Friday, November 16, 2012

Friday Night Ramblings -- The Bakken, But Nothing New

CarpeDiem.com regularly posts uplifting updates regarding the Bakken and just as regularly there is one informationally-challenged individual who never fails to comment. I can't even succinctly summarize his/her arguments/comments because they ... well, they just don't reflect reality.

One of the more interesting arguments is that all the good wells have been drilled, all the sweet spots have been found. The reality is, if nothing else, it appears most operators have been getting better at completing Bakken wells. As time goes on, we will see more and more data validating that observation.

Back in November, 2009, Hess drilled EN-State B-155-93-1609H-1 in section 16-155-93, Alger field. It was a very long lateral, almost 21,000 feet, and Hess reached total depth in 18 days. And that was back in late 2009. The IP was a moderately impressive 531 bbls/24 hours. To date that well has produced 137,876 bbls of oil. Although wells are increasing in cost, at the time this well was drilled, the general consensus was that wells were well on their way to recovering costs when 100,000 bbls had been produced. Yes, the decline rate is horrendous, but this well is still producing about 2,500 bbls/month (at $50/bbl --> ~ $125,000/month and at very little cost.

[Most natural gas from this well is being sold, but a bit is still being flared. This naturally begs the question whether the well is producing at maximum rate. The NDIC has rules about flaring and production.]

[In addition, I was unable to find the frack data for this well; it may be there, but if it is, I missed it. But back in 2009 they were fracking with less proppant and fewer stages than in 2012. All things being equal geologically, the wells should be even better going forward.]

So, back in 2009, Hess drilled the State B well in section 16, which has now produced almost 150,000 bbls (remember, this figure is only through September; it is now almost the end of November).

And today, Hess was issued permits for four more wells in this section: #2, #3, #4, and #5 in the EN-State B-155-93-1609H-1 series of wells.  So, we will get to see if, as some have suggested, "they" have drilled all the good wells in the Bakken. I can hardly wait to see how these four wells compare with the "original" well in this section.

That 2009 well is expected to produce oil for 39 years -- that's the average lifetime projected for a Bakken well. But the lifetime of a well is inconsequential. The total recovery is the key, and the period of time it takes to reach total recovery. Regardless how long a Bakken well produces, the estimated ultimate recovery (EUR) is what is important, and whether it can produce that total in a reasonable length of time. I don't know what the average EUR is/was for a legacy formation, such as Red River, or Madison, but it appears that 150,000 to 250,000 bbls is about as good as they get, and the average is well below that, and it takes 30 years to reach those totals. A Bakken well reaches 150,000 in under two years in most cases. EURs are estimated to range from 400,000 to one million bbls for Bakken wells, the latter in the best Bakken locations.

Check out "monster wells" to get some idea of the potential of the Bakken as well as other formations. 

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Some folks might have noticed this announcement earlier today:
KOG announced that it has completed its offer to exchange $800 million aggregate principal amount of its unregistered 8.125% Senior Notes due 2019 for $800 million aggregate principal amount of its outstanding 8.125% Senior Notes due 2019. 
$800 million. Hey, folks, in my book that's $1 billion.  Don reminded me that just a few years ago one could have bought a share of KOG for 60 cents.  Not too shabby. And except for a few fields, most sections still have just one well in them. The Bakken is just beginning.

They say it will take at least 48,000 wells to drill out the Bakken (that number has been increasing, and will probably continue to increase). I suppose about 5,000 total Bakken wells have been drilled to date.  Through December 31, 2011, according to the NDIC, 3,578 Bakken wells had been drilled.  Close to 2,000 more Bakken wells will be drilled this year. North Dakota now produces more oil than California with less than 8,000 active wells; someone has said that California has about 60,000 active wells.
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A new hotel is going up in Alexander, North Dakota, right in the center of one of the sweet spots in the Bakken. They are putting that hotel up in 90 days. Modular concept. It is designed to be in place "permanently." But it can be moved if necessary. This is the kind of entrepreneurial thinking that makes the Bakken so exciting.
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It seems like just the other day that we read the announcement that Love's was putting a truck stop in north of Williston. That truck stop opened this past week.  A year ago folks were clamoring for a truck reliever route, or another bypass around Williston. Some weeks ago, that bypass was being used. Not perfect, but infrastructure keeps moving along.

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Crude-by-rail? Who would have thought? CBR has completely changed the way we think about moving oil in a fast-moving economy.

4 comments:

  1. Bruce there's still more to this play than most know. Stay tuned as always

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    1. Thank you for your support. I'm always inappropriately effusive about the Bakken, but every so often "it" really hits me, how incredible/unexpected all this has been. Again, tonight was one of those nights. I think it was the four Hess permits in a section that was otherwise fairly non-descript. And then to see that it took awhile, but the "older" Hess well has produced a respectable 150,000 bbls to date and looks like it will continue.

      I also think about all the crude oil pipelines and all the natural gas pipelines and processing plants that are still needed.

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  2. All sweet spots found?

    I did not notice earlier mention of a BR well released from tight hole status today 21454 in 10/147/97 with an IP of 2,846. There are still 5 drilling units not held by production in this Township.

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    1. That's interesting about the drilling units not yet held by production. I'll post that later.

      I failed to highlight it in a "headline," but BR's #21454 was posted twice, first at "New Wells Reporting":

      http://www.milliondollarwayblog.com/2012/10/new-wells-reporting-4q12-williston.html

      And also at "High IPs":

      http://www.milliondollarwayblog.com/2012/08/high-initial-production-numbers-page-2.html

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