EOG and WLL Head-To-Head in the Parshall and the Sanish -- Bakken, North Dakota, USA

The fifth permit for a fifth monitoring well along an EOG horizontal suggested a comparison of EOG wells and Whiting wells in near proximity to each other might be in order.

I compared the IPs and cumulative production of the EOG wells and Whiting wells within a few miles of each other.

I looked at all the EOG wells in the nine sections in the southwest corner of T153N-R90W (Parshall oil field) and all the Whiting wells in the southeast corner of T153N-91W (Sanish oil field). East to west, these wells are less than six miles apart, all in the same latitude.

All data taken from NDIC file reports (no corporate presentations, or press releases). 

The EOG wells were all short laterals; the Whiting wells were all long laterals. Here are the results, file numbers, IPs, cumulative oil produced, and IP test date:

EOG wells:

• 17042, 492, 252K, 11/22/08
• 18315, 102, 27K, 4/24/10 -- compare with WLL's 18481 below
• 17142, 1,055, 274K, 9/16/08
• 17366, 553, 224K, 11/6/08
• 18807, 467, 21K, 6/30/10 -- seven months and only 21K; this is the Parshall; recent well
• 18808, 665, 15K, 11/10/10
• 17129, 610, 218K, 12/22/08
• 17732, 895, 170K, 6/16/09
• 16746, 1,523, 226K, 6/21/09
• 17019, 732, 194K, 6/18/09
• 17121, 800, 175K, 8/4/09
• 19317, 213, 5K, 11/5/10 -- this one is concerning; very prolific Sanish; a very low IP; total cumulative less than 5K in 2.5 months

Total EOG cumulative production in nine sections: 1,801K


Whiting wells:

• 18136, 1,455, 140K,11/1/09
• 16731, 1,323, 359K, 12/16/07
• 17586, 2,004, 246K, 12/8/08
• 16780, 2,247, 330K, 1/24/08
• 17575, 3,260, 356K, 2/3/09
• 18481, 2,672, 168K, 5/9/10 -- less than a year; paid for at the wellhead
• 17253, 2,045, 283K, 9/18/08

Total Whiting cumulative production in nine sections: 1,882K

Note: I thought EOG had an earlier start than WLL in the Bakken but in this area, WLL had the earlier well. WLL had to drill only 7 wells to exceed (slightly) EOG's 12 wells. Granted, long laterals are more expensive then short laterals, but probably not significantly.


Size of the field:

• The Parshall field is about 211 sections. 
• The Sanish field is about 192 sections.

Total production for the entire fields (NDIC data, as of January 31, 2011):

• Total cumulative for the entire Parshall field (first month of production: May, 2006): 44 million bbls.
• Total cumulative for the entire Sanish field (first month of production: April, 2006): 28 million bbls.

Other notes:

• Sanish field: 8 rigs on site; about 20 additional wells where drilling is almost complete
• Parshall field:  3 rigs on site; one additional well where drilling is almost complete

Disclaimer: this is not a precise review. I may have missed some wells in these sections; the size of the fields may have changed slightly since I last reviewed them.  Numbers have been rounded, and there may be typos.

Wednesday, March 2, Huge Day: NOG To Release Earnings Before Market Opens; AAPL to Announce New iPad

Wednesday, March 2, 2011, is gonna be a huge day.

Here's what one guy thinks about NOG's 4Q10 earnings. 

North Dakota Benefiting From Events in the Mideast -- Article

Here's the link.

From MinnPost.com, the author suggests that events in the Mideast are benefiting oil activity in North Dakota.

North Dakota has sailed through the recession with the lowest unemployment in the country, a shortage of skilled workers and a budget surplus as the state has benefited from the shale oil boom in the western part of the state.

Now the stocks of companies working in the Bakken oil fields straddling western North Dakota and eastern Montana seems to be benefiting from turmoil in the Mideast.

Investors and traders are bidding up the stocks of these companies faster than the big oil companies. 

To some extent the author's thesis is accurate, but I think there's more to it. First, new investors are starting to realize the Bakken is "for real." Second, seasoned investors are starting to understand the Bakken may be bigger than originally thought.

The Bakken oil companies started their run-up well before recent events in the Mideast.

Two (2) New Permits in North Dakota, USA -- Enerplus, Sinclair With Nice Wells

Produers: Hess and CLR.

Fields: Big Butte (see below) and Hamlet.

On the other hand, eighteen wells came off the confidential list. Results are reported elsewhere. However, of the eighteen, four were canceled or expired permits; two targeted the Madison; Enerplus had a great well (3,424 bopd, IP); and, Sinclair had a nice well (1,039, IP).  The others were unremarkable Bakken wells.

I neglected to include the names of these two wells in the original post. Here they are:

• 18546, 3,424, Enerplus, Ethan Hall 6B-31-30-1H, McGregory Buttes, Bakken (50K in  one month)
• 18888, 1,039, Sinclair, Martens 1-5H, Sanish, Bakken

*********

The Hess permit in Big Butte was the fifth of five permits for vertical wells on either side of horizontal #17117, EN-Person-156-94-1102H-1, a long lateral starting in section 11 and ending in section 2, T156N-R94W.  With this permit, there are now five permits/wells along this lateral. They do not have the "H" designation, and this, as well as their name (Person Observation) suggests these vertical wells are monitoring the activity of the horizontal and probably the formations above and below this lateral. [Update, on the March 14, 2011, daily activity report, there is now another permit for another well next to #17117. This permits is 20599, EN-Person Observation 2-43.]

The six permits along the horizontal #17117:

• 20500, SI, EN-Person Observation 11-33, Three Forks,
• 20315, SI, EN-Person Observation 11-22, Duperow,
• 20442, SI, EN-Person Observation 2-24, Three Forks,
• 20361, SI, EN-Person Observation 11-31, Three Forks,
• 20539, SI, EN-Person Observation 2-32, Three Forks,
• 20599, SI, EN-Person Observation 2-43, Three Forks, 

The folks over at the Bakken Shale Discussion Group noted the same thing, and may have more information going forward.

Comment: simply "observation wells." Never any intent to produce from them. -- May 10, 2014.

CLR To Offer 11.5 Million Shares in New Offering And Raise CAPEX by $400 Million for 2011 -- Bakken, North Dakota, USA

Link here.

Currently 169.3 million shares outstanding.

The offering:

• 9.17 million new shares
• 0.83 million sold by selling sharesholders
• 1.5 million additional for over -allotment

_________________________________

TOTAL: 10.67 million new shares, if I understand this correctly = 6.3% of current shares outstanding.

CLR announced today that it and certain selling shareholders intend to offer 10,000,000 shares of the Company's common stock to the public, of which 9,170,000 shares would be sold by the Company and 830,000 shares would be sold by the selling shareholders, pursuant to the Company's effective shelf registration statement.  The Company also intends to grant the underwriters a 30-day option to purchase up to an additional 1,500,000 shares of common stock to cover over-allotments, if any.  

*****

This is the link to the prospectus.

******

On page S-4 of the summary:

"We will not receive any proceeds from the sale of shares of common stock by the selling shareholders."

If I understand that correctly, the shareholders selling 830,000 shares of common stock will keep the proceeds for themselves. Immaterial to the offering.

******

CLR also announced today that the company is increasing its CAPEX from previously announced $1.36 billion to $1.75 billion.

******

More comments later.

CLR: New Presentation -- Bakken, North Dakota, USA

Link here.

If you want to see a great photograph, go to slide 21 of this 25-slide presentation -- an Eco-Pad.

World proved reserves (billion barrels)

• Ghawar, Saudi Arabia: 140
• Rumalia, Iraq: 22
• Cantarell, Mexico: 11 - 20
• Prudhoe Bay, Alaska: 13
• Tupi, Brazil: 5 - 8
• Bakken: 11 - 24 (depending on analyst)
• Total official estimated US reserves: 19 billion

Fracking

• 24 - 30 stage fracs
• 8 stages per day
• Sand + ceramic proppant

Cost/Well Completion (CWC): $6.5 million
Increasing production rates (90-day average) (my estimate based on graph)

• 2007: 180 bbls/day
• 2008: 220 bbls/day
• 2009: 400 bbls/day
• 2010: 450 bbls/day

Higher IPs = higher EURs

More frac stages = higher EURs

CLR using 518 as representative for EUR in presentation

Similar to Whiting, CLR is estimating 8 horizontals on 1280-acre spacing units

CLR says IHS esimates North Dakota to produce 1,000,000 bbls opd by 2020; I've seen others suggest 1 million by 2015. The delta probably relates to infrastructure and takeaway capacity.

Demand for the Coal-Powered Chevrolet Volt Has Been "Red Hot"

Link here.

GM sold 321 Chevy Volts in January, five less than they sold the month before.

GM says they are selling Volts as fast as they can make them. [They must be making them by hand.]

“Right now we’re selling every one we can make,” GM spokesman Tom Wilkinson said, “so as shipments rise we expect sales to rise as well.”

It should be noted that GM has said in the past they expect to lose money on every Chevy Volt that they sell.

This report comes out about the same time that Consumer Reports said the Volt makes little economic sense.  Especially since the Volt costs more than the Cadillac.

I can't make this stuff up.

A Great Well for Enerplus -- A Relative Newcomer To The Bakken -- North Dakota, USA

18546, 3,424, Enerplus, Ethan Hall 6B-31-30-1H, McGregory Buttes, Bakken (50K in  one month)

Link here for other wells coming off confidential list. 

McGregory Buttes sits in the southwest corner of the reservation, between the Mandaree field and the Moccasin Creek -- both of which are pretty good fields.

$17,000/Mineral Acre in the Bakken -- Too Much To Pay? -- LINN Energy

Update

Actually this is not an update per se. Rather, I have been thinking about this and determining the amount paid per acre is problematic. 

Here are the facts and one assumption which I think is pretty close to factual:

• LINN Energy paid $194 million for the Concho assets
• Most likely the assets included about 11,193 acres = 17 sections
• Most likely the assets included 2,000 bopd production

Now for assumptions. At 200 bopd/well (and this figure could be all over the map), this amounts to about 10 net producing wells.  Ten wells on 17 sections certainly sounds plausible.  And/or Concho very likely could have working interest in wells on non-leased acreage.

Ten Bakken wells could conservatively have 400,000 bbls EUR. At $65/bbl = $26 million. Ten net wells = $260 million. One could argue, that if LINN Energy picked up 10 producing wells, they could be worth as much as $200 million over the life of the wells. And, of course, the wells hold the acreage leases by production.  Without knowing how many wells, and what kind of wells were included in the acquisition, it is impossible to determine the price LINN Energy paid for the 11,193 acreage.

For that reason, I am changing my mind once again, and going back to $12,000/acre as the record amount paid for Bakken acreage in this boom.

Original Post

This past week it was announced that LINN Energy will buy into the Bakken, paying $194 million for Concho Resources assets.

Unless I missed it, I was unable to find the number of acres that were acquired by LINN Energy in this transaction or the other assets, including producing wells.

Based on the 2009 Annual Report, Concho Resources had 11,193 acres in the Bakken/Three Forks.

Dividing $194 million / 11,193 acres = $17,332/acre. Someone with more current information suggests the price was closer to $16,500/acre.

The previous record was $12,000/acre in the North Dakota Bakken.

Until new information regarding the LINN/Concho is forthcoming, I will consider $16,000/acre the new record for ND Bakken/Three Forks acreage. [Based on the first comment below, and re-thinking this, I will change this to $13,000/acre as the new record.]

[See first two comments below: if LINN Energy bought 2,000 boepd production in the Bakken, that amounts to about $48 million / year at $65/bbl, bringing the per acreage cost down significantly.  Then it is closer to $148 million/11,193 acres = $13,000/acre.]

*********

The question is whether this makes sense.

Of course, we don't know where the acreage is in the Bakken and most agree that some areas are better than others.

Having said that, some observations.

First, the simplest of observations:

• Most agree that EURs for Bakken wells will be about 500,000 bbls
• If one assumes the price of oil at the wellhead will average $65 --> $32.5 million for the EUR
• If one well is sunk into a 640-acre spacing unit, that $32.5 million --> $50,000/acre

Now, some observations derived directly from the first observations:

• Depending on the location of the wells, some Bakken wells have EURs of 750,000 bbls
• $65 at the wellhead for sweet oil seems conservative
• It is likely that more than one well will be sunk into every 640 acres in the ND Bakken

The edge of the envelope in 2011:

• WLL is placing up to eight horizontals in their better 1280-acre units (current presentation)
• Zenergy wants to create a 3840-acre unit for 9 wells (426-acre) (February hearing docket)
• CLR wants to place 7 wells on a 640-acre unit (February hearing docket)

********

For conversation, some further commentary.

I don't like the cliche, "this time things are different."

However, in the case of the Bakken and horizontal drilling, I think there one can make a case that things ARE different this time.

Some background: in the "old days," it is my understanding that vertical wells could have a spacing unit as low as 40 acres. I assume some vertical wells had spacing units of 640 acres, but I don't know.

In the "old days," there were a certain number of "dry" wells. 

Once a well is producing, and as long as it is producing, the lease remains in effect, i.e., the lease is held by production.

Generally speaking, leases do not specify formation.

Therefore, in the "old days," a single vertical well, as long as it was producing, might "control" 40 acres, or as much as 640 acres (one section). 

With the Bakken, I think there are some significant differences:

First, there are "no" dry wells. It happens, but it's rare. Anyone acquiring acres in the Bakken can assume that a well is likely to be productive. It may or may not be a "good" well but it will be productive.

Unlike vertical wells which had spacing units as low as 40 acres, all horizontal Bakken wells will have a minimum of 160 acres; some 320 acres; most, or many, 640 acres; and many, or most 1280 acres. I can't imagine a horizontal well being less than 160 acres. But those smaller units will generally come after the larger units have been drilled, or they will be special circumstances based on geography.

So, now, here comes the "this time things are different":

When someone acquires a lease in the Bakken and drills a well, he/she is almost guaranteed it will produce at least something. Right now, the good wells are paying for themselves (at the wellhead) in 1.5 years; the less good wells taking as long as 3 years. But the wells now "hold by production" 640 acres or 1280 acres for all eternity (the wells are expected to produce for 30 years, and for me, at my age, that is "for all eternity). To me, that is incredible. One well will "hold by production," 1280 acres of future activity.

During the next 30 years, these are my expectations:

• the price of oil will not fall (inflation, weakened dollar, peak oil, supply/demand, political unrest in Middle East)
• exploration and production technology will  improve --> increased production/unit 
• producers will go back in and re-frac (the early wells were fracked with a single stage; they will all be re-fracked; newer wells will eventually be re-fracked)
• producers will go back in with horizontals into legacy formations and new formations (Tyler/Heath, Birdbear/Nisku) from existing Bakken/Three Forks wells

I don't know if $17,000/acre is too much to pay for a mineral acre in the North Dakota Bakken. Obviously the LINN Energy folks don't think so. Will this be the end of appreciating prices paid for Bakken acreage?

IPs For "Late-Reporting" Wells -- Newfield, Zenergy, and Stockyard Creek Look Good -- Bakken, North Dakota, USA

I noted earlier that more and more wells are coming off the confidential list with no initial production being reported, probably due to backlog of fracking.

When the well is finally fracked, and the initial production calculated/reported, it is not often reported to the general public.

Periodically I will update the wells that come off the confidential list with a "DRL" for status as their IPs are released. By comparing the spud date and the IP date, one get an idea how long it takes to get a well fracked. Remember, producers are reaching TD in less than 30 days. Fracking only takes a day or two (depending on type of fracking); and in a perfect world, fracking would occur within days of a well reaching TD.  In the examples below, there are several wells that apparently had to wait five to six months to get fracked. Some may have waited longer than six months (#18402, #19220, #18737).

The following were updated March 1, 2011
File, spud date, IP date, IP, Producer, Well Name, Field, Pool

• 19228; 8/9/10; 11/4/2010; 211, Wesco, Federal 43-12, Bicentennial, Red River
• 19046; 8/6/10; 11/10/10; 844, Oasis, McFarland 5502 44-12H, Squires, Bakken
• 18402; 8/4/10; 2/21/11; 641, Petro-Hunt, Fort Berthold 152-94-22D-15-1H
• 18901; 8/2/10; 2/3/11; 640; CLR; Horob 1-14H; Bakken
• 19220; 8/1/10; NO IP YET but looks like a good well: 45K in four months; BTA, 20711 Saccaro 310 1-H, Stockyard Creek, Bakken
• 19230; 7/26/10; 1/26/11; 649; MRO, Goodall USA 11-29H; Reunion Bay; Bakken
• 19278; 7/25/10; 11/7/10; 593; Peak; Audrey Rabbithead Hall 33-11H; Spotted Horn; Bakken
• 18737; 7/20/10; 2/10/11; 1,034; Zenergy; Dakota-3 Mason 2-11H; Van Hook, Bakken
• 19112; 7/18/10; 11/15/10; 2,526; Newfield; Charlotte 150-98-17-20-1H

Investors: SeekingAlpha Concern About Recent Run-Up in Bakken Shares, or A Wake-Up Call?

Link here.

Three companies mentioned: KOG, SSN, and AXAS.

My hunch: continued volatility.

But the price of oil long term?

• Inflation.
• Weaker dollar.
• Continued unrest in the Middle East.  Even in "stable" Iraq, problems erupt.
• Supply/demand -- think China, India, US.

A memo from the President, Louisiana Oil and Gas Association: Mideast Turmoil: The Final Wakeup Call:

A wise person once defined insanity as doing the same thing over and over again and expecting different results. In the wake of civil unrest mounting in the Middle East and skyrocketing energy prices, it’s safe to say that our nation’s backward energy policy continues along the path of lunacy.

Disappointing, Pathetic, Frustrating, Reality, It Is What It Is -- Bakken, North Dakota, USA

One  year ago when wells came off the confidential list, initial production numbers were provided in almost every case.

Look at the results of the last dozen wells that came off the confidential list in the past few days:

• 18581, DRL, Newfield, Caliente 1-9H, Wildcat, Bakken
• 19081, DRL, Fidelity, Lynn 19-20-29H, Sanish, Bakken
• 19102, 1,885, BR, Phantom Ship 24-22H, Westberg, Bakken
• 18967, 159, XTO, Sundhagen 31X-3, Midway, Bakken
• 19359, DRL, Petro-Hunt, Sorenson 152-96-24C-13-2H, Union, Bakken
• 19087, DRL, Newfield, 1-H Sandhill 25-36, Wildcat, Bakken
• 19144, DRL, MRO, TAT USA 34-22H, , Antelope, Bakken
• 16811, DRL, MRO, T Kupper USA 34-11H, Bailey, Bakken
• 18865, 1,026, Slawson, Silencer 1-29H, Big Bend, Bakken
• 19251, DRL, MRO, Quale USA 31-20H, Four Bears, Bakken
• 19127, 1,319, XTO, Carter 14X-12, Grinnell, Bakken; Three Forks well, 30 mi east of Williston; 18 frac stages
• 19049, DRL, SM, Jorgenson 1X-30H, Bear Den, Bakken (21K in first 24 days)
• 19167, DRL, Oasis, Holmes 5601 44-32H, Wildcat, Bakken (7 miles north-northwest Williston)

Of the baker's dozen wells that have come off the confidential list in the last few days, only four had an initial production number.

It is my understanding that Bakken wells coming off the confidential list but have no IP are waiting to be fracked.