While the rest of the industry flocks to shale other shale plays, Cunningham Energy focuses on West Virginia.
The United States oil and gas industry has been focused on shale plays in the Midwest, Northeast and Gulf Coast since hydraulic fracturing and horizontal drilling have made natural gas reserves there more profitable than ever.
However, there is still plenty of oil and gas accessible in the shallow plays in the Appalachian, Illinois and Williston basins. Cunningham Energy founder Ryan Cunningham recognized those opportunities in 2008 and launched his independent production company to take advantage of the oil in these fields.
“When the gas market experienced a dramatic drop in prices, larger high volume wet shale plays became more in
vogue,” Cunningham says. “We happen to be oil-focused, so that left the shallow playing field open for us, and we’re taking advantage of that.
“As bigger producers moved into large horizontal shale plays like Marcellus and Utica, it left a huge void for smaller producers because no one was drilling these wells anymore,” Cunningham adds.
Based in Charleston, W.Va., Cunningham Energy acquires, explores and produces oil and gas with a focus on tight conventional reservoir production in proven areas of development primarily located in Clay, Roane and Kanawha counties in West Virginia.
“We’ve been acquiring acreage for about three-and-ahalf to four years and building a position in those fields anticipating a move to shallow horizontal drilling,” Cunningham says. “That’s where we are now. We’re making that transition and getting ready to drill our first three horizontal wells.”
Charging at the ‘Rhino’
Cunningham is referring to three new shallow horizontal oil wells slated to be drilled in Clay County from the “Rhino” pad. This pad consists of three wells surveyed with a specified measured depth of more than 5,200 feet and vertical depths of more than 2,150 feet.
In a press release, Cunningham Energy says the three Rhino horizontal wells are targeting oil in the Big Injun Sand Formation in the Union District of Clay County. The company plans to use its Speedstar 185 top-drive drilling rig in conjunction with these new wells, and each well bore on the Rhino pad has been planned to be completed with multiple frac stages with varying spacing dependent on future wireline data.
“Cunningham Energy is tremendously excited to be involved in horizontal oil development in West Virginia,” Cunningham said in a statement. “We believe that the future of West Virginia shallow oil and gas development is horizontal drilling and completion.”
Head of the Class
Whenever drilling wells in a new region, the first attempts are always the most expensive. Cunningham Energy experienced the same phenomenon when it started drilling in 2008 as it learned about the typography of its new location.
“Your first wells are always most expensive because there will be a lot of learning involved,” Cunningham admits. “Whenever we get into a new play, we have to anticipate that. It’s one of the things you have to deal with.”
Oftentimes, those additional costs come once regulations for environmental and safety concerns are put into place. Cunningham cites how the Marcellus Shale was once an affordable investment for mid-size entities to pursue, but when regulators stepped in, independent producers were often squeezed out of the play.
That isn’t the case in the Appalachian Basin for horizontal shallow yet, however, according to Cunningham.
One of the advantages of getting into this region before the competition follows suit is to get a handle on operational costs well before regulations shrink profit margins.
“With so much capital coming into the Appalachian Basin, we felt like shallow horizontal drilling will have no big changes just yet,” Cunningham says. “We feel like we’ll be able to get a foothold before changes do come from regulatory bodies, and we’re anticipating that a couple years down the road.”
Along with being one of the only shallow drilling operators currently growing in the state of West Virginia, Cunningham says his company is one of the few that can handle all of its operations in house.
In fact, the company merged with a mid-size drilling and services company to expand those in-house capabilities at the end of December 2013.
“Most companies are in the habit of hiring this contractor or that contractor,” Cunningham says. “We have a tight-knit group of employees here that are local and try to keep capital circulating in the immediate area.”
With 80 employees currently on the payroll, Cunningham Energy is ensuring that it keeps hiring local people for the future of the business.
Cunningham says the company hires high school students during summer breaks to work on its wells as apprentices. Once they finish high school or complete some college, they often are invited back for full-time work.
With the long-term plans Cunningham Energy has for the Appalachian Basin and other horizontal plays, recruiting and retention will be a key factor for the firm down the line.
“We’d like to be a major player in shallow horizontal oil and gas in the entire basin eventually,” Cunningham adds.