Saturday, August 5, 2017

The Bakken Was A Hard Nut To Crack -- August 5, 2017

Back on October 23, 2010, I posted a list of the operators in the Bakken with a few comments about most of them. About MDU (Fidelity), I wrote at the time:
Of all the operators, [MDU /Fidelity] is the most disappointing; HQ in Bismarck, ND; seemed to have missed the Bakken right in their backyard; "discovered" Cottonwood oil field; sold it to Oasis after some disappointing wells; Oasis became "overnight" success with this purchase; MDU re-entering the Bakken in 2011; doing better; MDU (utility) focused on natural gas; waited a bit too long to shift to oil
Earlier this week, a reader talked about how well Oasis had done because of the Bakken.

Here is my reply, not ready for prime-time, with a few additional notes, in no particular order:
It has become incredibly clear to me that the Bakken was an incredibly difficult nut to crack. There have been very few long-term survivors. Yes, MDU had its challenges in the Bakken but it was not the only one.
1. Hess has survived because it's been in North Dakota forever; and the natural gas story has been bigger than anyone expected; the reader noted that Hess had really deep pockets and knew that technology would eventually win; it always does; winning in the oil business seems to require time and money;
2. EOG: I don't know how much was luck and how much was really, really good work. But they had deep pockets to begin with and moved quickly with huge fracks which was one of the secrets to cracking the Bakken; the reader noted that EOG got into the east side of the field where they had huge wells (huge at the time); that area also had the highest field pressure, perhaps because nothing had yet been tapped

3. CLR: survived because Harold Hamm had bought so many acres over the decades at cheap prices prior to the boom; was incredibly brilliant across upstream and midstream; a survivor but certainly not in a real strong position today if oil stays below $50 another year; the reader noted that CLR focused along the Nesson Anticline figuring that the natural lifting and fracturing of the rock would help them;

4. Whiting: wanted to sell out; get out of the Bakken several years ago; no buyer found; stayed in; probably did much better than expected; again, because of simply getting better and better at figuring out the Bakken. The reader reminded me that Whiting wrote off the entire value of KOG after buying its assets at the top of the boom

5. Statoil: great initial IPs; but really doesn't seem to be particularly remarkable in the big scheme of things; again, deep Norwegian pockets. The reader agreed, suggesting that BEXP and "Bud" goaded all the operators with his 24-hour IPs (which is now the norm in the Bakken); it may not have been the best strategy, going after max IPs based on ultimate EURs, it appears;
6. Oasis: looks like the real survivor -- bought SM Energy's assets; doing very, very well

7. Others all gone -- sold out (KOG, SM Energy, BEXP) or renamed after coming out of bankruptcy (Triangle, others).
8. OXY was never able to figure out the Bakken; they were the poster child for incredibly bad Bakken wells when small independents were drilling incredibly good wells; the location of their play in the Bakken may not have been the best, but certainly not the worst;
9. Chesapeake: another huge company that never figured out the Bakken;
10. Anschutz was in very early; and out, very early;
11. MRO and XTO, both with deep pockets; MRO seemed to take the lead on re-fracks;
12. SM Energy, once said they would never leave the Bakken, recently exited the Bakken to focus on the Permian;
13. Slawson. See comments. I did not include Slawson in the original post but a reader reminded me. Slawson was noted for having incredibly good wells in the early days; a private company, it would not have had deep pockets, so it made every dollar count ... and they got incredibly good wells; Slawson is not only a survivor, but apparently, a successful survivor;
At the end of the day, every operator added something to the Bakken. Some showed "us" how not to do it; others more successful for a variety of reasons.

In Bakken 2.0, some new operators and a few survivors.

The point: the Bakken was a hard nut to crack and operators are still learning. 

6 comments:

  1. It reminds one of the men and women who pushed west during the early days of the American experience.

    Exploring new frontiers, venturing out into the unsafe and the unknown, has never been easy.

    It took all types. Some perished, but others flourished.

    But in the aggregate it worked out for us as a nation, as a people. And this sense of adventure, of accomplishment and failure based on one's skill, luck and grit, is what the American Dream is all about.

    The Bakken was the first shale oil play. Others learned from its successes and its failures, without which the other plays that came later could not have unfolded as they did.

    We owe the Bakken pioneers a great deal of gratitude for what they achieved, but we should also be thankful for our nation's vast natural wealth. It is the combination of the two that has created vast new opportunities for the rest of us.

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    1. Thank you. I appreciate that. I was hesitant to post that because it was a fairly simplistic overview; and, I might have been a bit too hard on some of the operators. But for "newbies" it might provide a bit of (my) perspective. I very much appreciate your positive comment; I was concerned what some folks might say, much less think. LOL.

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    2. Simplistic maybe. But maybe not.

      As the Rev. Martin Luther King, Jr. said, "The American racial revolution has been a revolution to 'get in' rather than to overthrow."

      I think most people know a good thing when they see it, and there are certainly a lot of people who would like to "get in." I know that an agency of the Mexican government conducted a poll a few years back which found that 60% of Mexicans favored the idea that the US and Mexico form a single country.

      --- 60% prefiere que México y EU sean un mismo país: encuesta CIDE ---
      https://www.sdpnoticias.com/nacional/2013/06/25/60-prefiere-que-mexico-y-eu-sean-un-mismo-pais-encuesta-cide

      But the US's first obligation is to take care of its own, ALL of its own. And I think we've made some improvements in this regard.

      PBS did a great video on this:

      A CLASS APART
      https://www.pbslearningmedia.org/resource/arct.socst.ush.class03ww2/mexican-americans-in-world-war-ii/#.WYZE-oQ1_IV

      During WWII, the US leadership class took the route of inclusion rather than exclusion (as Germany did) in mounting the war effort. It asked for, and received, the help of millions of Blacks and Hispanics in fighting the war. And when they came back home, they weren't about to go back to being second-class citizens.

      As David Montejano wrote in 'Anglos and Mexicans in the Making of Texas, 1836-1986'

      "Social conflict and national crises provided the necessary impulse for the decline of old race arrangements. World War II, in particular, initiated dramatic changes on the domestic front. The need for soldiers...meant that the counterproductive and embarrising customs of Jim Crow had to be shelved... In more lasting terms, the war created a generation of Mexican American veterans prepared to press for their rights and privileges. The cracks in the segregated order proved to be irreparable."

      Many Blacks and Hispanics are proud to be a part of their nation. And too many people are in denial of the fact that it was the big swing in the Black and Hispanic vote, not the white vote, that put Donald Trump in the White House. I've heard Trump himself acknowledge this.

      https://s2.postimg.org/oqcf45h3t/Captura_de_pantalla_1364.png

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    3. Again, thank you. Amazing how much "good stuff" is out there. Thank you.

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  2. Don't know if you intentionally focused on the public companies, but Slawson has done a remarkable job, as being one of the "Little guys".

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    1. Good point. Slawson has been one of my favorites; I actually remembered Slawson while posting the note above ... it was subjective why I left it off the list .. my mistake .. I will go back later -- when I get more time .. and add it to the list. Good observation.

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