The Bakken As A Trilogy; The EOG Experience

Regular readers know that when I mention the "Bakken," I am thinking of the Bakken in three different ways.

• the oil patch in North Dakota
• a laboratory for horizontal drilling and fracking in tight oil
• an entrepreneurial spirit in which all concerned work together to solve problems

I am reminded of those three "Bakkens," the "trilogy," perhaps, when I think of EOG.

It was reported first over at SeekingAlpha (a couple of weeks ago) and then in Forbes (this past week) that EOG will soon be the biggest producer of oil in the continental United States. Over at the EOG page I posted:

December 21,2013: Forbes has almost the identical story that SeekingAlpha had on November 25, 2013, about EOG to be the largest producer in the lower 48 by 2018. 

• Chevron: 475,000 bopd
• XOM: 450,000 bopd
• BP: 400,000 bopd
• COP: 350,000 bopd
• OXY: 300,000
• EOG should hit 500,000 by 2018

That little snippet validates my thoughts about the "Bakken, the trilogy."

I don't know what EOG was doing back in 2000 when the Bakken pre-boom began in Montana's Elm Coulee, and I don't know how "big" EOG was just before the company started drilling the Parshall oil field back in 2007 in North Dakota.

But it appears the EOG history is something like this. The company was meandering along over the years following the Enron debacle. Then, that first Bakken well near Parshall, North Dakota. EOG quickly delineated what they had, and watched the development of the Bakken in North Dakota.

The company must have know then what Harold Hamm was telling anyone who would listen: the Bakken is bigger than you can imagine.

EOG recognized several things during their first year of drilling in the Bakken: a) it was WAY bigger than anyone was imagining; b) success would go to the operators who figured out best completion (fracking) techniques; c) the infrastructure to take away all that oil in North Dakota was grossly lacking.

After a gang-buster start in North Dakota, 2007 through 2010, EOG seemed to be relatively quiet in North Dakota, at least compared to the other operators. There wasn't a big urgency to drill like one's hair was on fire. The oil wasn't going anywhere. Literally and figuratively. If the oil wasn't drilled in 2011, it would still be there in 2014. And, there was not enough pipeline to take away all that oil anyway -- except at high prices to transport. So, no reason not to wait and watch.

While watching, one of the things they noted was that the pipeline infrastructure was never going to catch up. EOG was the first to have a CBR facility. I'm not going to check now, but I think they planned to have their first shipment in early 2010, and in fact beat the deadline by shipping the last day in 2009.

EOG also watched the completion techniques of the other operators, particularly those of BEXP. EOG is now doing the biggest sand fracks of any operators, using up to 10 times the amount of sand of some other operators.

While watching the North Dakota Bakken, EOG was doing two other things. It was quietly buying up sand mines in Minnesota and/or Wisconsin.

And, last but not least, EOG was looking for other tight oil plays. EOG bought early into the Eagle Ford. The Eagle Ford is likely the only tight oil play that will rival the Bakken among the "single formation plays." [The Permian is likely to out do them all, but it is such a multi-layered Oreo it defies comparison.]

It is interesting to watch the personal dynamics also. All of the above was done under the guiding hand of man I came to learn late in the game. I believe one of my readers first introduced me to "Mark Papa."

This past year the EOG baton passed to William R. Thomas, a youngish 60 years old. One can bet he wants to set his mark. EOG has said they will ramp up in the Bakken in 2014 now that they have more experience gained in the Eagle Ford.

And that brings us to the SeekingAlpha and the Forbes articles linked above.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you might have read here.

Post script: it will be interesting to see how EOG does in the Bakken this year. EOG has some incredibly good acreage in the Parshall, but it also has a fair amount of acreage in areas that are not seen as quite as good as the Parshall. It will be interesting to see if EOG surprises us in some of those areas.

For newbies: EOG stated about six months that it was  reaching 100% "payout" on its Eagle Ford wells. In its more recent presentations and interviews, EOG states it is now reaching that same 100% payout in its Bakken wells. In fact, there are analysts who suggest that EOG is reaching 100% payout in six months with some of its Bakken wells.