Decline Rates and EURs; Bakken-Type Curves; Economics

Updates

 April 11, 2013:

From the Oasis corporate presentation, September, 2012, a PDF, slide 26, middle Bakken type curve and economics.

• Average EUR type curve: 600K bbls (range 450K to 750K)
• Average cost of well: $8.8 million
• Average cumulative Mboe, at 365 days: 111K
• Price of oil: $90 --> $10 million at the wellhead
• 111/600 = 18.5%

Original Post

Another article on the dreaded decline rate of the Bakken. I debated whether linking it or not.

Let's say for point of argument that the average Bakken well has an estimated ultimate recovery of 400,000 bbls of crude oil.

The Bakken produces the majority of that oil in the first few years, and then tapers off. But the EUR, for the sake of this argument, will be 400,000 bbls of crude oil.

Now, for sake of argument, let's say there was no decline rate but the EUR remained the same. The initial production would be lower but production would not vary, and the wells would produce 400,000 bbls of crude oil.

So, I don't get it. With regard to EURs, who cares what the decline rate is?

Actually, I can't think of a better scenario. Operators and their investors get their money back in two or three years; they don't have to wait twenty years for payback.

I wonder if everyone on the East Coast would be happy if Bakken-centric oil companies would simply store oil on site, and put the identical amount of Bakken oil into the pipelines each year for forty years with EURs of 400,000 bbls of crude oil. Thus, no decline rate coming out of the Bakken.

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The Bakken-centric operators certainly don't seem too worried about the dreaded decline rate. In the North Dakota state lease yesterday, companies were still willing to pay $13,000/acre for good Bakken acreage.  Without the Bakken, these acres would be going for $25/acre. Last month, one operator paid a record $19,500/acre in the better Bakken at the Federal lease sale.

Again, I don't know why non-operators are so worried about the decline rates. One would think if anyone should worry, it would be the folks paying the bonuses for these leases.

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Here's a well with a typical Bakken decline rate:

• 17152, 937, EOG, Wayzetta 15-05H, Parshall, short lateral, t7/09; cum 573K 12/12;

The first six months of production:

BAKKEN	12-2009	31	21623	21810	83	9566	8810	601
BAKKEN	11-2009	30	21606	22067	76	9485	9152	183
BAKKEN	10-2009	31	21848	21542	95	9485	8760	570
BAKKEN	9-2009	30	21370	21262	106	8882	8226	506
BAKKEN	8-2009	31	20265	20389	110	9033	7819	1062
BAKKEN	7-2009	27	19031	18179	1288	8077	6402	1546

The last (most recent) twelve months of production:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	12-2012	31	5687	5690	46	3397	3242	0
BAKKEN	11-2012	30	5648	5642	16	3257	3107	0
BAKKEN	10-2012	31	5849	5859	136	3269	2753	364
BAKKEN	9-2012	30	6042	6055	119	3538	3388	0
BAKKEN	8-2012	31	6294	6537	51	3636	3481	0
BAKKEN	7-2012	31	6638	6438	22	3655	3067	433
BAKKEN	6-2012	30	6510	6534	22	3451	3202	99
BAKKEN	5-2012	31	6621	6614	5	3514	3360	0
BAKKEN	4-2012	26	5773	5748	85	3484	3280	80
BAKKEN	3-2012	31	8958	9018	25	6049	5874	24
BAKKEN	2-2012	29	8645	9070	34	6085	5941	0
BAKKEN	1-2012	31	9523	9138	112	6323	6098	77

Again, it's the EUR that's important; not the decline rate. This well is a SHORT LATERAL. It was completed in July, 2009 -- it has produced about 3.5 years. Bakken wells are expected to produce 39 years. But again, regardless how long they produce, it's the ultimate recovery. And this is PRIMARY RECOVERY.