Being a much smaller company, Surge does not match eog on it's balance sheet. And probably not geo and eng depth either. Maybe surge has lower drill and complete costs and can achieve higher recovery Than eog thinks is possible. Looks like surge will at least try and for that I give them a lot of credit and wish them success.
If EOG did, in fact, get out of the Spearfish in Bottineau it was a business decision.
It's the same reason Donald Trump does not build duplexes in Williston to rent; Trump builds skyscrapers in NYC. Duplexes in Williston won't move the needle on Trump's bottom line, no matter how many he rents. These Spearfish wells were not going to move the needle on EOG's bottom line.
In addition, small companies are at the end of the queue waiting to get their wells horizontally fracked. Spearfish wells don't need horizontal fracking. Even well-established, but very small operators in the Bakken are going to have increasing problems with the fracking backlog.
Eog is exiting because the going in economics were not confirmed by their initial drilling program. The smaller area compared to eog's other projects was also a factor I am sure. Spearfish wells are short lateral (2000 feet) and multistage hyd frac is a must to improve permeability. I think, the "right" frac approach has yet to be discovered although eog Canada is having success north of the border and eog tried this in bottineau with not as good results apparently . Eog probably still has acreage in bottineau (surge didn't buy all of eog's acreage only what they think is the "best"). we'll see what happens but surge has it's work cut out.
Thank you. I wasn't sure about the fracking. Except for a handful of recent wells in Bottineau County, the GIS map server does not show any horizontals.
Regardless these will be low productivity wells, more suitable for smaller players. There's a reason, for example, why XOM or CVX would not in Bottineau.
"productivity" based on eur per well can be misleading. Productivity should take into account the lower drill/complete costs and the higher well density in the spearfish (assuming 65k is correct) and the smaller spacing. The productivity metric needs to be adjusted for a per acre yield vs cost. Comparison on a eur basis can be very misleading. The most important metric is the rate of return. Again , higher eur per well may or may not result a better rate of return.
You are absolutely correct, but we are talking past each other.
The original conversation was why EOG might not want to drill the Spearfish whereas Surge Energy might.
Again, Donald Trump would not rent duplexes in Williston no matter what the rate of return. All the duplexes in Williston will not affect his bottom line. Likewise, XOM won't go into Bottineau because it won't affect its bottom line even if the rate of return was double what it is getting elsewhere.
EOG's Scandia 3-36H well -- a horizontal well, Spearfish/Madison, with an IP of 304 (very, very good) has produced 11,000 bbls of oil in 12 months of production. EOG can get 11,000 bbls of oil in the first 15 days of a Parshall well.
The Scandia well is now producing 350 bbls oil/month, and producing 1,500 to 2,000 bbls of water. All that water needs to be trucked away.
EOG will do better with its wells in the Parshall than its Spearfish wells regardless of the rate of return (within reason, of course).
I have been reading your blog for a long time and enjoy 100% of your wisdom and information.I own 180 acres of mineral rights in Bottineau County about 9 miles south of the town of Maxbass.At this time I do not have a lease but I hope and have my fingers crossed that the Canadian oil companies will have success with the Spearfish and Madison formations and hope it spreads to my area. Again, thanks for your interest and all your important information.
Well I don't know what the Donald's plans are for wiliston, but I do know this. Eog invested in the spearfish based on roi. Eog stated that publically. Their results did not confirm their assumptions so they are gone. Yes a factor is that the total area involved is relatively small as is the investment. Roi is the best metric there is for any investment. Why else would anyone in set in anything. I would agree that the scope the project in terms of the fit with eog's other projects is questionable. There are other ways to make money beside being the largest in terms of area and/or prod volume . That is the only point I was trying to make.
I think you will be pleasantly surprised. Surge Energy appears to be a growing company, eager to do well. I was very, very happy to see this turn of events.
Good luck with your well. I will be watching the Bottineau area with much interest.
The Surge acq is a very positive development as eog's plan encountered difficulties. I am sure eog briefed surge and identified changes for surge's consideration as they go forward. Surge may have it's own ideas also. One thing is certain, and that is that some changes are needed. Different lateral length different frac design ways to control costs or ??? Also, it is not clear that surge acquired all the eog leases and eog has not made any announcement.
Yes, I am not convinced that EOG sold their acreage. EOG is a public company and by now one would have thought a public announcement would have been required had a sale been material to their bottom line. Ward-Williston also has acreage in Bottineau County.
By the way, later I plan to post a stand-alone post on something about the Spearfish I have not yet seen addressed. Stay tuned.
My thesis is that surge bought only a small portion of eog's leases. A few thousand out of appx 40k that eog has under lease. You are correct that there are sec disclosure regulations, but the deal just closed last week so there probably is a window of time that may still be open if the $ amount triggered some immediate reporting requirement. We'll see. Also not clear what part of the 20m involved eog certainly not all in my view.
Being a much smaller company, Surge does not match eog on it's balance sheet.
ReplyDeleteAnd probably not geo and eng depth either.
Maybe surge has lower drill and complete costs and can achieve higher recovery
Than eog thinks is possible. Looks like surge will at least
try and for that I give them a lot of credit and wish them success.
http://tmx.quotemedia.com/quote.php?qm_symbol=SGY
If EOG did, in fact, get out of the Spearfish in Bottineau it was a business decision.
ReplyDeleteIt's the same reason Donald Trump does not build duplexes in Williston to rent; Trump builds skyscrapers in NYC. Duplexes in Williston won't move the needle on Trump's bottom line, no matter how many he rents. These Spearfish wells were not going to move the needle on EOG's bottom line.
In addition, small companies are at the end of the queue waiting to get their wells horizontally fracked. Spearfish wells don't need horizontal fracking. Even well-established, but very small operators in the Bakken are going to have increasing problems with the fracking backlog.
Eog is exiting because the going in economics were not confirmed by their initial drilling program. The smaller area compared to eog's other projects was also a factor I am sure. Spearfish wells are short lateral (2000 feet) and multistage hyd frac is a must to improve permeability. I think, the "right" frac approach has yet to be discovered although eog Canada is having success north of the border and eog tried this in bottineau with not as good results apparently . Eog probably still has acreage in bottineau (surge didn't buy all of eog's acreage only what they think is the "best"). we'll see what happens but surge has it's work cut out.
ReplyDeleteThank you. I wasn't sure about the fracking. Except for a handful of recent wells in Bottineau County, the GIS map server does not show any horizontals.
ReplyDeleteRegardless these will be low productivity wells, more suitable for smaller players. There's a reason, for example, why XOM or CVX would not in Bottineau.
65000 bbl/well. X 24. Wells/section. =. 1560000 bbl per section. Low productivity. ???? Hello!
ReplyDeleteThe reason the larger players are not active (eog was) is that the area is not large.
"Low productivity wells." EURs of 65,000 in the Spearfish vs EURs of 700,000 in the Sanish.
ReplyDelete"productivity" based on eur per well can be misleading. Productivity should take into account the lower drill/complete costs and the higher well density in the spearfish (assuming 65k is correct) and the smaller spacing. The productivity metric needs to be adjusted for a per acre yield vs cost. Comparison on a eur basis can be very misleading. The most important metric is the rate of return. Again , higher eur per well may or may not result a better rate of return.
ReplyDeleteYou are absolutely correct, but we are talking past each other.
ReplyDeleteThe original conversation was why EOG might not want to drill the Spearfish whereas Surge Energy might.
Again, Donald Trump would not rent duplexes in Williston no matter what the rate of return. All the duplexes in Williston will not affect his bottom line. Likewise, XOM won't go into Bottineau because it won't affect its bottom line even if the rate of return was double what it is getting elsewhere.
EOG's Scandia 3-36H well -- a horizontal well, Spearfish/Madison, with an IP of 304 (very, very good) has produced 11,000 bbls of oil in 12 months of production. EOG can get 11,000 bbls of oil in the first 15 days of a Parshall well.
The Scandia well is now producing 350 bbls oil/month, and producing 1,500 to 2,000 bbls of water. All that water needs to be trucked away.
EOG will do better with its wells in the Parshall than its Spearfish wells regardless of the rate of return (within reason, of course).
I have been reading your blog for a long time and enjoy 100% of your wisdom and information.I own 180 acres of mineral rights in Bottineau County about 9 miles south of the town of Maxbass.At this time I do not have a lease but I hope and have my fingers crossed that the Canadian oil companies will have success with the Spearfish and Madison formations and hope it spreads to my area. Again, thanks for your interest and all your important information.
ReplyDeleteWell I don't know what the Donald's plans are for wiliston, but I do know this. Eog invested in the spearfish based on roi. Eog stated that publically. Their results did not confirm their assumptions so they are gone. Yes a factor is that the total area involved is relatively small as is the investment. Roi is the best metric there is for any investment. Why else would anyone in set in anything. I would agree that the scope the project in terms of the fit with eog's other projects is questionable. There are other ways to make money beside being the largest in terms of area and/or prod volume . That is the only point I was trying to make.
ReplyDeleteI think you will be pleasantly surprised. Surge Energy appears to be a growing company, eager to do well. I was very, very happy to see this turn of events.
ReplyDeleteGood luck with your well. I will be watching the Bottineau area with much interest.
The Surge acq is a very positive development as eog's plan encountered difficulties. I am sure eog briefed surge and identified changes for surge's consideration as they go forward. Surge may have it's own ideas also. One thing is certain, and that is that some changes are needed. Different lateral length different frac design ways to control costs or ??? Also, it is not clear that surge acquired all the eog leases and eog has not made any announcement.
ReplyDeleteYes, I am not convinced that EOG sold their acreage. EOG is a public company and by now one would have thought a public announcement would have been required had a sale been material to their bottom line. Ward-Williston also has acreage in Bottineau County.
ReplyDeleteBy the way, later I plan to post a stand-alone post on something about the Spearfish I have not yet seen addressed. Stay tuned.
My thesis is that surge bought only a small portion of eog's leases.
ReplyDeleteA few thousand out of appx 40k that eog has under lease. You are correct that there are sec disclosure regulations, but the deal just closed last week so there probably is a window of time that may still be open if the $ amount triggered some immediate reporting requirement. We'll see. Also not clear what part of the 20m involved eog certainly not all in my view.