The Million Dollar Way (The Bakken Oil Blog): 12/15/10

Wednesday, December 15, 2010

Five (5) New Permits -- North Dakota, USA

Producers: CLR (2), Whiting (2), XTO

Fields: Sanish, Wildrose and two wildcats

Both Whiting permits are in the Sanish. I just posted interesting information regarding Whiting earlier today and a bit of comment here.

In today's daily activity report, CLR reported another nice well in McKenzie County, the Olson 2-8H, with an IP of 1,219.

Other wells released from confidential status that may or may not have been reported earlier:

18940, 1,488, Oasis, Andre 5501-13-4H
19000, 1,048, Slawson, Goblin 1-26H
19031, 1,773, BEXP, Boots 13-24 1-H

Of course, all wells are reported here as they come off the confidential list (or information released elsewhere).

And Some Say I'm Inappropriate Exuberant About the Bakken -- North Dakota, USA

"We look forward to delivering approximately 160% year over year production growth from 2009 to 2010 and expect to grow production by approximately 130% from 2010 to 2011. We plan on running seven operated rigs in 2011 in the Williston Basin, with six in West Williston and one in East Nesson," said Thomas B. Nusz, Oasis' Chairman and Chief Executive Officer. "We anticipate that we will spud 69 new gross operated projects, actively manage our over 300,000 net acre position, add oil and gas gathering and water disposal infrastructure, and obtain valuable subsurface data in 2011."

Just for perspective, two comments:

The "face of the Bakken," CLR, has about 900,000 net acre position in the North Dakota Bakken.
It seems Oasis came out of nowhere to amass 300,000 net acres in just the past year or so.

CAPEX

2010 CAPEX: $350 million (increased from beginning of 2010)
2011 CAPEX: $490 million

Complete overview and highly bullish comments from "Zman" here.

For Newbies: Lots of Information on the Bakken in Whiting Presentations

I have previously opined that Whiting, along with Continental Resources, has some of the best corporate presentations.

Anyone interested in the Bakken, but especially newbies, should look at these presentations. I find the Q&A at the end of the Whiting particularly interesting. Here is a sampling:

1. How much oil is in the Sanish oil field? Whiting estimates 8 - 11 million barrels per section in the Sanish. Whiting expects to recover about 8 percent of this oil, or about 600,000 to 900,000 barrels per section. That's in line with earlier estimates by CLR, but I think CLR has been increasing their estimates of oil in place, and perhaps percent of recoverable oil.

2. This does not include the Three Forks formation. Whiting estimates another 4 - 6 million barrels per section from the Three Forks formation, with similar recovery -- about 8 percent.

3. Whiting plans to place two wells in each 1280-acre spacing unit in the Sanish targeting the Three Forks formation and two wells in each 1280-acre spacing unit in the Sanish targeting the Bakken formation. On average, there will be 2.5 Middle Bakken wells for ever 1280-acre spacing unit.

4. In Whiting's Lewis and Clark prospect in southwestern North Dakota, the Bakken formation thins out and becomes non-existent, whereas the Three Forks formation continues -- or "pinches out."

5. How long does it take to complete a fracturing stimulation? In about 24 hours.

6. How many days between "spud" to "spud"? 39 days and Whiting thinks they can bring that down by another 2 to 4 days.

7. I won't repeat it here, but the Q&A defines precisely how Whiting determines the "IP."

In all, there are 33 questions/answers at the end of the linked presentation for December, 2010. These are just an example.

Federal Money for Alternative Energy Projects Drying Up -- Not a Bakken Story

Link here. The linked article looks like a news article, but reads like an op-ed piece. An op-ed piece that might have been written by the wind energy industry, or more specifically the backers of Cape Wind. More on that later.

My hunch is that Congress will extend grants and/or credits for renewable energy projects on a case-by-case basis (earmarks). They have already done so with ethanol subsidies in the tax bill that is being considered (to the tune of 45 cents/gallon of ethanol and a mandate that a certain amount of ethanol be produced every year).

However, the uncertainty of federal funding makes it more difficult for developers to move ahead with their projects; banks and venture capitalists less willing to loan / partner if federal funding uncertain.

Of note in this article is the Cape Wind off-shore / off Boston wind turbine program, which after ten (10) years finally has all permits and can start building. Cape Wind has a confirmed contract for 50% of electricity produced by the project, and is (desperately?) looking for customer(s) for the other 50%.

The Cape Wind project, which appears close to becoming the first offshore wind farm in the United States, will rely on government loans to make up at least some of the $2 billion it needs to get started, according to people briefed on the matter.

At the top I mentioned this linked article looks like a news article but reads like an op-ed piece. Examples abound. Here are two; first:

It does not help the financing outlook that renewable energy has been snubbed repeatedly during this session of Congress, while old-line energy, including nuclear energy, still gets significant government subsidies.

Comment: Nuclear energy is not exactly "old-line." It is state-of-the-art, highly sophisticated, extremely expensive to build, and regulations are such, funding is the least of the problem.

Second example:

The end of the tax breaks are likely to result in the loss of about 15,000 jobs, according to industry estimates.

Comment: the 15,000 figure may be a bogus number. The year 2009 was a banner year -- the best year ever -- for wind energy, but, in fact, jobs related to wind energy actually decreased.

Comment: jobs? Jobs? You wanna talk about jobs? Talk about all the jobs that were lost and are still lost due to moratoria on drilling off-shore on the west coast; drilling off-shore on the east coast; drilling off-shore Alaska; and, drilling in the Gulf of Mexico. Now add in the "slow-rolling" of granting or honoring Federal land in Utah and other western states.

I was happy to see that it was acknowledged that solar energy is not an answer.

Solar energy provides less than 1 percent of all the energy in the world, but accounts for around 50 percent of government renewable energy financing. The problem, [one analyst] argued, is that the government is backing technologies that are too expensive or inefficient to be widely adopted.

Thus, when you get down to it, we're talking wind energy, I guess. And possibly coal-powered automobiles.

New Whiting Wells Reported -- Bakken, North Dakota, USA

Whiting has provided IPs for the following wells at their December corporate presentation which can be found at their website.

I will put in the file numbers later. Note that many of these are wells in sections where previous very successful wells have been drilled in the Bakken. I believe these are all in the Sanish.

For full list, click here.

File number, 24-hour IP boe, WLL, name of well, (comments):

xxxx, 2,396, WLL, Locken 14-9XH
xxxx, 2,111, WLL, Meiers 12-17H (see also Meiers 11-17H, 2,181, previously reported)
xxxx, 1,359, WLL, Cvancara 11-14H (see also several other Cvancara wells)
xxxxx, 1,620, WLL, Moore 11-7H (see other Moore wells; 1,485 for Moore 14-7XH, for example))
xxxxx, 2,945, WLL, Ness 43-21H (see other Ness wells)
xxxxx, 2,980, WLL, Jones 12-8H
xxxx, 2,299, WLL, Kannianen 43-33H (see many other Kannianen wells)
xxxxx, 2,625, WLL, Helple 11-3H
xxxxxx, 1,914, WLL, Bartleson 12-18H
xxxxx, 2,110, WLL, Anderson 21-7H

One may want to compare these IPs with the EOG IPs from wells in the Parshall oil field which is the core Bakken for EOG.

18473, 1,045, EOG, Fertile 18-30H, Parshall, Bakken
18438, 285, EOG, Fertile 32-33H, Parshall, Bakken
17951, 251, EOG, Oakland 5-16H, Parshall, Bakken
18203, 1,154, EOG, Fertile 34-31H, Parshall, Bakken
18366, 1,497, EOG, Burke 29-33H, Parshall, Bakken
18110, 1,018, EOG, Fertile 11-10H, Parshall, Bakken

BEXP Reports Five High Rate Bakken Completions

Link here.

Name, stages, 24-hr peak flow back

Arvid Anderson 14-11 1H, 38, 2,834
Roger Sorenson 8-5 1H, 38, 2,347
Heen 26-35 1H, 38, 3,425
Brakken 30-31 1H, 30, 2,804
Lippert 1-12 1H, 31, 2,000

Operational Update

Three rigs in Rough Rider, North Dakota
Three rigs in Ross, North Dakota
One rig in Richland County, Montana
Eighth rig expected to arrive in May, 2011

Current wells in progress

Two wells flowing back
Two wells fracking
Eight wells waiting on completion

Fracking

Will add two dedicated frac crews in 1Q11
Capacity: fracture eight wells/month

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Wednesday, December 15, 2010