Monday, August 18, 2014

Converse County, Wyoming -- Powder River Basin -- Using Unconventional Shale Technology To Go After "Not-So-Tight" Legacy Conventional Fields -- August 18, 2014


September 16, 2018: The U.S. Bureau of Land Management has given final approval of the environmental impact statement on a 3,500-gas well project proposed by Jonah Energy in Wyoming’s Powder River Basin.

August 27, 2018: update here; Motley Fool says the Powder River Basin is the next big basin -- now it is the Power River Basin's time to shine.

February 8, 2018: new crude oil pipeline proposed.

Original Post

This is an interesting story that was sent to me quite some time ago -- while I was traveling. It looks like the oil industry is starting to look at whether lessons learned and technology used to recover oil from tight/unconventional sources can be used in "emerging tight conventional reservoirs."

The unconventional energy blog is reporting:
The growing importance of the application of horizontal wells and hydraulic fracturing to boost recoveries from tight and under-performing conventional reservoirs is exemplified by a recently announced group development project in Wyoming’s Powder River Basin.
The proposed 5,000 well development project involving seven or eight Cretaceous producing reservoirs in Converse County, Wyoming is the first evidence that emerging tight conventional reservoir developments might rival some of the shale/resource plays.
Anadarko Petroleum Co, Chesapeake Energy Corp, RKI Exploration & Production, EOG Resources, Samson Resources and SM Energy propose to drill approximately 5,000 horizontal oil and gas wells in Converse County, Wyoming in an area encompassing approximately 1.5 million acres over a 10-year period.
The project area’s northern boundary is the Campbell County line. The Operators Group (OG) also represents the interests of other companies within the project area. The U.S. Bureau of Land Management (BLM) published a notice of its intent to prepare an environmental impact statement (EIS) for the Converse County Oil & Gas Project.
The article led with this:
The unconventional oil and gas revolution in North America created a new boom for North American energy supplies which was driven by application of new technology.
Horizontal drilling and hydraulic fracturing are the most cited technological keys for unlocking commercial oil production from tight rocks.
The new oil and gas boom also has changed the conventional oil and gas playing field.
Today we are seeing legacy asset revivals in many areas of North America, including the Permian Basin, the Anadarko Basin, the Powder River Basin and other oil and gas rich basins.
The key components of this conventional revival are the “unconventional technologies” cited which are now being used to unlock the “not-so-tight” conventional rocks. Other key enablers include increased operational efficiency, leveraging and capitalizing on in-place infrastructure and the benefits of working in areas of historic production with communities that understand the industry.
Companies are reevaluating legacy reservoirs from top to bottom and expanding the use of traditional borehole data plus reservoir analytical modeling tools to recover left behind and previously uneconomic to produce hydrocarbons. With an average recovery factor of 34% for a conventional oil reservoir, there is plenty of upside potential to improve that recovery factor.
If I understand that correctly, the rule-of-thumb is 34%: that being the amount of oil that can be recovered from the original EUR/primary production. With new technology and lessons learned, the 34% may be low-balling the potential.

Don says MDU (Fidelity) was is a member of the Operators Group involved in the Converse County (Wyoming) Oil & Gas Project.

From the MDU press release, dated March 13, 2013:
MDU Resources Group, Inc., announced today its indirect wholly owned subsidiary, Fidelity Exploration & Production Company, closed on the purchase of oil and natural gas production assets in Converse County, WY, in the southern Powder River Basin, with an effective date of Oct. 1, 2013.
The purchase price was approximately $183 million plus accounting and purchase price adjustments customary with acquisitions of this type and is expected to be accretive to 2014 earnings per share.
“We identified the area last year for establishment of our third oil play and our team successfully sought out acreage in this top-tier basin,” said David L. Goodin, president and CEO of MDU Resources. “The upside potential of its multiple prospective zones is appealing to us and we anticipate it will result in a long-lived production asset.”
Third oil play for Fidelity/MDU? I assume the first two are the Bakken and the Niobrara. The PRB acquisition:
The acquisition consists primarily of non-operated undeveloped mineral leasehold positions of approximately 42,100 gross acres and 24,500 net acres. In January, the properties had existing net production of more than 1,100 barrels of oil equivalent per day, 80 percent of which is oil. Plans for 2014 include a two-rig seasonal drilling program targeting the heart of the prolific Frontier play. 
$183 million / 24,500 net acres =  $7,500/acre which compares favorably to some of the better Bakken acreage.

[Note: with the slump in oil prices in 2014 - 2016, many operators sold out their positions in the Powder River Basin.]

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