NEWS AND COMMENT
January 26, 2011: 4Q10 earnings.
December 29, 2010: Hess completes AEZ acquisition; bought TRZ one month ago. Acquisitions push Hess acreage to over 750,000 net acres in the Bakken.
First quarter, 2010, earnings call.
Fourth quarter, 2009, earnings call (4Q), Bakken specific highlights:
CAPEX, 2010: $1 billion
Increase rig count from 3 to 10 by middle of 2011; gradual ramp up
Expectation: EUR of one million barrels per dual lateralHess has only four (4) dual laterals in the Bakken right now
Expectation: 10,000 bopd currently to 80,000 bopd by 2015
Bakken wells economical at $40/barrel
For EUR, see FAQs, # 7.Down below I talked about the relative poor IPs for Hess. Some have commented on my observation; note comments.
We now have another data point for a Hess well; apparently #18194 (RS-ENANDER A-155-91- 0607H-1) is still on confidential status, but reports suggest this well produced 4,387 barrels (this link is now broken; total oil, does not include gas) in October, which would be about 140 bbls/day. I don't (yet) understand the Hess nomenclature but the "0607H-1" suggests a "long" lateral and looking at the GIS map server, most of the producing wells in the immediate area are "long" (2 sections; 1280-acre spacing) wells. On a "per section" basis, this well produced, on average about 70 bbls/day in October, early in its production history. Lots of questions: has the well been frac'ed? If so, how many stages? Is the well choked back for some reason? Does Hess have a different strategy for maximizing EUR? Does Hess calculate IPs significantly different than other producers? Be that as it may, Hess has been granted two permits in the Clear Water field which is being aggressively pursued by EOG. I have all those wells on my wells-to-watch list. December 16, 2009.From the 3rd quarter, 2009, analyst's call via Bakken Shale Discussion Group, November 13:
Hess will double number of rigs in "the Bakken," from 3 (2009) to 6 or 7 (2010)But the discussion group noted something much more interesting: lackluster wells.
Hess will move toward $1 billion/year in capital expenditure next 4 - 5 years
We have all noted that some producers seem to have lackluster wells compared to others. One of the folks noted that Hess is one of those with less-than-stellar results in North Dakota. But an exception: Hess reported an IP of 1,998 boepd for the RS-Feldman. This was reported in NOG's recent update; NOG also noted that Hess used a 14-stage completion on the RS-Feldman well. That may be Hess's best well to date in the Bakken. (The RS-Feldman well is file # 17696, about 3.75 miles northwest of Stanley.) UPDATE: NDIC reported that the IP for the RS-Feldman well -- file # 17696 (this link is now broken) -- was 570 bbls/day. Also, note the decline rate from 16,000 bbls in the first full month of production to 9,000 barrels in the third month of production (most recent data). January 19, 2010. [Update, November 5, 2013: to date, this well has produced almost 200,000 bbls of oil; 198,979 bbls to be exact.]Fidelity (MDU): same problem?
Comment: some weeks ago I opined on the Bakken Shale Discussion Group that "in the old days [two months ago]," no one was doing multi-stage fracturing, but now it was becoming the norm. Someone responded, taking me to task, saying that multi-stage fracturing had been around for at least two years. [In fact, multi-stage fracturing has been around for at least two decades.]
I was mis-read. I was using hyperbole; of course I was aware that multi-stage fracuring was being used in the Bakken. The point I was making was that it was my opinion that not all producers were using multi-stage fracturing. It appears I may have been correct.
People who follow the industry much more closely than I do were surprised to see Hess using a 14-stage fracture stimulation. Hess has had lackluster results in the Bakken according to some; with the multi-stage fracture stimulation they may have a good well.
The thread also states: Hess drilled a Bakken/TFS stacked lateral (EN-Uran-154-93-1213H-1 / file number 18228). This well: 225, reported Mar 3, 2010; not exciting.
On another note, I have also been struck by the uniformly poor Fidelity (MDU) wells in the Bakken. My hunch is that they have also been using one-stage fraction stimulation. November 14, 2009.
When reviewing the entire database, I did find a couple of very good Fidelity wells based on IPs. December 16, 2009.
Don't be fooled by some of these operator's IP results! There is not a standard for reporting IP's. They may flow it back hard after the frac for an hour and extrapolate out the production for their report. This is a marketing game for the companies to attract investors. These well still may be good. Hess reports actual 24hr tests. They have also been using multistage (10 stages) for about 2 years. This company is here to stay and produce the wells long term, not drill it out and sell it off like many of the others. Who is the oldest producing company in ND? HESS
ReplyDeleteThank you for stopping by. You are absolutely correct about the different methods for calculating/determining IPs. I posted that on my previous "Bakken" site but I think I neglected to put that "warning" on this site. I will put that on my FAQs page in the next day or so -- about the significance (or non-significance) of IPs. The decline rate in the Bakken has also been pointed out. At the end of the day, the best data seems to be cumulative production at one year and five years if one wants to compare wells. IPs are nothing more than one data point in time.
ReplyDeleteI actually spoke with a representative of Hess about their lackluster IP results compared to other operators. He mentioned that the NDIC does not have a standard in which to report the IP of the well. Hess actually reports their IP's in terms of the first 10 days of production averaged out. Don't be fooled by some of the results. As mentioned by some of the results above they are just extrapolated numbers. If you take a close look at the overall production of the wells that Hess has brought on in the last 2 years, they are very good daily producers. Production decline curves are much shallower than some of the other operators...
ReplyDeleteI agree completely; IPs are just one data point in time. Only over time will one know exactly how "good" a well is.
ReplyDeleteI believe EOG averages their IP over seven days (it seems I read that somewhere; I could be wrong).
Someone came up with this analogy. Assume two wells end up with identical production over 10 years, one with high IP and steep decline; the other with smaller IP and a more gradual decline. Some prefer the former; some the latter. It's like winning the lottery: would you prefer your cash up front, or take the annuity? If I'm 75 years old and no heirs, I take the cash up front. At 25 years of age, I would probably take the annuity. But it depends.
(The jury is still out whether higher initial IPs, and a steep decline result in less production over time.)
Adding to this dilemma is the amount of water recovered which adds to expense because water needs to be removed and placed elsewhere.
But regardless how one looks at these various data points, I enjoy tracking the wells and following the oil activity in North Dakota.
One also needs to factor in the length of these laterals on horizontal wells. Many of the early wells were "short" laterals (640-acres; one section); now we are seeing more and more "long" laterals (1280-acres; two sections) in initial stages of field development. It seems Whiting (WLL) was one of the first to consistently go with "long" laterals. EOG, heretofore drilling mostly "short" laterals, is starting to dril "long" laterals more often. In my simple mind, it seems one needs to divide by 2 the IP of a "two-section" horizontal well if comparing it to a "one-section" horizontal well (assuming everything else is equal, which of course it is not). Hess, I believe, tends to drill "short" laterals, but that, too, may be changing.
ReplyDeleteOut of Hess's 130+ Bakken wells 90+% are long laterals. In the early part of the game it was a lease hold angle with the long lateral for research purposes. Personally I don't believe the comment about cutting a long lateral IP in 2. This formation is so tight that it boils back to the number of frac stages that stimulate the formation. The other comment that I have about the Bakken is that it isn't turning out to be as easy to produce as intially thought. There are numerous scale problems going on that need to be mitigated as well as the looming water shortage. These local municipalities better start making themselves rich by selling the communities number one resource at a premium, so they can afford there own water treatment programs when they run out of good drinking water!!!
ReplyDeleteThanks for correcting me on length of the Hess wells. I'm starting to add the length of the lateral when I post well results (assuming I have them and I remember).
ReplyDeleteNDIC reported that the IP for the RS-Feldman well -- file # 17696 -- was 570 bbls/day. Also, note the decline rate from 16,000 bbls in the first full month of production to 9,000 barrels in the third month of production (most recent data). January 19, 2010. Press release stated this was a 14-stage fracture stimulation.
ReplyDelete