Updates
Later, 12:47: the more I look at this, the more I have to agree with the individual who provided the first comment questioning "cemented liners." It sounds like KOG's cemented liners for completion is simply the "old" plug-and-perf method of fracking. And the little I know about it suggests that the swell packers technique is more effective in the Bakken. But that's just my two cents worth, coming from a non-specialist with no formal (or informal) training in the oil and gas industry.
Later, 12:08 pm: see first comment below. The questions: is anyone other than KOG using cemented liners in the Bakken? Has KOG switched to cemented liners as a matter of course, or are they testing various completion methods? Is cemented liners "old" technology, common technology when fracking Bakken wells? This UND-EERC source would suggest that cemented liners are neither innovative nor preferable to other methods. This is the conclusion of the UND-EERC source:
Since horizontal drilling became standard practice over the past two decades, all of these completion methods have been utilized in the Bakken. However, the uncemented, preperforated liner isolated with swell packers has become the most commonly employed method of completion in most Bakken wells because of its high degree of fracture control and long-term success rate.
Original Post
This linked article breaks out four key areas it says must be watched:
- production
- cash balance and credit facility
- hedge situation
- cost-cutting measures
Second, hedge situation: currently, KOG is using swaps and "no premium" collars; in hedging transactions, KOG will either receive cash from, or will have to pay cash to, its counterparties in the transaction.
Third, cash balance and its credit facility situation: good, bad, or indifferent regarding its financial situation, KOG provides a glimpse of the potential and the risk of drilling in the Bakken. In 2009, KOG's CAPEX was $27 million. Two years later, in 2011, its CAPEX was $260 million, and for 2012, the company estimates it will spend $650 million to meet production goals. Wow. KOG now has a $750 million revolving line of credit.
Finally, cost-cutting measures. Drilling times, completion techniques, reduction in time to complete wells, lease operating expense. Several data points:
- according to the article, KOG has cut drilling time to five days, representing a 3-day reduction
- using cemented liners for completing a well (more on that later)
- using "zipper fracs" to decrease time to complete a well; completed two well pads in 8 to 10 days by using "zipper fracs," which are made possible by microseismic fracture mapping
- bringing lease operating expenses down to $5 range per barrel
- cost-cutting measures most helpful in areas (of Williams County) where wells are not as good; KOG expects an internal rate of return fo 20%, assuming well costs of $7 million to $7.5 million EURs of 300,000 bbls
Now, about those cemented liners:
In terms of completion, the company is making solid progress by using innovative techniques, such as cemented liners. This is a completion technique that involves cementing the liner throughout the horizontal wellbore, which has the benefits of greater wellbore stability, greater control of fracture initiation, as well as improved well serviceability. [See first comment and update.]
Read the article.....was written by a classic stock analyst who knows little bits and pieces of the process but really does not understand what he/she is talking about. Cemented liners an innovative process? Really? We've been doing that for almost 40 years in high angle wells up on the North Slope. And the jury is still out on completing wells in this manner versus using swell packers and frack sleeves. 5 days to drill the wells? Really? It takes me 18-20 days to drill the wells in the Middle Bakken or Three Forks....guess I need to go back to drilling school. Don't mean to be a smarty. Just there is not much red meat in the article and it is meant for your average Harvard grad uninformed Wall Street type. KOG may be a fine company. Nothing I read in the article would indicate why I should buy their stock or work for them.
ReplyDeleteYes, I thought the 5-day drilling was a bit off. I have seen some wells get to vertical depth in 5 days or so, but that is not yet the norm. Lynn Helms says 18 - 20 days is now the expectation, and I have seen a number of 12-day wells.
DeleteI have followed the Bakken for two years and had never heard of cemented liners so I learned something new. It's possible that cement liners are being used up on the North Slope on a regular basis but not on a regular basis in the Bakken. And again, I don't know anything about drilling, but "high angle wells" vs wells that are being fracked? I was unaware that they were fracking wells Prudhoe Bay.
In fact, that makes sense: I had only heard about swell packers and sliding sleeves in the Bakken, so maybe cemented liners in the Bakken is not the norm.
The jury is still out on the swell packers/frack sleeves vs cemented liners. Cemented liners are old-school technology. Swell packers are new-school. Unfortunately, there is a big pressure drop across the ball seats in the frack sleeves which makes fracking the more distal sleeves less effective than utilizing plug-n-perf. Plus, sometimes the sleeves do not work and you have to skip that zone. Plus, if you want to go back in and recomplete a zone later, you have way less flexibility with the frack sleeves. Prices are coming down on the frack sleeves/swell packers, they were getting way out of line for awhile leading some operators to consider going back to cemented liners. I'm still on the fence with this issue and am not 100% sure which method will be the preferred down the road. My suspicion is the old-school plug-n-perf will eventually go back into vogue due to eventual re-fracks of the Bakken and Three Forks wells (like in the Barnett Shale of the Ft. Worth Basin), but that is only an educated guess.
ReplyDeleteAs far as the 5 days to drill......normally you are doing good if you spud-rig release in 20 days. A few contractors who trip pipe exceptionally fast and have no break downs and just get lucky where everything goes well(i.e. no mud motor or mwd failures) can spud to TD in as little as 12 days, but that does not include the time to run the production liner. The 5-day number may come in as the number of days to drill a 10,000' lateral. Once again, you have to get lucky to knock it out drilling 2000' a day and have no failures. Plus, that is a Middle Bakken well. Three Forks are more difficult to drill that fast.
Hope this helps your readers. Do not mean to rain on The Motley Fool's parade, but I get very tired of reading and listening to barely informed Wall Street types act like experts in an area they know very little about. It would be like me trying to talk about the ins and outs of junk bonds versus municipals. I know just enough to be dangerous.
BTW. Yes, the operators are definitely fracking up on the North Slope. Not utilized everywhere, particularly where you have problems with gas migration. My guess is eventually, other zones such as the Sag River, HRZ/Peggle Shale and Shublik will become huge targets with completion techniques currently being developed in the Bakken (and we can all merrily tramp up that way when things start slowing down in North Dakota 5 to 10 years from now). Lisburne may also benefit from this stuff down the road on the crest of the Prudhoe structure (Lisburne is the Limestone equivalent of the Madison Fm in North Dakota)
Thank you. I may just "erase/delete" the entire Motley Fool story and replace it with your very good reply/explanation. I will probably post it as a stand-alone. Thank you.
DeleteThere's probably a reason they are called "fools" over at Motley Fool.
Again, thank you.
I have been hauling sand in the Bakken for a year and a half, our company servicing Sanjel, CalFrac and Cudd. I can hopefully add a little clarity on a couple of points:
DeleteZipper frac: the only type of zipper fracing I know of is when two plug and perf frac jobs are done simultaneously on a multiple well pad. I.E., the frac crew pumps one well while the other well has the "gun" downhole, then reverses the process. They're able to frac two wells at once without (theoretically) the down time a plug and perf normally engenders.
The zipper frac methodology is, in my experience, one of those ideas that works better on paper than in real life. We've had 6 or 7 multiple well pads in the last 4-5 months that were to be "zippered". None of them came off. They ended up fracing one well then moving to the other. Pressure problems, equipment problems, you name it.
Continental Resources has gone to almost 100% plug and perf on their wells that we service. Ball and sleeve is faster, on average, but also tends to more problems, especially with sanding off, or better put plugging up. Continental wants slower with fewer problems, this from a friend who is a Continental compamy on site rep.
BTW, Cudd is rumored to be moving their operations center to Billings, Mt. They have acquired a new contract for the east slope of the rockies area (Shelby-Conrad areas)and also have quite a bit of work in Wyoming. Most of the Shelby-Conrad work will be existing wells.
Another excellent bit of information to add to the mix. Several nice data points in that post. Thank you very, very much for taking time to send that in. I hope you are not snowed in somewhere. Smile.
DeleteWow. That was a very informative comment. I am always trying to understand more about how this works and that helped.
ReplyDeleteI wonder if down the road re completions will be a regular occurrence and what type of results may be expected from them? Also, if a well was originally completed with frack sleeves, then are you saying that a re completion of that well may be less successful?
On another note, if using sleeves makes the distal fracks less effective, wouldn't this make a case for a multiple well spacing unit with the well heads opposing each other at the ends of the unit? Sorry if I misunderstand this.
I hope you stick around and comment more often in the future.
Thanks.
Look what was posted at MDW on October 26, 2011:
Deletehttp://www.milliondollarwayblog.com/2011/10/heel-to-toe-and-toe-to-heel-parallel.html
Interesting, huh? I've been watching for examples of this; there might be a couple of examples, but not many.