ND Oil: Trends

Note: 53 wells come off the confidential list in January, 2010.
Note: 55 wells come off the confidential list in Febraury, 2010.
Note: 65 wells come off the confidential list in March, 2010.
Note: Skipping ahead -- 49 wells come off the list in June, 2010.
It has been opined that the increase in wells coming off the confidential list early in 2010 was due to number of EOG wells that would have been reported earlier, but were delayed due to delay in fracking.

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I am an eternal optimist so take the following with the proverbial grain of salt. I'm getting the feeling that 2010 could be a watershed year for the oil industry in North Dakota, the perfect storm one might say, but in this case, a very, very good storm, for these reasons:

a. Oil prices seem to be trending higher, but in an orderly fashion. Meanwhile, analysts predict demand for oil will outpace supply in 2010. More recent update from EIA, January 14, 2010.

b. The oil companies will continue to define the geology and the extent of the basin.  Particularly noteworthy is the "far east field" -- the Clear Water field bordering Ward County -- which EOG is aggressively pursuing. As of early January, 2010, EOG has 50 of 54 wells/permits in this field of 101 sections (the prolific Parshall field has 162 sections). [Note: both fields could be expanded over time. The Parshall field could be extended north and east. EOG is not the only producer interested in the Clear Water field; Hess was granted two permits in the Clear Water on December 16, 2009.

c. North Dakota had a record-breaking land lease auction, November, 2009. Producers and developers did not lease this land to watch the prairie grass grow.

d. All major producers in the Bakken have announced a) an increase in their capital expenditure program; and, b) an increase in the number of rigs they will be operating.

e. Although a lot of consolidation that resulted from slump in oil prices in 2008 seems to be ending, there are still significant deals being made. The relationship between NOG (publicly traded) seems to be growing with Slawson (not publicly traded).

f. Several major producers or exploration companies have recently concluded new share offerings: KOG, BEXP, NOG, raising cash for their 2009-2010 program. These companies are not raising cash just to invest in money market funds.

g. Current data suggests 20+ stage fracturing will become the norm in the Bakken.

h. It appears that more companies are drilling 1280-acre spacing wells.  Even EOG, historically drilling short laterals, now has applications in for long lateral wells.

i. Time to complete a well has decreased significantly, which will result in at least two things: a) more wells being drilled in a calendar year; and b) less cost to drill.

j. The US has adjusted to an unemployment rate of 10%.  The strength of the dollar has increased, and oil continues to rise in price (January, 2010).

k. Could the choke point for increasing oil production and getting oil out of the state be the pipelines? Although still lagging, the pipeline capacity to get the oil out of North Dakota has increased remarkably, and EOG's rail head to ship oil out by tanker went operational December 31,2009, about two months ahead of schedule. [Nice overview posted here, dated November 16, 2009.]

l. If an eco-pad with four wells on it actually works out, it's going to be quite a story. Can you imagine initial production (IP) numbers based on an Eco-Pad with eight (8) laterals versus a single well with a single lateral?

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I think the biggest trend in "the Bakken" right now is multi-stage fracturing. Examples abound but the history of Hess may be as good as any and better than most. It's hard to believe that only a year ago there was not a lot of talk about the number of stages of fracturing. All of a sudden, it seems, the number of stages of fracturing has become a hot topic of discussion. A few months ago, Halliburton announced a huge ($20 million) expansion in its complex east of Williston. And shortly after that, BEXP announced that 20-stage fracturing will become the standard.

This site says we will soon see 32-stage fracturing, and it will not be long before operators/drillers could see 60-stage fracturing.

It also appears that producers are studying the best time to actually accomplish the fracturing. The timing may depend more on the finances/availability of frack crews/price of oil rather than simply fracturing immediately after the well has reached total depth. There were suggestions/rumors on message boards that EOG was studying the timing of fracturing. EOG has stated it is researching the optimum number of fracturing stages.

There may be a good example of this trend line. The Charlson 44-33H came off the confidential list today. Its IP was under 300 bopd, and yet two months later, its average daily production is over 500 bopd. So, the questions: when did they do the frac; and how many stages?

The Bakken Blog posts a wonderful review of multi-stage fracturing. Posted November 6, 2009.

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This may or may not be important in the future as a trend (cost and time to drill a horizontal Bakken well), but I don't want to lose the link. If you scroll to the top of that link, Slawson reports that it has put in a horizontal well in 16 days and for less than $3 million. The rule of thumb for a horizontal well in North Dakota: 30 days (it used to be 45 days) and $4 - 6 million.  [Note: since this was posted a long time ago, NOG and Slawson have strengthened their relationship.]

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The trend in prices paid for oil leases from the state of North Dakota can be found by clicking here. North Dakota state holds an auction every three months. The November 3, 2009, auction hit a record ($71 million vs $30 million in 1980).


Original post: November 5, 2009. Updated: January 12, 2010.  Reviewed: January 23, 2010.