Continental Resources: Up to Seven Wells in One 640-Acre Spacing Unit -- Bakken, North Dakota, USA

NDIC Hearing Dockets, Wednesday, February 21, 2011

• Case 14121: Continental Resources requests permission to drill not more than seven (7) wells in a 640-acre spacing unit, section 2-T152N-R94W, Antelope field, Bakken pool.

So, what if anything is going on in that section? Section 2-T152N-R94W?

It turns out Continental Resources already has two short lateral producing wells in that section:

• 17640, 380, Mack 1-2H, NWNW 2-152-94, Three Forks (Sanish)
• 19115, 609, Mack 2-2H, NWNW 2-152-94, Middle Bakken

These two wells sit 315 feet from each other in that section.

Continental Resources is requesting permission to drill not more than seven (7) wells in this section. I assume that means up to five (5) more wells.

The first Mack well was spud on January 17, 2009; IP date was three months later, March 29, 2009. As of December 31, 2010 (24 months of production), the well has produced 77K bbls of oil.  The first Mack well targeted the Three Forks formation.  Fracture specifics not known.

The second Mack well was spud on July 23, 2010; IP date was October 1, 2010. As of December 31, 2010, (four months of production), the well has produced 36K bbls of oil. Fracked but unknown number of stages. The second Mack well targeted the middle Bakken.

The two horizontals are parallel with each other and have a separation of about 740 feet laterally.

I do not recall these two wells were presented as evidence that the Bakken and Three Forks do not communicate.  Those wells were the Mathistad wells, and I believe, if my memory serves me well, the Omar and Bice wells.

CLR has two similar wells in section 3 of the same township, one mile west, but those two are long laterals, #18909 and #18159.

Back of the envelope calculations:

1. If Bakken and Sanish wells have EURs in the 500,000 barrel range, and these seven wells each have an EUR of 500,000, that would mean that a single section in the Antelope field could have a total EUR of 7 x 500,000 = 3.5 million recoverable barrels of oil using current technology.

2. It is interesting that I opined some time ago that based on how far fracturing seemed to be effective, one could put up to six wells in one section. A section is generally 1 mile by 1 mile or 5,280 feet by 5,280 feet. One can get six laterals with 740 foot spacing in one section. There are two formations currently being targeted in the core sections, the Bakken and the Three Forks. That could work out to twelve (12) horizontals in each section.

I am not really suggesting this; just fiddling with numbers. In fact, to even think this, one has to be truly irrationally exuberant about the Bakken.

Then, again, Harold Hamm opines that there are 24 billion barrels of recoverable oil from the Bakken/Three Forks compared to only an estimated five billion or so based on the 2008 USGS survey.

North Dakota: 3rd In Nation -- Workforce Working Multiple Jobs

9 percent of North Dakota residents work at least two jobs.  (Regional link will be broken soon.)

That puts North Dakota in the nation's third place for this metric.

South Dakota (10 percent) and Nebraska (9 percent) rank are in first and second place, respectively.

A Look At the Anschutz Activity in Dunn County -- Idle Chatter -- Bakken, North Dakota, USA

It's my understanding that OXY bought all of Anschutz assets in the Bakken, but permits are still being issued to Anschutz. OXY USA is also getting permits.

It's too bad Anschutz assets got swallowed by Occidental. It appears that Anschutz could have been a huge independent, publicly traded oil exploration and production company had it gone that route. As it is, these assets are now part of a much bigger company, Occidental.

Look at the permits and producing wells that Anschutz has in the Bakken, most of them in the more productive fields of Dunn County.

Anschutz went from  no activity in the Bakken in 2006; to two (2) permits in 2007; six (6) permits in 2008; to 22 permits in 2009; and to 48 permits in 2010.

So far in 2011, Anschutz has 17 more permits.

This Anschutz well got my attention:

• 17808, Sadowsky 24-14H, SESW 14-141N-96W, 80, 95K as of Dec 31, 2010; 12-stage fracture; spud at the end of December, 2008; IP test date was March 25, 2009; s12/08; t3/09; 106K 6/11.

Here's a well with an IP of 80, and it goes on to produce 95,000 barrels of oil in less than two years. At $50/bbl, that's $4.75 million. Current production has leveled off at about 2,500 bbls/month. [Update: as of June, 2011, this well went over 106,000 bbls. This well was stimulated with only 12 stages. This well has paid for itself and is expected to produce for the next thirty years. Over the next three decades, the price of oil will trend higher, this well will be re-fracked multiple times, and other pay zones may come into play. Though the target was the Middle Bakken, the crew drilled down to the Duperow, and the company has access to information gained from these cores.]

Checklist for Oil and Gas Leases

Because I know a lot of folks won't read the comments that are sent to me, I am posting this link which might be of value to some folks.

This is a checklist for those looking to sign an oil and/or gas lease: http://www.tlma.org/oilgasleasechecklist.pdf.

It was sent to me by a reader who was alerted to a conversation regarding a "180-day drilling clause." (If interested, see comments at this link.)

Note: as mentioned several times on this site, I own no mineral rights, and I have never signed or been involved with a mineral lease, so I cannot comment on the merits of the checklist, except to say, it looks pretty good to me. Smile.

This link will be posted at the "Mineral Rights" tab at the top of the blog.

By the way, the "Mineral Rights" tab includes some nice links for those interested in leasing. For example, the state of North Dakota provides a fairly comprehensive document on just this subject: https://www.dmr.nd.gov/oilgas/leasingconsiderations.pdf.

Gasoline Prices Nationwide -- Added to "Data Links" Tab

A very nice graphic of "gasoline prices nationwide" has been added to the "Data Links" tab at the top of the blog.

For Investors: COP -- Idle Chatter

Yesterday I spoke with someone who had sold his COP to buy AAPL. He mentioned that COP wasn't doing anything for him.

I had not payed attention to COP for quite some time, except perhaps in passing. So, let's take a look.

On a per-share appreciation basis, COP has outperformed AAPL in the past three months; and both have been pretty similar in the past year on a percentage basis.

At three months, COP has appreciated almost 25 percent, AAPL less than 15 percent; at six months, both AAPL and COP have appreciated about 40 percent; and, over the past year, COP has appreciated almost 60 percent, AAPL a little over 70 percent.

In addition, COP pays a 3.50 percent dividend, and increased its most recent dividend significantly. Three months ago, COP paid 55 cents/share; this month COP will pay 66 cents/share. 

This is just idle rambling. Again, not a recommendation one way or the other. But I was certainly surprised. As an avid Apple fan, and one who follows AAPL very, very closely, I was very, very surprised.

That 3.5% dividend on top of share appreciation certainly catches one's attention.

For investors: DWSN -- Another One In Which Hindsight is 20/20

Back on November 13, 2009 -- more than a year ago -- I put up a short note about Dawson Geophysical. Publicly traded, it is a seismographic company.

Check out its three-month share price action and its one-year share price action (DWSN). When I first mentioned it in November, 2009, it was trading for about $22. As recently as December, three months ago, shares were selling for $31.

On Friday, it closed just under $46 with a fairly significant rise the past few days. Since that first note, one could have doubled one's money.

In the past three months, AAPL has appreciated about 12 percent; Dawson has appreciated 72 percent. Since November, 2009, both AAPL and DWSN have appreciated 80% but whereas APPL is now flat, DWSN's trajectory remains up.

A lot of folks focused on the Bakken would not have seen this coming.  Much of the seismographing has been completed in the Bakken. Folks in North Dakota don't see many seismographing crews any more. They've been replaced by fracking crews. But when I was growing up in North Dakota, I saw those "thumpers" everywhere.

However, this is not the case in the Eagle Ford. That's a new basin and much work has to be done, and I suspect, but do not know, that that is one of the reasons for the run-up in Dawson.

A lot of investors remain focused on drillers / producers, including me, and we miss a lot of opportunities in the oil service industries.

China and North America Energy

This is just some odds and ends about the deepening Chinese involvement in North American energy plays.

Back in 2005, not all that long ago, CNOOC, a Chinese state-owned company, lost its $18.5 billion bid for Unocal following widespread media reports and subsequent political opposition.

Since then, CNOOC and other Chinese companies have entered into several North American shale plays:

• CNOOC will partner with Chesapeake Energy Corp. to develop the Niobrara Shale and Powder River Basin in Wyoming and Colorado. That deal closed Wednesday, February 16, 2011.
• CNOOC closed a similar deal with Chesapeake last November (2010) as partners in the Eagle Ford Shale play in south Texas
• PetroChina and Encana are looking to partner in the British Columbia shale gas project; that is currently being reviewed by the Canadian government. PetroChina is part of the China National Petroleum Corporation, another state-owned entity

There is nothing new here but I may need a page to keep track of all the Chinese plays in North American energy and this may end up being the "main page."