The Bakken Pool: A Trillion Barrel Reserve; 45 Billion Recoverable Barrels? -- The August, 2012, CLR Corporate Presentation

Updates

September 21, 2014: looking at CLR's annual "Analyst and Investor Day" presentation, it appears that CLR has gone back to the 500-billion-bbl reservoir. Will provide a link later. 

August 17, 2013: from a reader on Bakken naysayers:

I chuckle when I read about folks saying the Bakken has peaked and is starting to fizzle.

One recent comment was the wells are becoming less productive because they are drilling further away from the sweet spots.

I like to look at Harold Hamm, the guy who came to the WB as a very small operator, picked up a bunch of production and leases on the SE end of the Cedar Creek Anticline because the majors thought it was played out and proceeded to create one of the largest onshore oil fields in the lower 48 by pioneering a combination of horizontal drilling and fire flood recovery in a continuous dolomite formation, the Red River.

CLR is now a pioneer in the Bakken, a continuous dolomite formation, where if you look at their recent presentation you can see they are working on pilot programs to see what will work the best for full fledged development regarding 320 acre or 160 acre spacing.

And that is for basically the MB and B1 of TF formations. A recent question and answer period I heard the comment that CLR feels that there are portions of the basin that will see development of 7 layers. The 4 benches of the TF, MB, Upper Bakken, and Lodgepole. Another comment I once heard was the secondary recovery methods used in the Red River will be a model for the Bakken. Do you suppose a technique that burns some of the oil in place that would produce heat, pressure, and a by product CO2 would work?

It will still be years before it is known where ALL of the SWEET SPOTS are located.

Once that is determined a full scale model for infrastructure can be developed. Gas lines, processing plants, oil pipeline gathering systems, fresh water provisions, disposal systems, and a beefed up system of all access roads to get the job done.

Dr Price predicted that there were maybe 450 Billion barrels in the Bakken system. He also felt that eventually 50% of that oil would be recovered. How long will that take? How many generations will it take to develop the technology far enough to get that done?

As Bakken production becomes sustained and more and more people are dependent on it and the support industries become well established, the technology will continue to evolve. In the last 10 years technology has advanced much in terms of getting more Bakken oil out of the ground. Let's see where we are 6 generations or 120 years from now. Will we be able to get 50% of that oil? If so 120 years of development and another 30 years of production means 50% of the oil in place will be produced. Let's say that Mr. Hamm with his knowledge and experience is right with the prediction that there is likely 900 billion barrels in place so if 50% of that is produced over 150 years or 450 billion divide by 150 equals 3 billion barrels per year. To divide by 365 days that would mean over  8 million barrels per day. For 150 years!

Where are we now? About 10% of that! Let's say Bakken production peaks in the neighborhood of Texas-sized production and the state produces 2 million barrels per day until 450 B are produced. 2 million x 365 = 730,000,000 barrels per year. 450 billion divided by 730 million = 616 years. To meet that goal would give the industry 586 years to develop the technology. The naysayers ain't seen nothin' yet!

December 6, 2012: the note below was written before we knew the results of CLR's plan to target the third bench of the Three Forks formation was known. Now we know.

Original Post

Don alerted me to the most recent CLR corporate presentation when it first came out; I was too busy to get to it at the time, but said I would eventually get to it. Then I forgot all about it. Fortunately, Brian, sent me a comment suggesting I should take a look. How fortuitous.

This is another corporate presentation that seems to have been missed by many of us. If Mike Filloon has mentioned it I missed it.

This stand-alone post should be filed under "How big is the Bakken?" The numbers are staggering.

As you go through this, remember, I often make mistakes, have no formal training in any of this, and am prone to misreading slides and presentations. But this is what I think I saw in CLR's most recent corporate presentation. 

First, some data points:

• folks can correct me, but I believe the official estimate is that the Bakken has about 3 billion barrels of recoverable oil, based on a USGS survey back in 2008
• CLR/CEO, Harold Hamm, stated some time ago his company's estimate is that the Bakken/Three Forks (middle Bakken and upper Three Forks) has about 24 billion barrels recoverable oil
• The "original" Leigh Price paper, never published, estimated that there was 150 to 500 billion barrels of original oil in place (OOIP) in "the Bakken"
• the consensus, if there is such a thing, suggests that OOIP is probably nearer the lower end of Leigh Price's estimates
• the consensus, if there is such a thing, is that about 3% of OOIP is recoverable
• 3% of 100 billion bbls OOIP --> 3 billion bbls
• to some of us, it appears that operators are recovering about 8% of OOIP; if one accepts the middle of the Leigh Price estimate, let's say 300 billion barrels OOIP, then 8% of 300 --> 24 billion bbls of recoverable oil; one can argue only 6% is recoverable, but then take a higher Leigh Price estimate, say 400: 6% of 400 billion --> 24 billion bbls

So, we will stop there and catch our breath. I'm doing that all from memory, as it were, and my numbers and what I recall may be inaccurate; I will gladly correct/refine if necessary once the stand-alone post is up.

For those interested in the Leigh Price paper:

• The Leigh Price paper
• My commentary regarding that paper, Part I
• My commentary regarding that paper, Part II

So, now, we've caught our breath. So far, we've been talking about only the middle Bakken and the upper Three Forks when we are talking about Harold Hamm's potential of 24 billion barrels of recoverable oil from "the Bakken." Hold that thought.

It turns out there may be additional payzones within the Three Forks formation/under the "upper" Three Forks that will affect these numbers. Continental Resources and others are referring to these "zones" or "sub-formations" that are part of the Bakken Pool, but deeper to the upper Three Forks as "benches. And to be clear: these "benches" are part of the Three Forks formation.

It's possible the "definition" of each of the "benches" has changed over time; Continental Resources has talked about these deeper benches for quite some time, and it's my impression that with the most recent CLR corporate presentation there is much more clarity.

Now would be a good time to pull up CLR's August 10, 2012, corporate presentation.

First, click here, a listing of recent CLR presentations.

Then, under Presentations, the very first presentation: Investor Update, August 13, 2012. It's a 3.0 MB PDF file and even on an old computer it seemed to load rather easily. It's dated August 10, 2012, so I assume the "August 13, 2012" date is the date it was posted on their presentation web page.

Go to slide 14.

The graphic will lay out the upper Bakken and lower Bakken shale (currently avoided for the most part), with the middle Bakken, between the upper and the lower Bakken shale.

Then, below the Bakken, one notes four yellow "sub-formations" or "zones" in yellow. These are the "benches" that folks are referring to. There are four benches: TF1, TF2, TF3, and TF4.  (The "TF" stands for Three Forks.)

Generally speaking, when folks talk about nice wells in the Three Forks, they are talking about the "upper" Three Forks, which seems to correspond to TF1. My hunch is that not all operators are differentiating the various benches and I don't know if all "Three Forks" wells have been in the upper or first bench or if some have gone lower.

Continental Resources is in the process of testing these four benches in something they call their "Charlotte Unit." CLR is drilling four wells into four different zones -- they say they are the first operator to have wellbores in four different zones.

CLR refers to these four wells as "Charlotte" wells. So far, according to the NDIC GIS map, only two of these Charlotte wells have permit numbers; I don't see permit numbers for two of the others.

Charlotte 1 and Charlotte 2 are in the heart of the Bakken, in Banks oil field, in north central/northeast McKenzie County, just south of the river; again, I don't see Charlotte 3 and Charlotte 4 yet with permit numbers. [Just after posting this, a reader pointed out that permits for Charlotte 4-22H and Charlotte 5-22H were just issued. There are two Charlotte wells in Siverston field, but they are Newfield wells; so ignore. Update: August 30, 2012 -- #23664 for Charlotte 3.] So, here are the "Charlotte unit wells, the targeted "zone" and the location;

• 19918, 496, Charlotte 1-22H, middle Bakken, SWSE 22-152-99; Banks, 30 stages; 2.5 million lbs; t6/11; cum 150K 10/12; total depth: 21,090 feet;
• 23664, conf, Charlotte 3-22H, Banks, TF1, SESE 22-152N-99W
• 21128, 692, Charlotte 2-22H, Banks, TF2, SWSW 22-152-99; 30 stages; 2.3 million lbs; t10/11; cum 74K 10/12; total depth: 21,358 feet;
• 23612, A, Charlotte 4-22H, TF3, Banks, [Update: see press release, December 3, 2012]
• 23608, loc --> conf, Charlotte 5-22H, Banks, ?TF4

From the well files:

• 19918, Charlotte 1-22H, middle Bakken geologic marker: 11,276 feet;
• 21128, Charlotte 2-22H, TF2, Three Forks geologic marker: 11,273 feet;

The geologist stated in the well summary that the target zone for Charlotte 2-22H was the "lower Three Forks. That makes sense. Generally speaking, it's my understanding that when folks are talking about "Three Forks wells" they are talking about the upper Three Forks sub-formation. Below that would be the lower Three Forks. CLR feels the four zones are distinct, i.e., the four benches.

So, stopping again, to catch our breath. It appears to me that two of the four Charlotte wells in section 22-152-99 have been drilled and were completed last summer and late fall. The middle Bakken well (Charlotte 1) was completed in June, 2011, and had produced more than 125,000 bbls one year later (June, 2012).

Results for Charlotte 2 are noted above.

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Summary so far:

CLR is testing the hypothesis that in some areas of the Williston Basin, there are four, maybe five, payzones in the Bakken Pool (the middle Bakken, and three, maybe four, payzones in the Three Forks, which they call benches). 

CLR has drilled into the middle Bakken ("everyone" does that) and into the "lower Three Forks"/"second bench" (TF2) (something new?). Both wells were highly successful.

They will next drill into TF1 (the "upper Three Forks) and TF3. To the best of my knowledge those permits have not been issued; at least they are not indicated on the GIS map server yet.

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There is something else on slide 14 that is very, very interesting. One of the "concerns" or "complaints" about "the Bakken" is that it is not very thick. Seams are measured in tens of feet, whereas they say the Eagle Ford is measured in hundreds of feet (or so I believe).  If CLR is correct that there are four payzones in the Three Forks (at least in some areas of the Williston Basin), then we start to see much thicker payzone overall -- in this case, on slide 14: 310 feet. 

A "formation/pool" that is 310 feet thick is not trivial. 

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So, enough of that. What else does this mean? Are you holding that thought that I told you to hold some paragraphs above?  Here it is again:

So far, we've been talking about only the middle Bakken and the upper Three Forks when we are talking about Harold Hamm's potential of 24 billion barrels of recoverable oil from "the Bakken." 

When the USGS estimates there are 3 billion bbls of recoverable "Bakken" oil, the society is looking at only the middle Bakken and the upper Three Forks. Remember, CLR suggests that these two zones may have 24 billion bbls of recoverable oil.

The August 10, 2012, presentation has been significantly updated from previous presentations. I won't make you look at previous presentations, but in the past, CLR had a slide that showed in big, bold letters: 24 billion bbls of recoverable oil; and, then in small letters, marked with an asterisk, "lower zones should be additive."

In the August 10, 2012, CLR has a new slide, or at least is seems new to me: slide 12: expanding the Bakken vertically. 

Remember Leigh Price's paper, upwards of 500 billion bbls of OOIP? There, on slide 12, the middle Bakken and the "1st bench" (upper Three Forks), 577 billion bbls of OOIP, and note the qualifier: "revised estimate."

The 2nd, 3rd, and 4th bench are estimated to have 326 billion bbls of OOIP.

577 + 326 =  903 billion bbls. For a thirty-second sound bite, that's a trillion bbls OOIP. In just the Bakken Pool.

Assuming 5% recovery, which I think is conservative for the "easy zones/core Bakken," one gets 45 billion bbls of recoverable oil.

Now, unless I'm missing something, CLR has just raised their estimates of recoverable oil from the Bakken Pool from 24 billion bbls to 45 billion bbls and are estimating the Bakken Pool to be just shy of a trillion bbls of OOIP.  For all intents and purposes, CLR has doubled their estimate of recoverable oil from the Bakken Pool.

Time will tell. But I think slide 12 is new; and slide14 has been made clearer (compared with the August 8, 2011, corporate presentation, slide 9). The earlier slide 9 did not include the 310' marker for the Bakken Pool, again a number that is not trivial. 

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Earlier I said: As you go through this, remember, I often make mistakes, have no formal training in any of this, and am prone to misreading slides and presentations. But this is what I think I see in CLR's most recent corporate presentation. But if I am correct in what I think I see, and if CLR is even close to being accurate, it helps explain why QEP was willing to pay the price they did for the Helis et al acreage. That acreage is in the same general area, about 25 miles to the southeast (the "Helis Grail" is about 25 miles to the southeast of Banks oil field where the Charlotte wells are).

Again, unless I'm missing something or misinterpreting it, CLR has almost doubled Dr Price's original estimate of OOIP (by including lower benches which Dr Price was probably not aware of) and CLR has almost doubled their estimate of total recoverable oil.

The 30-second sound bite of a trillion-barrel reservoir, and 50 billion recoverable bbls seems about right.

I apologize ahead of time if I am "jumping the shark" on this.