Crazy Numbers -- Bakken, North Dakota, USA

Update

I originally posted this blog a long time ago, when the general consensus was only one Bakken well per section (640 acres). At the time, I went again the general consensus and opined that one could see at least six horizontals in a spacing unit. That has come to pass. Denbury Onshore has requested as many as 7 wells in one spacing unit, regardless of whether it is a 640-acre spacing unit or a 1280-acre spacing unit. I rest my case. September 17, 2011.

Below, the original post follows. For a more recent commentary about crazy numbers, click here for data on NDGS estimates of original oil in place and estimated ultimate recovery.

Original Post

See also Crazy Numbers, Part 2: One well in this current boom will soon surpass one (1) million barrels oil produced, and five have passed the 500,000 barrel mark.

Take this all with a grain of salt. I have nothing better to do this morning than just some back of the envelope doodling.  But I have to run the numbers to explain why anyone would buy an acre of mineral rights for $8,000.

With current technology and/or based on what is being reported in "the Bakken," how much oil might be recovered from a single section in the Parshall oil field?

EOG estimates, and links can be found in numerous places, that the estimated ultimate recovery (EUR) of a single well in the Parshall is 700,000 barrels.

By definition, historically, one well targets one formation.

We now know that, at least in some places, there are two pay formations that are under discussion: the Bakken and the Three Forks Sanish. There is evidence that the Three Forks Sanish is as prolific as the Middle Bakken, at least in some places.

The more I read, and the more I follow the discussion groups concerning horizontal drilling in the Bakken suggests that the impact of fracking is measured in hundreds of feet. I'm willing to suggest that fracking may only impact out to 400 feet on either side of the lateral. Thus, one lateral impacts 800 feet. [CLR's dual-well test to determine whether the Bakken and the Three Forks Sanish communicate might support this supposition, but I don't understand a) the geology of Bakken shale; b) natural fractures; and, c) man-made fracture stimulation entirely.]

The laterals generally run diagonally across a section, so the math/geometry is a bit tougher to sort out, but let's say the laterals ran straight up and down (north-south) in a section. Using that geometry, one could conceivably put 6 laterals running north-south in each section in the Parshall (5,280 feet/800 feet = 6.6)

CLR has opined similarly, stating that dual laterals could increase the EUR by 400,000 barrels. A dual lateral, apparently, is one well, with two horizontals, one horizontal into one formation and one horizontal into another formation. However, folks are already asking why CLR hasn't raised the EUR with the higher IPs being reported; CLR/CEO says there is still not enough data to raise the EURs.

Again, EOG estimates that each well has a EUR of 700,000, not each section. But is CLR then suggesting that one well, with dual laterals, has a EUR of 1,100,000 barrels of oil?

Is is possible that there could be conservatively four horizontals in each section targeting the Bakken, each with a EUR of 700,000 barrels and another four horizontals in each section targeting the Three Forks Sanish, each with a EUR of 400,000 barrels.  That would be a staggering 4.4 million barrels from each section.

Is there 4.4 million barrels of recoverable oil in each section? It appears to be the industry consensus that using current technology only 1 - 3% of total Bakken oil is recoverable; there are suggestions that EOG is extracting 6 - 9% of the recoverable oil. Let's say, EOG is recovering an unheard-of 10% of the total oil. Remember, EOG opines EUR of 700,000 barrels per well. Currently, EOG generally drills one well in each section in the Parshall. 700,000 is 10% of 7 million barrels. [And, if EOG is only extracting 3% of the total oil reserves, then there would be 23 million barrels oil where EOG drills a well.]

So, yes, there is more than enough oil in each section to support four laterals per formation (the USGS survey considered the Bakken and the Three Forks Sanish one formation, and the NDIC is not yet separating the two formations in their reporting).

At $60/barrel, how much is 4.4 million barrels worth? That would be $264 million over the lifetime of the wells. Per section. The Parshall has about 210 sections.

Incidentally, if the fracking impacts 800 feet laterally, it obviously impacts 800 feet in all directions. The Middle Bakken and the Three Forks Sanish are separated by much less than 800 feet. But that is a story for a different day. Just remember that CLR's analysis suggests that nominally separating two wells targeting the two formations will not affect the other formation. That supports my supposition that fracking has significant impact out only so many hundreds of feet. A CLR press release, March 16, 2010, is very, very interesting along this point.

The Bice 1-29H was our [CLR] first Three Forks well completed in May 2008. The Bice 2-29H is particularly important because its initial productivity was so much stronger than the Bice 1-29H, which has been producing for almost two years. Despite almost 83,000 boe of production from the lower Three Forks zone, there was no pressure depletion in the Middle Bakken zone with the Bice 2-29H.

In its first 21 days of production, the Bice 2-29H produced a cumulative total of 16,318 boe, 70 percent more than the Bice 1-29H during its first 21 days of production.

Oh, one more thing: EOG is requesting permission from the NDIC to drill not one (1), not two (2), but three (3) wells in each of their sections in much of the Parshall, targeting not one (1), not two (2), but three (3) different formations: the Middle Bakken, the Upper Three Forks Sanish, and the Lower Three Forks Sanish. Something tells me my numbers may not be too far off the mark.

UPDATE: one day after posting the above "crazy numbers," a much more reliable, sedate, intelligent, reasonable Bakken analyst posted his numbers.  Yeah, maybe my numbers are not so crazy after all.



In the Flesh, Blondie