Idle Chatter On Costs Of Completed Wells In The Bakken -- September 20, 2014

About a week or so ago, a reader sent me an e-mail regarding the high cost of a CLR well in the Bakken. I replied at the time:

It probably was an expensive well. The operators all say they are bringing prices of completed wells down, to the neighborhood of $7 - $8 million but I don't put much faith in those estimates. The biggest problem is figuring out what is being paid for; too many things that can be hidden in numbers like that. I think we will continue to  see "cost containment" in the corporate presentations, but with a) huge proppant volume; and, b) slickwater adding 35% to the average EUR in the Basin, I think the emphasis is going to be on raising EURs this year and next (despite the cost) and then get back to trying to contain costs. Operators will see savings in pad drilling and leasing costs, offsetting completing/fracking costs.

I wrote that on September 18, 2014. Tonight, while reviewing the most recent CLR presentation, my thoughts were confirmed. Slide #50 of the presentation shows the cost of completed CLR wells. Between 2012 and early 2014, operators were talking about decreasing the cost of completed wells. CLR was reporting the following:

• 2012: $9.2 million
• 2013: $8.0 million
• 1H14: $7.8 million
• But then, starting earlier this year, the price of completed CLR wells increased from $7.8 million to $10 million, due to higher proppant volumes and slickwater. 

It looks like we're back to $10 million wells. Remember, these are long laterals. I believe wells were costing in the neighborhood of $4 - $6 million for short laterals when the boom first began in the Bakken. In other words, the costs of completed wells is still in the same ballpark as when the boom began, but the wells are much, much better, and the time from spud to first production has decreased significantly.

Whiting has differentiated itself in the Bakken as the "low cost operator' in its corporate presentations. It will be interesting to see if that continues to be a bullet in their presentations once they acquire KOG, with their very expensive wells.