As good as the Bakken is, the fact is that North Dakota produced more oil per well per day in 1951 than it produced in 2010. And that, folks, means there is a lot of room for growth; lots of room for optimism; a target to shoot for -- to set a new record -- produce more oil per well per day than North Dakota produced per well per day in 1951.
(I think we broke the record in 2011 -- )
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After more than three years of blogging (maybe more, if one counts my original blog), and countless stories of the Bakken in the mainstream media over the past year or so, it still boggles my mind that some folks who can surf the internet (apparently able to read) are still unable to do simple arithmetic (addition, multiplication) or read simple graphs.
Elsewhere, not on this site -- because I won't post such inane comments -- a naysayer doubted the Bakken -- saying that the numbers did not add up. She noted that the average well in North Dakota was producing less than 100 bbls/ day; that it took 1,600 wells to get to the 500,000 bopd milestone; that at $10 million the wells can't be economical. Wow.
First, of all, not all wells cost $10 million. But even if they did, the oil companies wouldn't be pouring $2 billion/month into the Bakken to lose money. The expectation of the Bakken for the oil companies is that they will get their investment back in 3 years. Many wells are doing much, much better than that. But if folks can get their $10 million investment back in three years and the wells keep producing for 35 years, .....
Second, 1,600 wells to get to 500,000 -- so what? They will drill 2,000 wells/year if there is no government interference, and every well pours $10 million into the economy (all of it staying in the US except maybe a few bucks for some Chinese proppant) and most of that into the local economy; and, think of all the jobs. Yeah, from an investor's point of view and from an environmental point of view, it would be great to sink one well and get 500,000 bopd but ... one can look at the glass half full or the glass half empty ...
But the best criticism, and one that I have talked about in the past, the average production per well. It is not 100 bbls of oil/North Dakota well; it is much "worse" than that:
58 bbls of oil per well per day in 2010, on average. When I first noted that -- a couple of years ago -- and blogged about it, I think (can't remember) I talked about the implications of this number. For me, I see it as an awesome statistic for investors to think about. This has to do with legacy wells that had much lower production to begin with; this has to do with "depletion," a concept that some apparently don't get; this has to do with wells producing for 50+ years in North Dakota; this has to do with wells taken off-line for periods of time for re-working; this has to do with wells taken off-line when the price of oil plummets. Again, the optimist loves to see this number historically below 100, because we all know this number will only increase over time. Here are the data points for amount of oil, on average, produced by wells in North Dakota on a daily basis (total bbls for all of North Dakota in parentheses); some numbers rounded:
- 2010: 58 (113 million) -- 5,300 wells
- 2009: 48 (80 million) -- 4,600 wells
- 2008: 41 (63 million) -- 4,200 wells
- 2007: 33 (45 million) -- 3,800 wells
- 2006: 31 (40 million) -- 3,500 wells
- 2005: 29 (36 million) -- 3,400 wells
- 2004: 26 (31 million) -- 3,400 wells
- 2003: 24 (29 million) -- 3,400 wells
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- 2000: 27 (33 million) -- 3,300 wells
- 1990: 28 (37million) -- 3,600 wells
- 1980: 46 (40 million) -- 2,400 wells
- 1970: 37 (22 million) -- 1,600 wells
- 1969: 37 (23 million) -- 1,700 wells
- 1960: 39 (22 million) -- 1,500 wells
- 1951: 72 (26,196 bbls) -- one (1) well, by the way
I think it's pretty incredible. In a positive sort of way.
The NDIC site puts these figures into graphic form and they are even more dramatic.
Oh, one last thing. I would dare say, the "average" well has paid for itself; and at 58 bbls of oil per day, at $85/bbl, that amounts to about $5,000/day with almost no expenses. Yeah, I'll take it.
So, every time you see an old pumper alongside some road in North Dakota, tell your kids that about $5,000/day is coming out of that well.
Unless I did the math wrong.