Tuesday, April 12, 2011

IPs Continue to Confuse -- Bakken, North Dakota, USA

I could pick any company and any Bakken well, but since I happen to be looking at the current corporate MDU presentation and having just linked the NDIC file reports, I will show newbies how IPs continue to confuse. [See first comment for explanation why the IP provided to the NDIC may be different than that presented to the public.]

In the MDU presentation, April, 2011, slide 20 of 53:
  • First discovery well in Three Forks formation, Stark County, Kostelecky 31-6H, 24-hour IP rate of
  • 1,257 bbls of oil, and 
  • 519 Mcf of gas, or 
  • 1,343 BOE
Now, from the official NDIC file report:
  • IP Oil: 595
  • IP MCF: 196
For newbies, that's just the way it is.

Several operators now agree that higher IPs correlate with faster payback on the well, and the total ultimate recovery. The easiest question for an analyst to ask when a corporate presentation is being provided is: "That's an impressive IP on the PowerPoint slide, but what was the "official" IP as reported to the NDIC?"

In addition, every time an IP is presented on a corporate slide, the type of frac, the number of stages, and the ingredients used to frac should be included. I would take it one step further. I would ask what did the operator learn about that particular frac that will help with the next well?
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6 comments:

  1. AnonymousApril 12, 2011 at 2:39 PM

    Dmr requires ip to be reported under production conditions.

    Oil cos report in their releases usually the peak rate observed during frac flowback which is the last step before well is configured for production.

    This whole subject needs some industry standards for testing as when test conditions are not standard, then a meaningful use of the reported results is not likely to happen. As far as I can tell, the only purpose of the flowback results are to max the financial community "buzz" I e boost the stock price.

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  2. AnonymousApril 12, 2011 at 4:56 PM

    Should also list the choke size. I checked a Brigham well listed in January that had an IP of 3760, and they used a 128/64" choke during the test. I have interest in the Dennis Kadrmas well that tested at 1304, with a 26/64" choke, and its neigbor, one of the Stroh wells with an IP of 2509, had a 49/64" choke. Seems that the hole size during the test would be significant. The Kostelecky 31-6H well had a 26/64" choke on the data submitted to the NDIC in the well file.

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  3. Bruce OksolApril 12, 2011 at 6:07 PM

    Thank you very much. After two years of following the industry, you are the first to provide the rationale for the discrepancy.

    The whole issue of IPs has been discussed ad nauseum here and elsewhere, so I don't want to re-open a "can of worms," but your explanation is fits the bill.

    Thank you for taking the time to comment.

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  4. Bruce OksolApril 12, 2011 at 6:12 PM

    I had forgotten about the choke size! Amazing how many things factor into all this, and so many of them very, very simple.

    I was not aware of a choke size of 128/64". Had I seen that I would have wondered about a typographical error. I've never seen a choke size that big.

    Thank you for taking time to comment.

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  5. AnonymousApril 12, 2011 at 11:04 PM

    How do you get the the official NDIC file report like you reference above? And, how often are they updated?

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  6. Bruce OksolApril 12, 2011 at 11:37 PM

    1. Go to the NDIC website:

    https://www.dmr.nd.gov/oilgas/

    When you get there, go to the sidebar on the left, and about two-thirds of the way down, click on "Basic Services" and there will be instructions on how to access this data.

    2. The reports are updated monthly (of course, the well has to be off confidential status).

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