Carpe Diem Has Another Post on the North Dakota Oil Patch -- Bakken, North Dakota, USA

Link here.

1. A new record for monthly production: 1,120,4576 barrels, a 21% increase from last May, and a 75% increase from two years ago (the link includes a chart).

2. A new record for average daily production: 361,438 barrels. 

3. A new record number of wells producing: 5,329.

4. A new record for oil-related jobs 15,200 (see chart), which is more than double the number of North Dakota oil jobs two years ago. 

The most interesting statistic that comes out of this is the average number of bbls/well: 68.


This number has always surprised me: how few bbls the "average" well produces. There are so many ways to look at this. When I go through the NDIC database there are a lot of wells producing 300 bbls/month which is only 10 bbls/day, and yet the oil companies would not keep these wells on-line if they weren't profitable. In fact, these wells paid for themselves a long time ago, and it costs almost nothing to keep these wells going: a bit of electricity to keep the pumps running, a little routine maintenance, a bit of bookkeeping, and that's about it. If the old wells are hooked into a pipeline, the expense is even less. At $75/bbl, that's about $750/day for a well that is paid for. There aren't many jobs in North Dakota that pay you $750/day ($275,000/year). The price of oil continues to increase, by the way.

A lot of those old wells were drilled at  time when dry holes were not unexpected. Now, a dry hole in North Dakota rates a headline, they are so rare. That has brought the cost per bbl produced way down; when you hit a couple of dry wells, that can really affect your bottom line.

But most important is this: these old wells producing 300 bbls/month are often targeting legacy formations like the Red River or the Madison. A lot of these fields will be rejuvenated when enhanced oil recovery (water flooding and CO2 injection). Even better: the leases for these wells are "held by production," allowing time for the operators to go back in and target other formations from these same wells or new wells. The new formations: Bakken, Three Forks, Three Forks Sanish, and the Tyler.

The new Bakken wells are paying for themselves "at the wellhead" in less than three years; the exceptional Bakken wells pay for themselves "at the wellhead" in less than six months. And these wells are likely to produce for 30 years; BEXP suggests they could produce for 39 years.