IPs and What They Mean -- Bakken, North Dakota, USA

It's a very quiet weekend -- except in Egypt -- and when it gets quiet, I tend to look for something to write about.

So this is a throw-away posting. I wouldn't pay much attention to this one.

It brings up an issue not much talked about any more: the significance of the initial production (IP) number.

Because different methods are used to calculate IPs, and because different factors can affect IPs, and for conspiracy theorists, producers can manipulate IPs, I think most agree that an IP is nothing more than just one data point that starts the discussion.

I was reminded of this when I went back to look at a Continental Resources well that reported an IP of 15 barrels back in June, 2008. That was the Mathistad 1-35H well, #16983. This was one of two wells that supported Harold Hamm's argument that the Bakken formation and the Three Forks formation do not communicate with regard to oil production.

Anyway, for a well that started out in life with an IP of 15, how has it done?

As of June 30, 2012, the total amount of oil produced from this well with a pathetic IP is ... drum roll ... drum roll ... 176,394 barrels.

Now, at an average of $50/bbl, that works out to about $9 million. So I assume the well has paid for itself.

So, how is this well doing now?

For the 2010 calendar  year, this well produced 40,000 bbls of oil, averaging 3,300 bbls/month.

For the 2009 calendar year, the well produced no oil or minimal amounts of oil for three months; in the "average" 2009 month, the well produced an average of 4,000 bbls/month, and produced a total of 35,000 bbls in those nine months.

In its first year, after that initial production, it produced 20,000 bbls in the first full month of production, and then quickly declined to 6,600 bbls by the end of the year. But from then on, the decline has been much slower, and seems to have leveled off at 3,000 bbls/month.

At 3,000 bbls/month and with oil at $50/bbl, it will produce about $1.8 million worth of oil this year at the wellhead. Not bad for a well in its third year of production, and probably paid for at the wellhead.

Especially for a well that had a reported IP of 15 barrels.

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So, how did the other well do, #18013, Mathistad 2-35H? This well targeted the middle Bakken.

The Mathistad 2-35H reported an IP of 842 bbls in July, 2009, almost a year (to-the-day) later than Mathistad 1-13H.  As of December 31, 2010, this well has produced a total of 95,247 bbls. [January 31, 2011: 97K x $50 = $5 million; not yet paid for itself at the well head.] cum 127K 6/12;

In calendar year 2010, it produced 36,000 bbls of oil, or an average of 3,000 bbls/month, almost identical to its twin.

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Like I said at the beginning: this is a throwaway posting, but I was curious what a well could produce despite an IP of 15. For those interested in more about these two wells, one can read what the thoughts were in "real time" regarding these two wells over at the Bakken Shale Discussion Group board.