Friday, July 1, 2016

Idle Chatter On The "Halo Effect" In The Bakken -- July 1, 2016


Later, 2:10 p.m. Central Time: see first comment. Think about that observation and the future of water boarding flooding in the Bakken.
Original Post
The other day, I posted a note about the jump in production of a particular well as seen in this production profile (the fourth column is produced bbls of oil; the sixth column in water:


I think it is due to the halo effect of fracking; see the linked post above. I could be wrong. Something else may account for this jump.

But assuming it is due to the halo effect of fracking, I often wonder why analysts don't talk about this more often. I seldom see any mention of it.

I think the reason has to do with the fact that the jump in production is relatively short-lived. It appears that these wells revert to their earlier production profiles. That may be.

But look at from this angle. This well was down to producing less than a thousand bbls of oil per month (for whatever reason). Then, over a period of 26 days, it produced 18,000 bbls, and then the next month, produced another 18,000 bbls. At the previous rate of 1,000 bbls/month, this equates to 36 months of production over a short two-month period.

Not only that, but even though production dropped quickly after that second month, these were the amounts per month that this well was still producing (remember, the base line was less than 1,000 bbls / month), numbers rounded:
  • Third month: 7,000 bbls
  • Fourth month: 9,000 bbls
  • Fifth month: 5,000 bbls
  • Sixth month: 5,000 bbls
  • Seventh month: 2,000 bbls
  • Eighth month: 2,000 bbls 
And now, two years later, monthly production still exceeds the 1,000-bbl baseline prior to the production jump.

But look at this, same well. Look at the months highlighted in red bold, especially that nearly 5,000 bbls of production in August, 2015:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Which brings me to another point.

A lot of folks talk about Bakken wells that are not economic. They say the production is too low. From the beginning, it always seemed strange to me that folks were concerned about these wells not being economic, but yet operators were not permanently abandoning these wells. Although it may not cost much, it is a cost to keep a non-economic well on the books. Non-economic wells never bothered me, and that was before the "halo effect" observations.

A lot of "non-economic" wells were part of the learning process. And, wow, did the Bakken operators ever learn a lot. Some learned faster than others.

In addition, a lot of "non-economic" wells held leases by production, allowing operators time to go back and drill new wells later.

But now, we have the "halo effect." It may or may not exist. It may or may not exist everywhere. It may not amount to anything. I don't know. But when I see a well produce 36 months' of production over the course of two short months in a well that might have otherwise been "non-economic" it makes one wonder.

Another point. This is occurring in a drilling unit where there are very few wells, maybe four, five or six. Think what might happen when 28 wells (or more) are put into this drilling unit.

Most of the stuff regarding EURs, etc, is based on new wells and production profiles of the first few months. One wonders if some folks might not be going back to these older wells and revising
EURs for older wells based on other factors.

Finally, one wonders: if the halo effect is real, what does that mean for "water flooding" in the Bakken. I do think there's a difference between water flooding shale (think gumbo) and water flooding sandstone/limestone/dolomite (think sandy beach).

But even if the "halo effect" amounts to nothing, at least in this case, the mineral owners must have been pleasantly surprised to see a jump in their royalties back in August and September 2013. All things being equal, their royalty check should have jumped by a factor of 20?

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