont Belvieu fractionation and storage complexes. Ongoing commercial negotiations will establish necessary connectivity to existing or developing NGL pipelines.

Finally, residue gas from the various regional plants are generally sent to interstate pipelines connecting at the region's processing plants or are routed into local power generation or utility markets in Oklahoma via Enogex LLC or Oklahoma Gas Transmission. Pipeline capacity to do that is not limited.