ND Oil: Trends

History of Permits Granted and Wells Drilled
July, 2010, update on wells coming off confidential list

Note: 53 wells come off the confidential list in January, 2010.
Note: 55 wells come off the confidential list in February, 2010.
Note: 65 wells come off the confidential list in March, 2010.
Note: 42 wells come off the confidential list in April, 2010.
Note: 49 wells come off the confidential list in May, 2010.
Note: 50 wells come off the list in June, 2010.

It has been opined that the increase in wells coming off the confidential list early in 2010 was due to number of EOG wells that would have been reported earlier, but were delayed due to delay in fracking.

Note: 54 wells come off the confidential list in July, 2010.

I'm surprised we're not yet seeing a jump in number of wells coming off confidential list. In October, 2009, there were only 56 active rigs; in January, 2010, the number of rigs approached 90 rigs, and yet, the number of wells coming off confidential list in January, 2010, was 54, and the number of wells coming off confidential list in July, 2010, is 49. 

Note: 73 wells come off the confidential list in August, 2010.

Note: 68 wells come off the confidential list in September, 2010.

Note: Jumping ahead -- 103 wells come off the confidential list in December, 2010.

The jump in the number of wells in December is probably due to two reasons:

• Increased activity from record number of active rigs
• Companies like EOG don't frack during the winter

If EOG fracks a well in March, it can then be placed on the confidential list for six months, meaning it won't come off the confidential list until September. We should start seeing number of wells on confidential list increase in the fourth quarter of this calendar year and going forward.

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I am an eternal optimist so take the following with the proverbial grain of salt. I'm getting the feeling that 2010 could be a watershed year for the oil industry in North Dakota, the perfect storm one might say, but in this case, a very, very good storm, for these reasons:

a. Oil prices seem to be trending higher, but in an orderly fashion. Meanwhile, analysts predict demand for oil will outpace supply in 2010. More recent update from EIA, January 14, 2010.

b. The oil companies will continue to define the geology and the extent of the basin.  Particularly noteworthy is the "far east field" -- the Clear Water field bordering Ward County -- which EOG is aggressively pursuing. As of early January, 2010, EOG has 50 of 54 wells/permits in this field of 101 sections (the prolific Parshall field has 162 sections). [Note: both fields could be expanded over time. The Parshall field could be extended north and east. EOG is not the only producer interested in the Clear Water field; Hess was granted two permits in the Clear Water on December 16, 2009.

c. North Dakota had a record-breaking land lease auction, November, 2009. Producers and developers did not lease this land to watch the prairie grass grow. Record setting lease prices (up to $8,000/acre) for the February, 2010 land lease auction.

d. All major producers in the Bakken have announced a) an increase in their capital expenditure program; and, b) an increase in the number of rigs they will be operating.

e. Although a lot of consolidation that resulted from slump in oil prices in 2008 seems to be ending, there are still significant deals being made. The relationship between NOG (publicly traded) seems to be growing with Slawson (not publicly traded). XOM buys XTO. Denbury buys Encore.

f. Several major producers or exploration companies have recently concluded new share offerings: KOG, BEXP, NOG, raising cash for their 2009-2010 program. These companies are not raising cash just to invest in money market funds.

g. Current data suggests 20+ stage fracturing will become the norm in the Bakken.

h. It appears that more companies are drilling 1280-acre spacing wells.  Even EOG, historically drilling short laterals, now has applications in for long lateral wells. Compare head-to-head results, 640- vs 1280-acre spacing.

i. Time to complete a well has decreased significantly, which will result in at least two things: a) more wells being drilled in a calendar year; and b) less cost to drill. Some producers are drilling wells in 16 days; however, time to completion not that much shorter due to long time to complete fracture stimulation.

j. The US has adjusted to an unemployment rate of 10%.  The strength of the dollar has increased, and oil continues to rise in price (January, 2010).

k. Could the choke point for increasing oil production and getting oil out of the state be the pipelines? Although still lagging, the pipeline capacity to get the oil out of North Dakota has increased remarkably, and EOG's rail head to ship oil out by tanker went operational December 31,2009, about two months ahead of schedule. [Nice overview posted here, dated November 16, 2009.]

l. If an eco-pad with four wells on it actually works out, it's going to be quite a story. Can you imagine initial production (IP) numbers based on an Eco-Pad with four (4) laterals versus a single well with a single lateral?

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I think the biggest trend in "the Bakken" right now is multi-stage fracturing (remember, this was originally posted November 5, 2009). Examples abound but the history of Hess may be as good as any and better than most. It's hard to believe that only a year ago there was not a lot of talk about the number of stages of fracturing. All of a sudden, it seems, the number of stages of fracturing has become a hot topic of discussion. A few months ago, Halliburton announced a huge ($20 million) expansion in its complex east of Williston. And shortly after that, BEXP announced that 20-stage fracturing will become the standard. Discussion groups continue to bemoan the shortage of frac crews.

This site says we will soon see 32-stage fracturing, and it will not be long before operators/drillers could see 60-stage fracturing.

It also appears that producers are studying the best time to actually accomplish the fracturing. The timing may depend more on the finances/availability of frack crews/price of oil rather than simply fracturing immediately after the well has reached total depth. There were suggestions/rumors on message boards that EOG was studying the timing of fracturing. EOG has stated it is researching the optimum number of fracturing stages.

There may be a good example of this trend line. The Charlson 44-33H came off the confidential list today. Its IP was under 300 bopd, and yet two months later, its average daily production is over 500 bopd. So, the questions: when did they do the frac; and how many stages?

The Bakken Blog posts a wonderful review of multi-stage fracturing. Posted November 6, 2009.

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This may or may not be important in the future as a trend (cost and time to drill a horizontal Bakken well), but I don't want to lose the link. If you scroll to the top of that link, Slawson reports that it has put in a horizontal well in 16 days and for less than $3 million. The rule of thumb for a horizontal well in North Dakota: 30 days (it used to be 45 days) and $4 - 6 million.  [Note: since this was posted a long time ago, NOG and Slawson have strengthened their relationship.]

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The trend in prices paid for oil leases from the state of North Dakota can be found by clicking here. North Dakota state holds an auction every three months. The November 3, 2009, auction hit a record ($71 million vs $30 million in 1980).


Original post: November 5, 2009. Some of this page was updated: July 20, 2010.

Things on my mind

UK faces 'oil crunch' within five years. February 10, 2010.

1. Everything points to continuing excitement in the Bakken. The number of active rigs is now up to 99 (March 6, 2010), 30+ more than when I first posted observations about the increase in rigs in North Dakota back in early November. The Grand Forks Herald reports (January 24, 2010) that there could be 110 - 120 rigs in North Dakota by mid-summer.

2. Oil takeaway capacity as of January, 2010, in North Dakota: 410,000 barrels/day. Pipeline takeaway capacity: 350,000 bbls/day. EOG railroad terminal: 60,000 bbls/day. New Dickinson railroad terminal, scheduled to be operational in October, 2010, another 60,000 bbls/day.

3. My father says that vehicular traffic has increased significantly in  Williston (November 26, 2009).

4. Even the NY Times has noticed that mid-tier companies have been buying up great acreage in the continental US while the majors (like XOM) were ignoring the US, and looking for oil/gas in politically unstable areas overseas. December 15, 2009.

5. Five areas of significant drilling activity: a) Parshall-Sanish oil fields north of the reservation; b) the Van Hook / Big Bend areas inside the reservation, especially Slawson; c) the area immediately around Williston, especially to the west, to include eastern Montana; d) the Highway 50 Corridor: on either side of Highway 50 southeast of Kenmare, and north of Parshall, the Clearwater oil field, especially EOG; and e) Ambrose, a ways north of Williston. [Update: Slawson hit a great well in Van Hook: IP of 1,208 bopd and 42,000 bbls in first 59 days -- Fox 1-28H. Also, EOG announced a great Van Hook well, the Van Hook 100-15H, with a 1,390 bopd, and this targeted the Three Forks Sanish. February 9, 2010.]

6.  Is EOG asking for 570 more wells in the Parshall? If you want excitement, look at the Ross oil field, T156N-R90W, section 27, where you will see six EOG wells spaced 50' from each other in a line, 500' from the section line. Follow this discussion thread regarding the two 2560-acre spacing units which will be allowed to have as many as six horizontal wells each. One spacing unit: sections 26, 26, 28, and 29. The other spacing unit: sections  20, 21, 22, and 23. January 24, 2010.

7.  The RS-Feldman well, about 4 miles northwest of Stanley. This appears to be the best Hess well in the Bakken and it may be due to multiple stage fracturing. The presentation by Harold Hamm, November 19, 2009, continues to support my opinion that the increased success in the Bakken is due to multiple fracturing. Some companies are still doing single-stage fracturing -- but I think single-stage fracturing is a thing of the past. Even EOG is studying the "right" number of stages.

8. GeoResources, Inc., announces an aggressive 2010 in North Dakota. GEOI is getting a lot of interesting comments on Yahoo!Finance message boards. Oil and Gas Journal has short article on GeoResources, March, 2010.

9. Slawson may be the next big story. Look at the results of the the November 3, 2009, North Dakota state land lease auction. In 2007, Slawson had 7 permits in the Williston Basin; in 2008, Slawon had 27 permits; 28 in 2009; and 12, as of March 6, 2010. Of the 27 permits granted in 2008, we have yet to hear the outcome of 14 of those permits. The other 13 have resulted in very good wells with IPs ranging from 248 to 2,205 bopd with an average of 791 bopd.

10. There are now 99 active rigs in North Dakota up from a low of "around 33" in the of autumn, 2008. Many of the big producers are still bringing in new rigs. Harold Hamm, CEO of Continental Resources, says he might have 18 rigs in North Dakota this time next year (mid-2010), a significant increase over the 5 rigs CLR had in 2009. EOG has stated it could triple the number of rigs they have, from 5 to 15. March 6, 2010.

11. Look at the IPs of the wells reported on November 5, 2009 and the wells that reported on December 14.  Cut the IP in half, and assume that amount will be produced on a daily basis for the first year, and multiply by $70. Then assume that the wells will be productive for seven years (on a declining basis) but subject to re-fracturing. The numbers are staggering. And not all those IPs were exceptional, many well below 1,000 boepd.

12. The companies engaged in fracking are going to be very, very busy: it appears the norm is now 24-stage fracturing, +/- four stages. Some opine that we may soon see 60-stage fracturing. I have to study it again, but it appears the mathematical relationship between fracturing and exposure to oil is exponential initially, but with increased stages, there comes a point of diminishing return.. Regardless, it appears that fracturing increases the initial amount of production, delays the need for a pump (albeit a very short period of time), and increases the ultimate total recovery of oil from a well. (My hunch: frac stages remain somewhere between 14 and 20.)



13. EOG typically has 70 - 80 wells on the confidential list. It has been opined that EOG could drill between 225 and 250 wells in 2010. And that's just one producer working in the Williston Basin, albeit the one with the most rigs (six now and going to 13 or 14 in 2010).

14. The area around Williston is very, very active. There are two areas: west of Williston, mostly BEXP. And then northeast of Williston, the Spring Brook area. In the Stony Creek field there are 11 wells/permits on the confidential list. The BEXP well on SE edge of Williston reported an IP of 3,394 bbls/day, which BEXP says is their largest IP reported to date.

15. Harold Hamm, CEO of Continental Resources, opines there may be double the amount of recoverable oil in "the Bakken" forecast by the USGS in 2008. CLR's goal is to double its proved reserves in the Bakken over the next five years.

16. North Dakota is #4 in oil production in the United States, surpassing Louisiana. I never thought that would happen, ever. In December, 2006, Mountrail County produced 1,300 barrels of oil per day; this past October (2009), Mountrail County produced almost 100,000 barrels of oil per day. At $60/barrel, 43 wells in Mountrail County produced $100,000,000 worth of oil at the wellhead over a three month time period, ending in October.

17. Reports that there is yet another formation, the Birdbear, amenable to horizontal drilling are intriguing, but statements saying this is a "new" formation are incorrect. This formation has produced oil, albeit not much, for decades. Incidentally, WLL re-entered an old well that was producing from the Birdbear Formation; exited with a horizontal and ended up with a 2,000 boepd IP in the Bakken (December 8, 2009).


Updated: March 6, 2010.

Producers returning to where it all started

I just posted the other day -- I forget where I posted it -- but it was in response to someone who opined that we are already seeing the beginning of the end in the Bakken in terms of more good wells. I reminded folks that the Elm Coulee Creek, the oil field that started the current boom back in 2000, was very quiet. This field was drilled before widespread multiple-stage fracturing was being accomplished, and I opined that it was possible that producers would move back into Elm Coulee with new technology, new procedures, and perhaps, even, new formations.

My point was this: I don't agree that we are seeing the beginning of the end of excitement in the Bakken. 

So, today it was quite a surprise to find an article in the Sidney Herald reporting that activity was increasing once more in Elm Coulee Creek. This is very, very exciting.

Bakken: News

Most news in "the Bakken" has to do with news in general regarding the oil industry in North Dakota. Only new information specific to the Bakken will be played on this page and thus I doubt much will be posted on this page.

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January 24, 2010:  Slawson remains one of the more interesting operators in the Bakken. Shares not publicly traded.


December 13, 2009: A "penny-stock" company is jumping into the Bakken fray. Ticker symbol CAVR.PK and recent price about 20 cents. Buying acreage in northeast Montana, looking for discovery well. The article is interesting for comments on "the Bakken," not necessarily as an investment.  UPDATE: On Thursday, Jan 21, 2010, share price was down to 10 cents; the next day, Friday, Jan 22, 2010, the price slid another three (3) cents. January 24, 2010.


December 7, 2009:  This is pretty incredible. Three oil companies are pursuing either the Bakken or the formation directly under the Bakken (Birdbear?) as far west as Browning, Montana. This is all the way over to the Rocky Mountains. The three oil companies: Newfield, Anschutz, and Rosetta Resources.

November 27, 2009: United States crude oil production for 2009 is on target to have its biggest one-year jump since 1970, according to a Platts analysis of industry data. With U.S. oil production averaging 5.268 million barrels per day (b/d) through October, the gain in U.S. output will be the most since the country produced 9.637-million b/d in 1970, which turned out to be the peak year of U.S. crude output. The article attributes much of this gain to the Bakken.