Follow-Up of a Whiting Sanish Well

For newbies, here's why folks remain excited about the Bakken.

This is a follow-up on a Whiting well, #17134,  in the Sanish, the Smith 11-20H, which had an IP of 3,115, back in November, 2008.

• 17134, 3,115, Whiting, Smith 11-20H, Sanish, t11/08; cum 584K 1/20;

Update: cum 584K 1/20;

Its first production run was at the beginning of November, 2011. At the end of January, 2011, it had produced a total of 278,728 blbls of oil = $18 million at the wellhead (at $64/bbl).  This well is paid for (again, at the wellhead; I don't know all other costs incurred: royalties, taxes, shipping, water removal, etc.). And now it keeps producing.

Like all Bakken wells, its decline rate was horrendous. It produced about 28,000 barrels the first month but by the fifth month or so was down to half that amount, 14,000 barrels/month. Then, starting in July, 2009, it leveled out, producing anywhere from 6,000 to 10,000 barrels/month.

In the last five months the well produced 7,000 bbls; 5,000 bbls; 7,000 bbls; 6,000 bbls; and, 5,000 bbls (all figures rounded). No one knows how long it will produce.

Folks say these wells will produce for fifteen to twenty years, and it appears this one is holding steady with at least 6,500 barrels/month (again, at $65/barrel = $422,500/month. Costs of this well are now minimal. At $65/barrel, that's over $5 million/year, and all indications are that oil is trending upwards, and with increasing takeaway capacity, the discount for ND oil is decreasing. Bottom line: I think WLL is getting much more than $65/barrel for this oil.)

And that's why folks are still excited about the Bakken and willing to pay $8,600 per mineral acre in the Sanish.

Oh, by the way, at the same link, note that its sister well, the Hansen 12-20H, #18531, has sold a cumulative of almost 146,281 barrels in eight months. The first full month run was 23,000 bbls; it decreased to a low of 11,000 bbls in the fifth month, but is now back up to 15,000 bbls in its eighth month of production.

The first of these two wells, the Smith, declined by more than 50 percent in the first two months; its sister well has not declined quite as quickly. I have opined that the operators are working hard on solving the horrendous decline rate in the Bakken; is this an indication that they've made some headway?  I don't know. Time will tell.

Whiting Hitting on All Cylinders

This is just a random note without any links or supporting facts except what I sort of remember.

After posting not less than a hundred different posts in the past five days (most of those posts were updates on earlier posts that folks won't see unless they specifically go to look something up using a search application), I have a gut feeling that Whiting is "hitting on all cylinders." Every time I turn around, I find WLL up to something interesting in the Bakken.

WLL will likely end up putting up to seven wells in 1280-acre spacing units in the Sanish.  The Sanish has been a tremendous oil field even by Bakken standards.

WLL has some of the best-producing wells in the Bakken. It's probably a toss-up between EOG and WLL who has the most good wells in North Dakota. 

WLL barely got started in its new Lewis and Clark prospect when it sparked a flurry of activity in the South Heart area. In this month's NDIC hearing dockets, WLL will request to pool forty-four 1280-acre spacing units just west of South Heart.

WLL has a dedicated fracking crew that can frack 100 wells/year.

WLL announces a natural gas gathering and processing plant near Belfield, ND.

WLL has the best corporate presentations, although I have to say BEXP and SM also have some great presentations.

Someone just paid $8,600/acre for 3.34 acres where WLL already has three wells.

WLL has 14 active rigs according to the NDIC website today.

Note: I do not hold any shares in WLL.

Hess will add a tenth rig in the North Dakota Bakken.

EOG has twelve active rigs in NDB.

CLR has twenty ARINDB.

Hess has eleven ARINDB.


It Never Rains in Southern California, .... but, girl, don't they warn ya, it pours, man, it pours.

$8,600/Acre in the Bakken (ND, USA)

Someone paid $8,600/acre for 3.34 acres in the Bakken:

OG1003464

152

93

3

MISSOURI RIVER IN SW4

TRINITY WESTERN

3.34

$8,600.00

That's a "cut and paste" -- but it says that Trinity Western paid a bonus of $8,600.00/acre for 3.34 acres of minerals in section 3 of T152N-R93.

If you look at the GIS map server at the NDIC website, you will see that section 3-152-93 in the Sanish oil field, is mostly under water; maybe 25% land; 75% river, depending on water depth and how accurate the map is.

There is currently a producing well in that section:

• 17554, a long lateral originating in section three and running southeast into section 2
• There is also a rig on site in this section for permit 19221, and there is a well that is almost complete (the rig is off-site), permit 19222. 

So, the three wells in this section:

• 17554, Hansen 21-3TFH, a Whiting Three Forks well, with an IP of 489, that my database showed reported out back in September, 2009, NENW 3-152N-93W.
• 19221, Whiting, Ness 21-3H,  Lot 3 3-152N-93W
• 19222, Whiting, Bartleson 21-3H, Lot 3 3-152N-93W

So, we will see. Only $29,000 for the 3.34 acres (3.34 x $8,600).

Look at that IP. 489. This is one more indication the IPs don't mean a thing. There's something about this particular location that made it worthwhile for somebody to pay a record price/acre, and it wasn't based on the IP.

I thought this was a record, but I think Enerplus still holds the record of nearly $10,000/acre for a much bigger tract.

State Oil Lease Sales, November 2, 2010 -- Results -- $8,600/Acre -- (Bakken, ND, USA)

For the full report, click here and enter county your are interested in (for newbies, select among these counties: Williams, Mountrail, Dunn, McKenzie, to begin your search).

A few tidbits:

Mountrail County, only six leases total (home of the Sanish and the Parshall):

• Slawson paid $6,500/acre for 40 acres in 23-92-151 (total = $260,000)
• Slawson paid $6,200/acre for 80 acres in 23-93-152 (total = $496,000)

Williams County

• Liberty Resources LLC paid $4,250/acre for several 160-acre tracts
• Exterra Resources LLC paid $4,200/acre for several 40-acre tracts
• Petro-Hunt LLC paid $4,000/acre for one 160-acre tract
• There were no tracts greater than 160 acres; and most were 80 acres

McKenzie County

• Trinity Western paid $8,600/acre for 3.34 acres (3-152-93); but not a record
• LSM Energy Inc paid $6,100/acre for two tracts (one 20-acre, and one 80-acre tract)
• LSM Energy Inc paid $5,400/acre for several very small tracts (40 acres each)
• Lewis Oil Company paid $4,000/acre for several 160-acre tracts

Dunn County

• All 34 leases bought by Empire Oil Company; most 40 - 80-acre tracts; most ~ $1,000/acre

Golden Valley County

• Most leases of any county, except perhaps for Williams, but all very low bonuses (under $500/acre and many for $100/acre)
• Almost all of the action by Lewis Oil Company, LLC
• Golden Valley is the center of WLL's Lewis and Clark prospect; coincidence?

Yellow River, Christie

Fifteen (15) New Permits (Bakken, ND, USA)

Operators: XTO (3), Newfield (2), Encore, Anschutz (2), CLR (2), Whiting, Slawson, Hunt, BTA, and EOG.

Fields: Stockyard Creek, Haystack Butte, Lost Bridge, Camp, Murphy Creek, Banks, Van Hook, and two wildcats.

Newfield has joined the group of those putting in multi-pad wells with this list of permits.

The wildcats: Anschutz, west of Ray; Whiting, Golden Valley County in their Lewis and Clark prospect.

On track for 1,587 permits in North Dakota this calendar year.

More Takeaway Capacity, PAA's Bakken North Project (Bakken, ND, USA)

I am not aware that this is projected on any current Bakken operator corporate presentation, but I could be wrong. It's impossible for me to keep up with all the oil activity in North Dakota.

Plains All American Pipeline (PAA) announced yesterday (November 2, 2010) a couple of new projects including one that affects the Bakken. It will be called the Bakken North Project:

• Crude oil pipeline from Trenton, ND, to Regina, Saskatchewan: links to a map and data
• At Regina, PAA would connect into third-party carriers (Enbridge? Trans-Canada?)
• From Regina, Saskatchewan, to Cushing and/or PADD II delivery points
• 103-mile, 12-inch pipeline
• Initial design capacity: 50,000 bbls/day scalable to 75k/day
• Cost: $160 - $200 million; 50% in 2011; 50% in 2012

Depending on the usual qualifying statements, PAA anticipates placing the project into service 4Q12.

Natural Gas is Not a Fossil Fuel

Updates

April 20, 2014: I may be slow, but I'm tenacious. LOL. I finally figured this one out. "Fossil fuels" is Democratic code for "coal." Read the original post below and substitute "coal" for fossil fuels." The Democrats count on unions and coal workers voting for Democrats. Rendell and Pelosi certainly are not going to come out fighting, using the word "coal." No sirree.... that would cost them votes. So, to obfuscate the discussion, they refer to coal as "fossil fuels" and suggest that natural gas is an alternative to coal fossil fuels. 

Bottom line: "fossil fuels" is Democratic political speech for "coal."
 

Original Post

Pennsylvania has a  huge natural gas industry due to the Marcellus shale.

Governor Edward Rendell, Pennsylvania, was on CNBC this morning (November 3, 2010 -- the morning after). He continued to reiterate his call for increased renewable energy for the US. When asked about natural gas, he pointed out that natural gas was not a fossil fuel.

I thought that was interesting. It certainly sounded like spin, unless he just mis-spoke. But this was so basic, he could not possibly be mis-speaking. Or so I thought.

But then I asked myself: is natural gas a fossil fuel?

Google "natural gas" and "fossil fuel" and these are the top two hits:

EIA Energy Kids (I kid you not)
Pelosi on Natural Gas: Fossil Fuel or Not?

I kid you not. If you google "natural gas" and "fossil fuel," the first hit you get will take you to a EIA site targeting children. This is what the US Energy Information Agency site says:

The main ingredient in natural gas is methane, a gas (or compound) composed of one carbon atom and four hydrogen atoms. Millions of years ago, the remains of plants and animals (diatoms) decayed and built up in thick layers.  This decayed matter from plants and animals is called organic material — it was once alive.  Over time, the sand and silt changed to rock, covered the organic material, and trapped it beneath the rock.  Pressure and heat changed some of this organic material into coal, some into oil (petroleum), and some into natural gas — tiny bubbles of odorless gas. 

That sounds like a fossil fuel to me. Although the word "fossil" is not used, "remains of plants and animals decayed and built up" sorta sounds like fossils.

Now, the Wall Street Journal article regarding Nancy Pelosi's take on natural gas:

House Speaker Nancy Pelosi's message on energy, already evolving in recent weeks, might have to evolve a little more.

On NBC’s “Meet the Press” on Sunday, the speaker twice seemed to suggest that natural gas – an energy source she favors – is not a fossil fuel.

“I believe in natural gas as a clean, cheap alternative to fossil fuels,” she said at one point. Natural gas “is cheap, abundant and clean compared to fossil fuels,” she said at another.

The speaker apparently was trying to contrast her support for expanded use of natural gas as a motor-vehicle fuel, and many Republicans’ preference for more domestic oil drilling — particularly through opening up more of the Outer Continental Shelf for exploration. 

That was back in 2008. The WSJ pointed out that Pelosi had invested between $50,000 and $100,000 in T. Boone Picken's Clean Energy Fuels Corporation which markets compressed natural gas and liquefied natural gas as a fuel for motor vehicles.

So, Governor Rendell did not misspeak. There is a political element that a) believes in global warming; and, b) believes that natural gas is not a fossil fuel.

I was amazed that CNBC did not challenge that assertion. Apparently I am wrong and the EIA is wrong. 

Today I will be going into teach as a substitute for a chemistry and biology teacher. I hope no one asks me if natural gas is a fossil fuel. I will be flummoxed.

I cannot make this stuff up.

EOG Reports Three Nice Wells (Bakken, ND, USA)

In its third quarter 2010 results EOG reports three nice Bakken wells:

• 18464, 1,659, EOG, Mandaree 1-10H 
  
• 18927, 1,358, EOG, Mandaree 2-9H
  
• 18697, 1,490, EOG, Mandaree 4-15H

Having said that, EOG reported a third quarter 2010 net loss of $71 million (28 cents/share), compared to a third quarter 2009 net income of $4 million (2 cents/share).

The report states that the North Dakota Bakken is EOG's largest crude oil producing asset. The report noted that well completion operations resumed during the second quarter following the winter 2009-2010 drilling program. Remember: it is EOG's policy to not frack during the winter. It took a number of months for those drilled wells to be completed, and brought on line.

EOG said it is in its sixth year of development in the Bakken and is operating a 10-rig drilling program in North Dakota and Montana.

EOG said it will continue to sell off natural gas assets in 2010, but made a pointed statement that it will not sell-down or joint venture any of its crude oil resource plays as they continue its strategic shift from natural gas to liquids.

Maybe I'm reading to much into that last statement, but in view of the third quarter loss of $71 million, it is a reminder that drilling in the Bakken is very, very expensive, and EOG, as big as it is, is feeling that pressure.

It supports my view that we will see huge changes in the make-up of the companies operating in the Bakken in 2011. I expect lots of mergers, acquisitions, acreage swaps/deals, etc., in 2011. The Bakken is getting just too expensive / too difficult for the smaller companies. The canary in this coal mine was American Energy (AEZ).