Enhanced Oil Production (CO2) From Wyoming Coal-To-Gasoline Project

In an earlier post, I talked about DKRW pursuing a project to convert Wyoming coal to gasoline.

Along with that project, DKRW will sell CO2 (carbon dioxide; a greenhouse gas), a byproduct, of the coal-to-gasoline process, to Denbury Resources.

Denbury is a leader in using CO2 for enhanced oil recovery. Denbury will use the CO2 generated by the coal-to-gasoline process to increase production of oil from Mountain Region fields.

On a separate note, someone wrote in asking about the relationship between Denbury Onshore, LLC and Denbury Resources. This article answers that question: Denbury Onshore, LLC is a wholly owned subsidiary of Denbury Resources. It was Denbury Onshore, LLC, to whom Encore assets in the Bakken were sold some months ago.

One gets the feeling that the "Lost Decade" is quickly receding in the rear view mirrors of the oil tankers in the Bakken, the Niobrara, and the rest of the Mountain Region. And that was before the Japanese nuclear disaster.

I keep thinking of the largest Fortune 500 company with significant investment in wind energy and nuclear energy, a company that is now quickly diversifying into oil. That company would be GE. But I digress.

Peak Oil? What Peak Oil? -- XOM: Most New Production in 5 Years -- XOM Drilled 63 Bakken Wells in 2010

Link here.

Data points (some numbers rounded):

• XOM to add 1.4 million boe/d net to its production by 2016
• Oil will account for 80% of that new production
• "No bias (oil vs natural gas) for us one way or the other. Our bias is to make money."
• 2011 project startups: + 120,000 boe/d over 2010
• XOM's average reserve replacement cost during 2005 - 2009: $8/boe
• Proved reserves (2010): 25 billion boe; up 8 percent from 2009

2012 - 2013: 10 new projects to come on line

Unconventional resources account for 40 percent of XOM's total boe resource base

• Of note: XOM has 410,000 net acres in the Bakken (MT and ND)
• Seven rigs in ND Bakken as of March 9, 2011
• In 2010: XOM drilled 63 Bakken wells

Additional Bakken comments at the link. Very, very interesting. (XOM presence in the Bakken is through its wholly owned subsidiary, XTO).

More On the Eco-Pad Permit Noted Yesterday -- Bakken, North Dakota, USA

Yesterday it was noted that CLR has four permits for an Eco-Pad series:

• File numbers: 20609, 20610, 20611, and 20612; a Salo/Hamlet Eco-Pad in section 35-160-96
• The two Salo wells will be long laterals going north, sections 35/26 in T160N-R96W
• The two Hamlet wells will be long laterals going south, sections 2/11 in T160N-R96W
• Spacing for all wells, according to the GIS map server: 1280-acre

There are already two producing wells in the same sections:

• 17587, 807, CLR, Salo 1-26H, spud 10/12/09; IP test date 4/11/10; total cumulative 59K,
• 17429, 435, CLR, Hamlet 1-11H, spud 9/26/08; IP test date 12/9/08; total cumulative 101K,
• Both are running about 2,000 barrels oil/month, slow decline now

At 101K cumulative, that well may be close to paying for itself (at the wellhead); if so, nice cash flow for the next 25 years as well as holding the acreage by production for more Bakken wells, or other formation.

Note: the relative short period to bring on-line #17429 compared to #17587, suggests problems with the well, or most likely, already seeing fracking backlog.

Seven (7) New Permits -- North Dakota, USA

Producers: BR (3), Oasis (2), CLR, Hess.

Fields: Crooked Creek, Haystack Butte, Bull Butte, Murphy Creek, Dollar Joe, and Keene.

All three BR permits are in different fields.

The two Oasis permits will be for wells on same pad.

The daily activity report was otherwise fairly unremarkable. Several wells released from confidential status but no data other than total depth; obviously waiting to be fracked and/or tested.

How Long Is It Taking To Complete a Bakken Well?

Updates

November 23, 2012: the post below is out of date with regard to how long it takes to reach total depth for a Bakken well. See question #27 at "FAQs." Currently, operators can reach total depth in less than 20 days; some operators have reached total depth in less than 15 days even for a long horizontal, and there is at least one case in which the operator reached total depth in 8 days (I don't remember if that was a short lateral or a long lateral). Completing the well/fracking is a different issue. Fracking can be accomplished in one to three days, but fracking generally does not occur immediately after drilling is completed. There can be a gap of several days to several months.

Original Post

I covered this issue about two years ago on this blog at the FAQs tab. I will have to update the answer.  Five things have changed:

• The horizontals are longer
• Companies are reaching total depth much more quickly
• The fracking backlog is more severe
• Fracking takes less time, depending on the method
• Winter weather is having a greater impact than some expected

Without a serious, statistical study, but just using a "gut" impression based on following the Bakken day in and day out, this is how I would answer. This should be taken as "conversational" and not legally, scientifically, or otherwise accurate.

First, again, the question: how long does it take to complete a Bakken horizontal well, from the date it is spudded to the date the IP test is posted at the NDIC site?

The time to drill to total depth (TD) will vary whether is it a short lateral (one section, slightly less than one mile horizontal) or a long lateral (two sections, slightly less than two miles horizontal). I do not have that information. Most wells are now long horizontals. I believe the record for a Bakken horizontal was fourteen days (probably a short lateral), but the usual length of time seems to be about 24 days to as long as 30 days. They can frac within a couple of days after reaching TD, and depending on the method and number of stages, fracking can be completed within three to five days. Once the fracking is complete, they can measure the flow. In the "old days," some companies used an average production rate over seven days to determine the IP, but now it appears most producers are calculating the IP based on 24-hour flowback achieved early after the well is fracked. So, 14 days + 3 days + 2 days, I suppose one could see an IP within 20 days of a Bakken well being spudded.

More likely, 30 days + 5 days + 5 days, one gets an IP within about 40 days of a Bakken well being spudded.

However, more and more it appears that in good weather, there is a wait of several weeks to get a well spudded, and the IP might not be calculated  until one to three months later. Thus, from the time the well is spudded, one may not see an IP until four months later.

In severe weather, the fracking backlog will be worse, pushing the time period out another month or so.

Larger producers have their own frack teams and some of these companies say they can keep up with the wells that have reached TD. Smaller producers do not have their own frack teams. In addition, smaller producers will be at the back of the queue when there is a backlog for fracking.

Some time ago, EOG stated its policy was not to frac the Bakken during the winter months (November to February, inclusive). I don't know if that is still their policy. It certainly creates challenges for a company that is required to produce quarterly results.

The NDIC doesn't post information on wells until they have come off the confidential list. Not all wells are on the confidential list, but it's my feeling that most are.

Bottom line:

• If the well is a gusher, and the producer wants to promote the company, one could see an IP published in a press release within a month of a well being spudded.
• However, it appears that the standard for IPs being publicized are closer to four months due to a number of factors (weather, fracking backlog). Some are taking as long as six months. (See EOG policy above, for example.)

One caveat: even at the end of the six-month confidential period, some producers will report "DRL" only for "initial production." For some reason, they have not calculated the IP for a particular well. However, production data becomes available at the end of the confidential period.

This posting should be read as "conversational" answer to someone asking me the question with no expectation that it is entirely accurate. There are too many variables, but for newbies it should give folks an idea of the time line for a Bakken well.

If you have read this far, one more little goodie: this may be the record for bringing a Bakken well on line one year ago. It only took 13 days for the "big rig" to reach TD, though it was preceded by the "smaller rig" for surface casing, and there was the usual time gap between the two rigs.

I would appreciate any comments, particularly where I have made errors. I will update/correct the post.

Oasis Has Another Good Well -- Bakken, North Dakota, USA

Two nice wells being reported from the Bakken today:

• 18886, 1,456, QEP, MHA 1-32-31H-150-90, Deep Water Creek Bay, Bakken
• 19036, 2,086, Oasis, Evans 5693 42-27H, Alger, Bakken, 47K in first 3 months

I have been quite impressed with Oasis. As some folks may remember, Fidelity (MDU) sold much of their Bakken acreage to Oasis a while back (about 18 months? I forget). At the time, I had mentioned several times how poorly Fidelity wells were in the Bakken, based on their IPs. Oasis seems to have cracked the code, or at least it's my impression (but not a statistical study) that the Oasis wells are coming in significantly better than the Fidelity wells. In addition, I haven't compared results and locations of the wells, but it was very seldom that I saw a "great" Fidelity well and it seems to be rather common to see a "very nice" or "great" Oasis well.

QEP's acreage is in/near the reservation and it, too, has had a number of good wells. Remember, QEP was a spin-off from Questar.

CNBC's Jim Cramer: Remains Bullish on the Bakken

This is just one of many stories on the Bakken and Jim Cramer. I think Cramer has featured the Bakken not less than three times in past ten days. Another Cramer/Bakken story here.

Nothing new; featured CLR and WLL.

Cramer seems to have arrived late to the Bakken.

USA Today: North Dakota Economy Booms, Population Soars

Link here.

There is nothing in the story that hasn't been told before, so no data points. The link is there if you are interested.

The story emphasizes Fargo's growth, oil, agriculture, and small, responsive manufacturing plants.

By the way, this link was placed at the top of column one on The Drudge Report.

Earthstone Provides Update

Rigzone.com provides an update of Earthstone.

The company participated in eight wells in calendar year 2010 in three fields: Banks, Mondak, and Indian Hill.

Banks field: four wells operated by Zenergy.
Mondak field: three wells operated by XTO, a subsidiary of XOM.
Indian Hill field: two wells operated by SM.

For individuals who can't keep track of their holdings, you are not alone:

The Mondak Federal 14X-11 was drilled, completed and placed on production during our last fiscal year. However, as previously reported, the Company did not learn it had an interest in the well until November 2010. As such, the capital expenditures for this well will be recognized in this fiscal year. The well had an initial potential of 1,175 barrels of oil per day and has cumulative production of approximately 57,000 barrels of oil, 36,000 MCF of gas and 38,000 barrels of water. Earthstone has a 2.2 % working interest in this well.

57,000 x $65 = $3.7 million
0.022 x $3.7 million = $81,000 before expenses.

And, another example of operations hindered by the forcing choke point and the severe winter weather:

The Mondak Federal 24X-12 was drilled in October and November 2010. Efforts to complete and hydraulically stimulate the well were hampered by harsh winter conditions. As a result, the well has just recently been placed on production. The well is still on confidential status and an initial production rate has not been released by the Operator. However, the Company estimates that the well will have an initial potential of approximately 850 barrels of oil per day. Earthstone has a 2.8 % working interest in this well.

Earthstone was previously known as Basic Earth Science System.

One Domestic "Coal-to-Gasoline" Project Could Provide 15 Percent of California's Current Gasoline Needs

In a recent press release, DKRW stated it could produce 21,000 barrels of gasoline on a daily basis from coal.

I often make simple calculation errors, so there may be errors below, but this is what I get, looking at the figures:

Montana daily sales of gasoline, gallons: 1.5 million gallons (EIA)

California daily sales of gasoline, gallons: 6.0 million gallons (EIA)

DKRW: the company says they can produce 21,000 barrels of gasoline on a daily basis from coal. In an earlier (2009) press release, the company stated 20,000 barrels of gasoline -- note: both press releases/new stories stated "barrels," not gallons.

• There are 42 gallons of gasoline per barrel. 
• 21,000 x 42 = 882,000 gallons/day x 30 = 26 million gallons/month

Montana

• For Montana, 1.5 x 30 = 45 million gallons/month gasoline consumption, and if accurate, if DKRW could produce 26 million gallons of gasoline per month, that would amount to more than one-half of Montana's requirements.

North Dakota, South Dakota, Wyoming, and Colorado

• South Dakota requires 22,000 gallons of gasoline/day (the US government does not have data for North Dakota, but let's assume it's a bit more than South Dakota, at 30,000 gallons of gasoline/day). For the two states, we are talking about 50,000 gallons of gasoline/day --> 1.5 million gallons/month.
• The federal government does not post data for Wyoming.
• Colorada appears to use about 600,000 gallons/day --> 18 million gallons/month. DKRW could supply all of Colorado's needs, and probably all of North Dakota, South Dakota, and Wyoming as well.  

California

• It would amount to 15 percent of California's requirement, and that percent would increase as California increases use of electric and hybrid vehicles.

Wow: Opportunities For Investors Who Take Advantage of Pullbacks

I see oil is back up to $100.

I see US stock market futures up nicely.

[Update, 8:20 EST, March 17, 2011: oil futures are up another $2.00 to $103.00.]

[Update, 14:30 EST, March 17, 2011: oil now up $3.40 to $101.40. Remember: much of the Bakken was shut down in January due to blizzards/weather. Producers might miss production targets, but that decrease should be balanced by higher prices paid for oil. It will be interesting to follow. US oil trusts in the Bakken might actually end up stretching out their "lives" due to decreased production in January. As long as the price of oil trends up, the longer the US oil trusts produce, the better.]