Hearing Dockets for April, 2011, Are Posted -- Summary Provided -- Bakken, North Dakota, USA

I have completed the summary of the April, 2011, cases coming before the NDIC.

I think the cases will leave many of you with your lower jaw hanging down.

• Based on graphics on corporate presentations, CLR's estimates of recoverable oil in the Bakken, and a realization that fracking doesn't extend more than 500 feet from the borehole, I thought we would see as many as four wells in a section. I underestimated
• I do not recall so many cases in which operators wanted to flare gas, in general to allow unrestricted production of oil;  I assume many of these operators need the cash flow to keep operating
• There are a couple new operators that I had not seen before
• Corinthian Exploration, which just acquired the Ritchie Spearfish wells in Bottineau County as a request for 240 Spearfish wells in Bottineau County
• CLR, Slawson, others are now putting in infill wells, as noted above, with as many as 7 wells/1280-acre unit; in some cases, the density may be almost double (such as 6 wells in 640-acre units)
• Burlington Resources will be putting in an additional 12 wells in 1280-acre spacing units where there is already a long lateral: thus, BR will be putting in as many as 13 long laterals in one 1280-acre units; BR has identified two such units for 13 wells each

Back of the envelope calculations: it is assumed that even the mediocre Bakken wells will produce 400,000 bbls EUR. Let's say that drops to 250,000 bbls EUR. With 13 wells in 1280-acres, that's 3.25 million bbls. At $75/bbl --> $244 million.   13 wells at $8 million a piece --> $104 million. So, it sounds like a lot of money ($244 million) but if the wells affect each other's EUR, they may only double their investment over 30 years. However, they will carry these wells on their books with EURs of 400,000 barrels; at $75 --> $390 million over 30 years. However, I doubt price of oil will remain at $75 over 30 years; inflation should increase price paid for a barrel of oil. In addition, there are depletion allowances, amortization. tax issues, etc.

Even the fields that produce mediocre wells, they are being fully developed.

I was not impressed with Oil for America's Zastoupil well, but it must be good enough to keep producing; the operator has asked for temporary spacing (case 14541).

This is the summary of April, 2011, hearing docket.