Commentary on All That Newfield Hand-Wringing -- The Bakken, North Dakota, USA

With all of the hand-wringing over Newfield's talk about the cost of doing business in the Bakken, I thought it would be interesting to see what their wells are doing. This is not a rigorous analysis at all. I simple went to the NDIC site and looked at the data from the first 10 Newfield wells listed. I believe NDIC lists them in order of location of the township (I could be wrong on that).

For newbies, I use "100,000" bbls as the milestone to measure wells by -- how fast a well gets to a cumulative of 100,000 bbls. At $50/bbl, 100,000 bbls would pay for a short lateral. So, as you approach $100/bbl, it should start to pay for a long lateral, at the wellhead. Of course, there are so many other factors that make that not accurate. But I've been using that for two years and I haven't gotten a lot of negative feedback. I did post a long time ago a press release from an producer that said a specific well with a cumulative of 40,000 bbls had paid for itself.

For newbies, it often took 20 years for a legacy well in North Dakota (a Red River well, or a Madison well) to get to 100,000 bbls cumulative after 20 years of pumping. Bakken wells are getting to 100,000 bbls in 1.5 to 3 years. Wells in North Dakota are expected to flow for 20 years; many go much longer than that.

So, with all that in mind, here are the first 10 wells listed for Newfield.

The first column is file number, followed by well name, the date spud, and then cumulative in bold black and the IP in bold red.

Any well over 100,000 bbls cumulative is free cash flow now (at least in my mind; those older wells were less expensive; and price of oil has been higher than it is now).

• 17045, Jorgenson 1-10H, 2008, 103,675, 786
• 16919, Jorgenson 1-4H, 2008, 82,678, 343
• 17348, Lost Bridge Federal 16-9H, 2009, 168,572, 901
• 17086, Jorgenson 1-15H, 2008, 107,002, 560
• 18122, Arkadios 1-18H, 2010, 36,814, 1,203
• 18425, Mukwa 1-17H, 2011, SI
• 18497, Ursus 1-20H, 2010, 64,468, 1,878
• 17924, Moberg 1-29H, 2009, 84,635, 936
• 14583, State 1-36A, 1997, 191,160, 197
• 19808, Malm 149-98-11-2-1H, 2011, 41,458, 2,461
• 18689, Bluefin 1-13H, 2010, 55,586, 1,869 
• 19110, Malm 149-98-14-23-1H, 2011, 78,901, 2,849

A couple of other points:

• There are "no" dry holes in the Bakken (dry holes are very, very expensive and to be able to take these out of the equation, is tremendous)
• Newfield's IPs have been increasing and are among the best in the Bakken
• Don't let shut-in (SI) wells bother you; Burlington Resources routinely does this, and their IPs, when finally reported, are very, very good
• There were some Newfield permits that were canceled among the list of 10 above, but I don't read anything into canceled permits in the Bakken
• There was one abandoned Newfield well among that list, so that's equivalent to a dry hole in some folks finds, but they would have gotten some of their initial investment back, and their are tax write-offs, so it's not a complete loss.

Bottom line: I just can't get too concerned about Newfield's hand-wringing.

We will know more when CLR, WLL, and BEXP report.