Enbridge To Double Capacity in the Bakken?

This is too important an item to be buried in a longer post, so I will re-post it here:

Enbridge is working on plans to further double the company's pipeline export capacity in North Dakota. Since the news had not been announced, the spokesman couldn't elaborate on the projects, except to say that the projects, once completed, would further double Enbridge's export capacity in North Dakota. While she couldn't get into specifics, she hinted that expansion activity could center around the Beaver Lodge Station south of Tioga, North Dakota (USA). -- Tioga Tribune Supplement, July, 2010.

Takeaway capacity should meet production demands for the next year or so, based on frequently presented data (in almost every major Bakken corporate presentation). The railroad tankers are scalable, but more costly, and can make up the delta if necessary until more pipeline is laid.

But if Enbridge doubles its export capacity, takeaway capacity should be more than adequate. It sounds like Enbridge is going to move sooner than later on this project.

Tioga Paper Supplement: Celebrating Oil Day

Download and enjoy. A supplement to the Tioga Tribune to celebrate Annual Oil Day in Tioga.

Even seasoned investors can learn a few new things in what looks simply like an advertising supplement. for example:

Page 6, under the photo: Enbridge is working on plans to further double the company's pipeline export capacity in North Dakota. Since the news had not been announced, the spokesman couldn't elaborate on the projects, except to say that the projects, once completed, would further double Enbridge's export capacity in North Dakota. While she couldn't get into specifics, she hinted that expansion activity could center around the Beaver Lodge Station south of Tioga, North Dakota (USA).

Page 8: huge story on Continental Resources, which I think is the "LA Lakers" of the oil industry in North Dakota.  That would make Harold Hamm the "Phil Jackson" of the operators in the Bakken. The article notes that CLR has 21 rigs operating in North Dakota, which is the most of any operator in the state.  (The article was based on an interview with Jeff Hume; see comments below; I referenced "Harold Hamm" in the original post; I have since corrected those references to Jeff Hume per the author of the original article.)

• Jeff Hume noted that the Nesson Anticline is the backbone of the Bakken.
• CLR currently has three rigs drilling Eco-Pads, and will have six rigs drilling on Eco-Pads by the fourth quarter of this year, with two or three of them in the Tioga area.
• A reminder that CLR increased CAPEX for 2010 to $1.3 billion; and expanded its bank credit faciltiy to a maximum of $2.5 billion. "However, the increased bank financing might be seen as a temporary measure."
• CLR is exploring ways to continue funding operations (interesting).
• CLR now has over 800,000 net acres in the Bakken.
• Jeff Hume expects to be in the Tioga area for the next 15 - 20 years. 

Page 9: Hess is currently producing about 14,000 barrels of oil/day in the Bakken, and plans to bost that to 80,000 in the next five years. Hess has a $4 billion annual CAPEX program (compare to CLR above).

• Hess noted that production generates a profit margin of 10 percent with a West Texas intermediate crude price of $40. (That explains an earlier cryptic/vague comment by a Hess spokesman. This is the most precise information I've seen Hess provide.)
• And if seasoned investors had not heard of Hess's Paris Basin play in France until now, they can credit the Tioga Tribune supplement.

Page 11: Full page on article detailing the risk to the Bakken-- federal regulation. Bottom line: "The Bakken is dead if they stop fracking." Downright scary. I think the writing is on the wall. For investors, the price of oil would certainly trend higher -- but natural gas would probably double or triple overnight -- the US is swimming in natural gas but only because of fracking. So, the more production these companies have on line before fracking is halted, the better prepared they are for any contingency. I think that's one of the biggest drivers for companies to expedite their drilling programs. Get the wells drilled; move elsewhere for two to three years while the federal frac rules are implemented (unless Feds allow fracking to continue while new rules are implemented); and then move back in when rules in place. (Some of this is my personal opinion; some of this has been shared by experts in the field.)

137 Active Rigs in North Dakota

New record for active rigs in North Dakota: 137.  It was 136 earlier today; this evening NDIC is reporting 137 active rigs in North Dakota.

For the Record: BTA Wells Are Now Sequels; URSA Resources With New Permit

In today's daily activity report, July 21, 2010, it appears all of the wells operated by BTA Oil Producers, LLC, have been acquired by Sequel Energy, LLC. This is the first time I have heard of Sequel.

In addition, a relatively uncommon name in the Bakken, URSA Resources Group, LLC, has been granted a permit, #19205, in Pierre Creek oil field, McKenzie County; it will be a long lateral.

Newfield Has Another Good Well in Sand Creek Oil Field

Newfield reports another good well in Sand Creek. This follows two other good Newfield wells in Sand Creek.

This one is the Garvey Federal 1-29H, 29-153N-96W, McKenzie County, with an IP of 2,825, file #17811 -- a permit that was granted November 17, 2008.

Newfield is very exciting and a company I completely missed: see my original discussion regarding Newfield for some interesting tidbits. Its ticker symbol is NFX (looks like Netflix?) and has a market cap of $6.7 billion. Without this blog I would have completed missed NFX; as it is, I wish I had paid attention a bit earlier. It seems to be in natural gas as much as oil, and thus another company to follow closely if natural gas ever catches on. 

Newfield has three or four active rigs in North Dakota at any given time and had a great first quarter, 2010, conference call.

Coincidentally Newfield released its mid-year operational update today:

• 2010 domestic oil production to grow nearly 30% over 2009
• Bakken production will see 60% growth; previous guidance was 40%
• Newfield added a four rig last week (mid-July, 2010)
• Newfield has drilled 13 wells so far this year; expects to drill 18 more the rest of the year
• The Garvey Federal had an initial flow of 2,500 boepd (two years ago this would have been a headline, front-page story; now it's expected in the Bakken with multi-stage fractures)
• Will do more long laterals; wells cost $6 - $8 million; EURs of 500,000 to 750,000 bbls, in line with estimates of other Bakken companies

Sand Creek oil field is about 15 miles due west of the Sanish, not far from some other good fields in the immediate area benefiting from the Westberg Anticline

For those keeping track, these are some of Newfield's recent wells (the year in parentheses is when the permit was granted):

• 17878, Harold 1-31H, 2,194 (2008)
• 17919, Clear Creek Federal 1-25H, 2,360 (2008)
• 17808, Rolfsrud 1-29H, 2,551 (2008)
• 17811, Garvey Federal 1-29H, 3,816 (2008)
• 18413, Heidi 1-4H, 1,231 (2009)
• 18689, Bluefin 1-13H, 2,497 (2010)
• 18626, Gladys Federal 2-9H, 3,631 (2010)
• Newfield's two most recent wells, including the Garvey Federal, were short laterals

The Origin of the Eco-Pad (With Kudos to Del Shannon)

I can just imagine Harold Hamm telling his guys, "I'm so tired of hearing the same ol' thing, day after day. One well here, one well there, another well there. Same old thing. C'mon, Max, follow me. We're gonna build ourselves an Eco-Pad."

Now, that vision looks like a runaway success.

Enjoy. 



Runaway, Del Shannon

For a more serious look at Eco-Pads, click here. 

Enthusiasm Waning? Click Here!

If your enthusiasm for the Bakken is waning, click on:

• Crazy Numbers
• Stockyard Creek Update
• Three Forks Sanish Review 
• Newfield Reports Two More Great Wells 

I think stories coming out of the North Dakota Bakken are reaching a steady-state situation. Stories that once were exciting are now boring. But if the stories coming out are in a steady-state situation, I think the activity has yet to hits its peak.

The record for active rigs in North Dakota has reached a new high: 136 as of yesterday. I believe it was a NDIC spokesman who said that each of the current rigs is doing the work of eight (8) rigs of the past.

Activity in the Fort Berthold Indian Reservation was held up for two years due to federal bureaucracy but will catch up to the rest of the Bakken this year. The activity in the FBIR at the end of this year will be where it should have been two years ago had it not been for federal bureaucracy delays.

Takeaway capacity pretty much matches productivity.

The price of oil is stable, and at a pretty good price. My hunch is that companies are not maximizing oil production/well at this time. If oil heads to $100 I think we will see production from wells increase significantly.

I remain as excited as ever about the Bakken. I appreciate all the comments folks make, many of them providing insight to the North Dakota oil industry and some of them alerting me to activity I might otherwise miss.

Zavanna/Samson Participate in a Nice Well -- Gene 1-22H -- Stockyard Creek

This is why I love to blog about the Bakken; there must be a dozen story angles in this one post. Have fun, enjoy. Congratulations to all the mineral rights owners, and especially the well-deserving farmer whose land this pad sits on.

It must have come from a press release from Samson (I forget where) but some days ago I posted that Samson's Gene 1-22H had an IP of 2,406. Today, from the NDIC, it turns out that this well, #18009, is operated by Zavanna. So I assume that Samson was a partner. If I'm wrong, someone will let me know.

The report submitted to the NDIC by Zavanna reveals an IP of 1,128. That's fine. Either way it looks like a good well.

Even better news: this well was not in the Sanish or the Parshall. It was in Stockyard Creek. But note this, from an earlier post:

But this is what got me excited about the Stockyard Creek, and again, I have to thank a reader for sending me this information: at the link noted above, the writer noted that Gene 1-22H, #18009,  a Zavanna well in this field, section 22, has been completed  and is flowing at 2,936 boepd. A second well on the confidential list, #18015, is also a Zavanna well, Grasser 1-26H, sited on the same pad as the Gene well but will be drilling NW to SE.  These two wells are on a pad exactly one mile south of the highway about midway through the field.

Stockyard Creek is one of my favorite fields because of my memories attached to the area and its natural beauty of rolling hills. It straddles ND-1804 east of Williston and I drove it countless times out to Lake Sakakawea. This was God's Country, as they say. Just to the west of God's Country is Big Sky Country.

I profiled Stockyard Creek (same link as above) some time ago but have not updated that post. Maybe it's time.

136 -- Holy Guacamole!

A new record. This I didn't expect. First, I thought we would max out at 135, and at this "height," I didn't think we would jump up by two (2) in one day. It was 134 for several days (the previous high) and now up to 136 active rigs in North Dakota.

Update, July 21, 2010: in comments below, it has been pointed out that not all "active" rigs are doing exciting things like actually drilling for oil. Some are work-over rigs converting an oil well (or what once was an oil well) to a salt water disposal well).

Three Forks Formation -- Basic Review, Part II

This is a continuation of Three Forks Formation -- Basic Review, Part I

Basic Review, Part I, ended with the estimated ultimate recovery of oil from each of the six major Bakken/TFS-producing counties in North Dakota as calculated by the North Dakota Geologic Survey.

Here the numbers are again, the EURs as calculated by NDGS:

• McKenzie: 737 million boe is the estimated ultimate recovery of oil (EUR)
• Williams: 714 million
• Mountrail: 576 million
• Dunn: 475 million
• Burke: 375 million
• Divide: 200 million

Here are the number of acres of each county (approximate) determined by multiplying square mileage of each county by 640 acres/square mile:

• McKenzie: 1.831 million acres
• Williams: 1.374 million acres
• Mountrail: 1.242 million acres
• Dunn: 1.332 million acres
• Burke: 0.722 million acres
• Divide: 0.828 million acres

Dividing the number of acres in each county by the number of bbls EUR:

• McKenzie: 402 bbls/acre
• Williams: 519 bbls/acre
• Mountrail: 464 bbls/acre
  
• Dunn: 356 bbls/acre
  
• Burke: 519 bbls/acre
  
• Divide: 241 bbls/acre

Finally (last step) multiplying the above number by 640 acres will get you the EUR/section as calculated by NDGS:

• McKenzie: 257,602 bbls/section
  
• Williams: 332,402 bbls/section
  
• Mountrail: 296,754 bbls/section
  
• Dunn: 228,146 bbls/section
  
• Burke: 332,152 bbls/section
  
• Divide: 154,560 bbls/section

Some sections are going to be much more prolific than others, based on results of wells being reported since this boom began.  The NDGS figures are averages across the entire county.

In the better sections, EOG, WLL, CLR and others seem to agree that EUR will be somewhere around 750,000 bbls/section.  In the less prolific sections, they estimate closer to 400,000 bbls/section.

The NDGS figures about 2% recovery rate (EUR/OOIP).  CLR and other suggest they are getting at least 4% and maybe as much as 8% in some areas. Four percent doesn't sound like much, but it is double what the NDGS predicts.

Okay, now to put some of this into perspective. 

How much oil has come out of McKenzie County over the past 60 years -- yes, oil was first discovered in North Dakota in 1951? The cumulative total of oil from McKenzie Country from April, 1951, to May, 2010, totals: 395,992,836 barrels. (This is from a spreadsheet from the NDIC that I transcribed; at 16 pages I'm sure I made some typographical errors, but it's probably pretty close).

So, to date, "we've taken 396 million barrels of oil from McKenzie County, most of it prior to the current boom and from other formations than the Bakken. It's taken 60 years to produce that much.

The USGS estimates there is 737 million barrels of recoverable oil from the Bakken/Three Forks Sanish in McKenzie County (see above). Compared to Mountrail, I think McKenzie is behind in drilling the Bakken/TFS.

It will be interesting to review/compare these numbers with actual results ten (10) years from now.