I normally wouldn't post this: regular readers see these numbers frequently on this blog.
But the story needs to be clarified in case newbies run across it. The story says that oil wells in North Dakota are now costing about twice what they did in 2007.
Wells in 2007 were short laterals (one section); wells in 2011 are long laterals (two sections).
That should be sufficient for most folks.
But then this: wells are offset 250 - 500 feet from a section line, meaning that a short lateral can leave 500 to 1,000 feet of a 5,280-foot long section untouched. Drilling a 1,280-acre unit, across a section line "captures" at least another 500 feet, maybe more. In addition, I believe that the state may be lowering the number of feet wells must be placed from a section line, but I don't know.
Extreme well costs are ruining the Bakken. Plays like the Eagle Ford, Mississippian Lime and maybe even the TMS Tuscaloosa Marine Shale, will likely eclipse the Bakken in profitability.
ReplyDeleteWhen I see a comment like that, all I can say is that a) you visit the blog rarely; and/or, b) you are not paying attention.
DeleteSounds like the wishful thinking of the anti-hydrocarbon indoctrinated. Use only partial figures and certainly not taking a look at the full body to get a clear idea.
DeleteThe reality is no one knows the full extent of what is possible. One thing for sure is the Williston Basin has been a tremendous success to date and the future looks bright. The investment is incredible and it indicates the big fall, wished for by some, is just not the case.
It is incredible there are so many negative people around. They are so unhappy they despise something that is positive and good for our country. I would guess this a product of our failed education system that has focused on negativity about the country.
Can someone say faux-enviromentalist and their fellow travelers.
Yes, that struck me as quite interesting, the comment that high costs were "ruining" the Bakken.
DeleteI didn't want to get into a long discussion but:
a) builing permits in Williston, measured in dollars, may break another record this year;
b) monthly production (on a daily basis) set another all-time high;
c) Schlumberger is building onto it's just newly completed huge complex west of Williston;
d) 34 more hotels/motels have been announced and/or are under construction; after two years of large number of hotel/motel construction
etc.
So, I don't yet see the objective measure that costs are "ruining" the Bakken.
I simply stated other shale plays are now more attractive than the Bakken, because the well/service costs are too high and the steep discount to get this crude to market. Many operators in the Bakken, like Oxy, are saying: “We have a lot more better places to put money right now than the Bakken." On a dollar for dollar basis, the Eagle Ford is more profitable than the Bakken. If keys wells in the Tuscaloosa Marine Shale pan out in LA and MS, this will be a more profitable play too, because of the proximity to a market, refinery, etc.
ReplyDeleteAs noted above, folks suggesting "high costs are ruining the Bakken," are a) not paying attention; and/or b) not reading the blog.
DeleteOXY USA, in particular, is not an example I would use. They reported an IP of 19 -- repeat, 19, for their most recent Bakken well. No matter how low costs got in the Bakken, an IP of 19 is not helpful.
http://www.milliondollarwayblog.com/2010/12/seeking-alpha-on-oxy-in-bakken-north.html
As for the Monterey Shale:
http://www.milliondollarwayblog.com/2010/12/seeking-alpha-on-oxy-in-bakken-north.html
And, with regards to the Eagle Ford, SM Energy is finding that this Texas play has its issues also:
http://www.milliondollarwayblog.com/2012/08/wow-sm-whiffs-on-revenues-motley-fool.html
Newfield, which started the public discussion on costs, has said less about the costs lately and has been reporting some nice wells. Whiting is doing spectacular as the low-cost operator.
When wells are being paid for in 6 months, one year, three years, or even five years, and then go on producing for 30 more years, it's a matter of perspective regarding costs. Go back to the non-shale booms of the 1980's: the number of dry holes for every producing well was not trivial. There are "no" dry holes in the Bakken. That alone drives down costs. Spending $10 million for a dry hole is very, very expensive. That happens rarely in the Bakken.
With regard to getting crude to market, you haven't been reading the RBN articles. The WTI-Bakken spread has narrowed due to rail. And, if operators can make money in this market, imagine what will happen as a) the price of oil trends higher; and, b) glut at Cushing resolves.
One can be an optimist, or a pessimist. I am an eternal optimist; and inappropriately exuberant about the Bakken. But yes, the Eagle Ford will be a monster play also.