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;
| 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.
The story of the year.
ReplyDeleteBakken lease prices plummet, from $19,500 to $13,000 in one month. At this rate, they will go negative before the spring thaw.
anon 1
Maybe I'm wrong; maybe the operators ARE worried about the decline rates. Maybe they had not noticed until this past month that oil wells do deplete. And with that, I'm calling it a day. Looking forward to another Bakken Thursday.
DeleteSome more babble from envious people who most likely do not have any skin in the game. It says more about who they are and where they are coming from. Your statement " One would think if anyone should worry, it would be the folks paying the bonuses for these leases" says it all.
DeleteA video done by Montana University about the Bakken oil development that is changing eastern Montana and western North Dakota is really bad. The video quality is good but the spin was very bad. My guess is they were trying to make us believe that a lot of field workers are wild sub human sex crazed pigs. Women are in fear of being assaulted or violated in some way. The lovely peaceful declining western North Dakota of the past is lost forever and saddens so many people. I watched it only to see how bad the reporting was. Fortunately not everyone played the "it is bad and it stinks" game for the camera. The elites are very critical of what the Bakken development has done to western North Dakota and eastern Montana.
I will pass the link on but I see little value in doing a post on it. However that is up to you.
http://watch.montanapbs.org/video/2236174487/
Yes, I get a real chuckle out of reporters and East Coast elitists worried about the decline rate.
DeleteOasis is hitting new highs; folks investing in the Bakken-centric companies should be worried about the decline rates. But I repeat myself.
I will probably pass on the video. I try to maintain an upbeat attitude throughout the day with regard to the Bakken. Thank you for the "spoiler alert."
American Geophysical Union? Conference in San Francisco? That should be enough to tell us where this article was headed. No wonder you debated about linking this article.
ReplyDeleteThis article needs a cleansing by a no spin detergent.
And remember, as the article states, were only recovering 1-2% of the OIP. That must be the end. The technology shop is closed, forever.
When I first started following the Bakken, we were taking about EURs of 350,000 bbls. Then to 450K and 500K. Now we have EURs of 1 million bbls in some of the better Bakken.
DeleteAnd as you noted, the technology continues to improve.
And EURs refer to primary production only. EOR will follow. The Permian is a good example.
For CLR, the company that started developing the Cedar Hills Red River continuous dolomite with horizontal drilling in Bowman County almost 30 years ago, just keeps chugging along. Nothing flashy.
ReplyDeleteWhen Leigh Price offered there may be over 500 Billion barrels in the Bakken I’m sure there was much skepticism. Today Harold Hamm says 80% more than that. Also something that has made Cedar Hills successful is the results of secondary recovery. CLR once again has a lot of experience in this area but has made no attempt on this effort in the Bakken that I am aware of.
They are still advancing their position with drilling and fracing as witnessed by the wells listed below in sections 28 and 29 of 146/96. The Bice 1-29H was one of the first TF wells drilled by CLR. The Bice 2-29H was part of an effort to determine if there was communication between TF and MB. The Hartman 1 and 2 were drilled about 1 ½ miles to the east of the Bice wells with Hartman 3 and 4 located between the earlier drilled two sets of wells.
I have no back ground or education to comment on the information below but looking at the data makes for some interesting head scratching. After 3 years Bice 2 and Hartman 1 are almost ½ way to your estimated recovery. Hartman 3 and 4 are off to a much better start.
16943 TF Bice 1-29H completed 5/9/8 IP 516 BO 1st 30 days approx 8,600 Cum to date 124,817
17530 TF Hartman 1-28H comp 11/10/09 IP 780 1st 30 days approx 15,600 Cum 174,702
17884 MB Bice 2-29H comp 12/21/09 IP 147 1st 30 days (over 3 mo) approx 15,000 Cum 188,404
21524 MB Hartman 2-28H comp 5/16/12 IP 732 1st 30 days approx 17,100 Cum 86,181
23212 TF Hartman 4-28H comp 11/14/12 IP 1,656 1st 30 day approx 28,566
23213 MB Hartman 3-28H comp 11/13/12 IP 1,703 1st 30 days approx 29,711
I have full confidence in CLR’s estimated recovery rates. I am confident that when they have some fully drilled out units and introduce secondary recovery the recovery rates will go up and the decline rates will go down. Just as they have done in Cedar Hills.
Everything CLR has "predicted" has seemed to come "true." I agree with you.
DeleteGreat note above, and lots of information for folks. I will link it at a stand-alone post in case there are folks that don't see the comments.
There are two separate issues, company profit and national long range projections of massive oil production. The Bakken is profitable for companies. Great, I own several of their stocks. However, how can production with such a decline rate be used to predict production in 5 or 10 years or 20 years?
ReplyDeleteDo not forget that the 12 unused degasification terminals for LNG in the USA were financed and built based on predictions that we would now be importing massive quantities of LNG.
1. With regard to the LNG import/export story: you are absolutely correct. I blogged about that. That was, of course, due to fracking. It's a fascinating story how the oil and gas industry took themselves and the world by surprise.
Delete2. With regard to the predictive models: again, you are absolutely correct. And that's why I am so skeptical when folks tell me that global temperatures will increase 1.0 degree or 2.0 degrees or 3.0 degrees or 3.5 degrees over the next several decades; and, that this will mean the end of life as we know it.
3. Again, based on comments on this post and other posts suggest that folks are missing my point, but that's fine. We will press on.