Wednesday, December 28, 2011

No Words Left to Describe the Bakken -- Rigzone -- The Bakken, North Dakota, USA

Link here.  From the Bismarck Tribune as posted in Rigzone.

This article is mostly about the Montana towns and cities along the North Dakota/Montana state line: Billings, Sidney, Fairview, Bainville.

Data points:
  • Jobless rate in Sidney: 2.8 percent; other parts of Montana -- 14 percent
  • Fairview: railroad loading facility for oil; 100-car tanker trains
  • Billings: more than 50 businesses chasing $1.5 billion/month being spent on oil wells in the Bakken
  • More than 200 rigs in the Bakken; each well averages $7 million to drill
  • Montana side of the Bakken: $1.2 billion/year
  • Billings' Whitewood Transport, Inc (local trucking company): business has jumped 8-fold in two years
  • Sanjel: opened new office in Billings
  • Aspen Air US Corps of Billings, hauls liquefied nitrogen; sales have tripled
  • RDO Equipment, sells heavy equipment; sales up one-third in two years
  • Billings: not just the Bakken, but natural gas and coal
  • First unit-train hauling crude to Louisiana left Dickinson, ND, on November 9, 2011
  • Within 35-mile radius of Bainville, two companies are investing $500 million to $1 billion to build two oil loading facilities and a natural gas loading plant
  • Businesses have to provide housing for their own employees
  • 350 oil companies working in Williston
  • "More trucks rolling Williston, ND, now than in downtown Chicago."

Operator vs Non-Operator -- Oil Patch Jargon

A reader asked about an issue regarding "operator" vs "non-operator."

"Anon 1" provided a great answer. That answer can be found among the comments at this post.

Eight (8) New Permits -- The Bakken, North Dakota, USA

Daily activity report, December 28, 2011 --

Operators: Hess (3), BEXP, MRO, OXY USA, Denbury Onshore, and Petro-Hunt

Fields: Big Gulch, Ellsworth, Lake Ilo, St Anthony, Tobacco Garden, and North Tioga.

Hess has a wildcat in Burke County; BEXP has a wildcat in McKenzie County.

Only one well released from confidential list:
  • 18181, 753, EOG, Fertile 19-29H, Mountrail County
About 15 previously producing wells (on DRL status) have now been completed, including these:
  • 19058, 2,834, BEXP, Bures 20-29-1H, Mountrail
  • 19765, 55, Sequel, Bull Moose 22Y-32, Duperow, recompleted from Red River, McKenzie
  • 19788, 3,742, BEXP, Charlie Sorenson 17-8 1H, Mountrail
  • 20306, 2,232, BEXP, Bures 20-29 2, Mountrail
In addition there were another 22 wells that were reported as producing or plugged (in the Bakken, they are "always" producing; "no" dry wells in the Bakken)

Of note, CLR canceled permits for the Sorenson-Thronson Eco-Pad in Mountrail County

And, of interest, in light of KOG's acquisition of North Plains. North Plains acquired the following from Newfield:
  • 19962, conf, Komodo State 154-97-16-1H, Truax, Williams County. The location makes sense; the Truax field seems to be "owned" by North Plains.
Those 22 newly reported wells was one of the longest such lists I've seen in a very long time. And the BEXP wells noted above are still thrilling to see. Those three BEXP wells are on a single 4-well pad in the Alger oil field; the fourth well (20306) is still confidential. #19058 and #20306 are both long laterals running south; #19788 is a long lateral running north; I assume #20305 will also run north.

Others Talking About The Madison -- The Madison, North Dakota, USA

Elsewhere (this site is no longer accessible) folks are starting to talk about the Madison.

Important bit of information:
Madison oil is sour (sulfur): Enbridge will only ship sweet oil (Bakken) in its pipelines. Oil with sulfur is less desirable at the refineries. They will pay a premium for sweet oil (Bakken).
Having said that, the guys over at the Bakken Shale Discussion Group have picked up on a great well that I missed, when I updated the Renville oil field, Bottineau County:
  • 15732, 25, Flatirons Resources, Stoa 41-1H, Lake Darling, Madison; twice; 2005 & 2010; cum 106K 9/14;
This is a real cool well with at least two instructive lessons:
Once the IP is reported, it is easy to forget about the well (unless one has a personal interest in it). This well, with an IP of 25 was as unremarkable as it could get.

Then, when "they" went back in with a workover, it got no press. In this case, they went in and drilled a fourth lateral.
Another lesson: 
Even a "bad" well early on can be turned into a "good" well and not be noticed (except by those with a particular interest).

In this case, this well was spud 2/23/05, produced for 28 days less than 800 bbls of oil. The was was "temporarily abandoned."  And abandoned for five years. Bad news? In December, 2010, five years later, a fourth later was drilled. In the first 50 days --> 10,000 bbls of oil, and in the past year, close to 50K bbls of oil. I don't know what it costs to put in a very short lateral that doesn't need fracking, but it can't be much compared to a Bakken long lateral.
They suggest that the price spread between ND sweet and ND sour is significant. Check out the prices at SemCrude: there is a difference (maybe 10 percent on the high side) but considering how much less expensive it is to drill a Madison compared to a Bakken, I don't consider the ND sweet/ND sour spread to be all that concerning.

Wow, I love to follow the Williston Basin and I have a lot of appreciation for the folks who ask the questions and provide the answers in the various discussion groups and provide comments to this blog.

Long-time followers of this blog are probably starting to see some themes that the "big guys" might be noticing in the Williston Basin. I have made a new comment at one of my top ten lists.

Hey, here's a random thought? I've been wondering why all the crude-by-rail interest, and why Enbridge would be moving into crude-by-rail. I think we got our answer: Madison, ND sour. Hmmmm.

Breitling Enters the Bakken -- The Bakken, North Dakota, USA

Link here.
Irving, Tex., independent Breitling Oil & Gas Corp. acquired a nonoperated acreage position in Sand Creek field within the Bakken formation in McKenzie County, ND.

Plans call for Breitling to participate in six Bakken and Three Forks wells during 24-36 months on acreage acquired through a joint venture. The operator will be Denbury Resources Inc.
The CEO says the Bakken will be a major focus for the company. 

Little Knife Field Has Been Updated -- Bakken Getting All The Attention, but The Madison Still Very, Very Nice

Little Knife field updates here.

Nothing remarkable except to note the Madison wells.

Propane Fracking

Link here.
A Canadian company is experimenting in Texas with a drilling technique as a substitute for the enormous amount of water used in the hydraulic fracturing process.

Jadela Oil Corp., a Canadian exploration and production company, fractured its El Indio No. 1 horizontal well in Maverick County near Eagle Pass with more than 5,000 barrels of liquid propane and butane, a process known as gas fracking.

Traditional hydrofracking has created a boom in drilling in shale formations, including the Eagle Ford Shale across South Texas.

But it also has caused environmental concerns because of the amount of water used — a single well requires millions of gallons — and because the water used becomes contaminated and cannot be reused.

The method using a propane and butane jell hopefully will reduce production costs because, unlike water, the gas mixture can be recovered and reused or sold, Jadela CEO Greg Leia said. The secondary benefit, Leia said, is environmental.
Ernie has sent this link with a bit more information regarding GasFrac and propane fracking.
The technology is so new that it has yet to catch the attention of U.S. environmentalists who track fracturing issues.
Give them time. 

I wonder if the EPA definition of "diesel" will include propane?  As noted before, my hunch is anything with C and H in it, and if used in fracking, will be declared "diesel."

Cushing Pipeline Flow Reversal on Track; WTI and Brent Narrowing

Link here.

While the Keystone XL withers on the vine, Enbridge will be putting in a new pipeline along an existing pipeline. Huge story. 
Having tested demand, Calgary, Alberta-based Enbridge has announced that it intends to go through with a plan to reverse the course of the Seaway oil pipeline between Houston, Texas, and Cushing, Oklahoma.

At present no pipelines extend from the important oil centers in Oklahoma to the refineries in Houston.

MarketWatch reports that Enbridge completed the purchase of a 50 percent stake in the Seaway pipeline from ConocoPhillips for $1.15 billion on Tuesday. In concert with Enterprise Products, which owns the other half of the pipeline, the company plans to add an additional pipeline along the course of the Seaway, a project that is expected to cost around $1.9 billion and be completed by mid-2014.

Until then, the Seaway plans to reverse course in the second quarter of 2012, reaching around 150,000 barrels per day midway through next year and around 400,000 barrels per day by the start of 2013.
The Keystone XL may eventually be built, but Enbridge is using this opportunity to great advantage. In hindsight, so many questions will be asked about TransCanada's strategy.

A Random Look At Madiison Wells In Small Area of the Little Knife Oil Field

These are some inexpensive vertical wells that were drilled back in the late 1970s. They are located in a relatively small area in the Little Knife oil field. To the best of my knowledge, the Madison "boom" did not end because the formation was no longer productive, but because the price of oil dropped out the bottom.

These wells were not cherry-picked. I simply listed the wells in this area that had 6XXX and 7XXXX file numbers; about half are now abandoned; about half are still producing, 30+ years later.

Most (all?) are 160-acre spacing (four of these wells in a section); all are Madison wells except a couple as noted otherwise (Duperow; several have multiple pay zones, but Madison was the predominant one in those cases). Original operator generally not Petro-Hunt.
  • 6228, 201 (Duperow), Petro-Hunt, Zablolotny 1-3-4A, t9/78; cum 1.7 million bbls (Madison);
  • 6225, 1,392, Petro-Hunt, Zabolotny 2-3-3A, s10/77; t12/77; cum 3 million bbls
  • 6427, 1,090, Petro-Hunt, George Hurinenko 2-2-4A, s8/78; t9/78; cum 660K bbls
  • 6752, 437, Petro-Hunt, Hurinenko State 1-2-3A, s10/78; t12/78; cum 142K bbls
  • 6568, 721, Gulf Oil, J and G Hurinenko 1-1-4A, s6/78; t7/78; cum 78K bbls
  • 7297, 105, Petro-Hunt, J and G Hurinenko 2-1-3A, s10/79; t12/79; cum 179K bbls
  • 7426, 100, Petro--Hunt, Gary Houghton 1-6-4D, s1/80; 7/80; cum 183K bbls
  • 6280, 877, Petro-Hunt, Tarnavsky 1-9-2D, s10/77; t1/78; cum 1.43 million bbls
  • 7400, 64 (Duperow), Petro-Hunt, Tarnavsky 3-9-2B, s11/79; t7/80; cum 125K bbls
  • 6211, 852, Petro-Hunt, Hurinenko 2-10-1A, s9/77; t1/78; cum 4.2 million bbls
  • 6217, 1,041, Petro-Hunt, Hurinenko 1-10-2A, s8/77; t10/77; cum 2.1 million bbls
  • 6423, 365, Petro-Hunt, Tedrow 1-11-1A, s8/78; t9/78; cum 306K bbls
  • 6772, 553, Petro-Hunt, Tedrow 3-11-2A, s2/79; t5/79; cum 268K bbls
  • 7090, 75, Chevron, Tedrow 5-12-1D, s7/79; t3/80; cum 86K bbls
  • 7191, 230, Gulf Oil, Tedrow 6-12-2A, s9/79; t12/79; cum 43K
  • 6252, 852, Petro-Hunt, Hurinenko 2-10-1A, s1/78; t 1/78; cum 4.2 million bbls
  • 6164, 473, Petro-Hunt, Miller 3-10-4B, s5/77; t7/77; cum 1.1 million bbls
  • 6095, 442, Petro-Hunt, E E Miller 1-10-3A, s3/77; t6/7; cum 677K bbls
  • 6425, 433, Petro-Hunt, Tedrow 2-11-4A, s7/78; t8/78; cum 204K bbls
Cumulative production: in the millions of barrels for many of these wells; Bakken well EURs --> 500,000 to 900,000

160-acre spacing: would you rather own 10 acres on 160-acre spaced million-bbl well or a 10 acres on a 1280-acre spaced unit with 500,000 bbl well?

Inexpensive to drill; vertical; not hydraulically fracked.

More could be written, but time to move on.

For Investors Only: Morningstar's Outlook for Energy for 2012

Link here.

Don sent me this article. Incredibly good, incredibly detailed. The first few paragraphs: every sentence is an incredibly important data point. The story would have more impact if they broke up the long paragraphs; it is difficult to read in an age where folks are used to Twitter (140 characters max).

As a bonus, Morningstar even includes a list of companies that deserve consideration. Two of the five companies have significant exposure in the Bakken:
  • WLL
  • BHI
  • Ultra Petroleum
  • BG Group
  • Energy Transfer Equity