Monday, August 18, 2014

Converse County, Wyoming -- Powder River Basin -- Using Unconventional Shale Technology To Go After "Not-So-Tight" Legacy Conventional Fields -- August 18, 2014

Updates

September 16, 2018: The U.S. Bureau of Land Management has given final approval of the environmental impact statement on a 3,500-gas well project proposed by Jonah Energy in Wyoming’s Powder River Basin.

August 27, 2018: update here; Motley Fool says the Powder River Basin is the next big basin -- now it is the Power River Basin's time to shine.

February 8, 2018: new crude oil pipeline proposed.

Original Post

This is an interesting story that was sent to me quite some time ago -- while I was traveling. It looks like the oil industry is starting to look at whether lessons learned and technology used to recover oil from tight/unconventional sources can be used in "emerging tight conventional reservoirs."

The unconventional energy blog is reporting:
The growing importance of the application of horizontal wells and hydraulic fracturing to boost recoveries from tight and under-performing conventional reservoirs is exemplified by a recently announced group development project in Wyoming’s Powder River Basin.
The proposed 5,000 well development project involving seven or eight Cretaceous producing reservoirs in Converse County, Wyoming is the first evidence that emerging tight conventional reservoir developments might rival some of the shale/resource plays.
Anadarko Petroleum Co, Chesapeake Energy Corp, RKI Exploration & Production, EOG Resources, Samson Resources and SM Energy propose to drill approximately 5,000 horizontal oil and gas wells in Converse County, Wyoming in an area encompassing approximately 1.5 million acres over a 10-year period.
The project area’s northern boundary is the Campbell County line. The Operators Group (OG) also represents the interests of other companies within the project area. The U.S. Bureau of Land Management (BLM) published a notice of its intent to prepare an environmental impact statement (EIS) for the Converse County Oil & Gas Project.
The article led with this:
The unconventional oil and gas revolution in North America created a new boom for North American energy supplies which was driven by application of new technology.
Horizontal drilling and hydraulic fracturing are the most cited technological keys for unlocking commercial oil production from tight rocks.
The new oil and gas boom also has changed the conventional oil and gas playing field.
Today we are seeing legacy asset revivals in many areas of North America, including the Permian Basin, the Anadarko Basin, the Powder River Basin and other oil and gas rich basins.
The key components of this conventional revival are the “unconventional technologies” cited which are now being used to unlock the “not-so-tight” conventional rocks. Other key enablers include increased operational efficiency, leveraging and capitalizing on in-place infrastructure and the benefits of working in areas of historic production with communities that understand the industry.
Companies are reevaluating legacy reservoirs from top to bottom and expanding the use of traditional borehole data plus reservoir analytical modeling tools to recover left behind and previously uneconomic to produce hydrocarbons. With an average recovery factor of 34% for a conventional oil reservoir, there is plenty of upside potential to improve that recovery factor.
If I understand that correctly, the rule-of-thumb is 34%: that being the amount of oil that can be recovered from the original EUR/primary production. With new technology and lessons learned, the 34% may be low-balling the potential.

Don says MDU (Fidelity) was is a member of the Operators Group involved in the Converse County (Wyoming) Oil & Gas Project.

From the MDU press release, dated March 13, 2013:
MDU Resources Group, Inc., announced today its indirect wholly owned subsidiary, Fidelity Exploration & Production Company, closed on the purchase of oil and natural gas production assets in Converse County, WY, in the southern Powder River Basin, with an effective date of Oct. 1, 2013.
The purchase price was approximately $183 million plus accounting and purchase price adjustments customary with acquisitions of this type and is expected to be accretive to 2014 earnings per share.
“We identified the area last year for establishment of our third oil play and our team successfully sought out acreage in this top-tier basin,” said David L. Goodin, president and CEO of MDU Resources. “The upside potential of its multiple prospective zones is appealing to us and we anticipate it will result in a long-lived production asset.”
Third oil play for Fidelity/MDU? I assume the first two are the Bakken and the Niobrara. The PRB acquisition:
The acquisition consists primarily of non-operated undeveloped mineral leasehold positions of approximately 42,100 gross acres and 24,500 net acres. In January, the properties had existing net production of more than 1,100 barrels of oil equivalent per day, 80 percent of which is oil. Plans for 2014 include a two-rig seasonal drilling program targeting the heart of the prolific Frontier play. 
$183 million / 24,500 net acres =  $7,500/acre which compares favorably to some of the better Bakken acreage.

[Note: with the slump in oil prices in 2014 - 2016, many operators sold out their positions in the Powder River Basin.]

For Newbies: Idle Chatter On Some Nice Petro-Hunt Wells In Charlson Oil Field, August 18, 2014

For newbies.

Another example of how good some of these wells really are in the Bakken, and how operational constraints can really hold back production. This well is an incredibly good well, still producing 10,000 bbls of oil per day when it was taken off-line for operational reasons.

NDIC File No: 20342    
Well Type: OG     Well Status: A     Status Date: 11/17/2011     Wellbore type: Horizontal
Location: NWNW 4-153-95    
Current Operator: PETRO-HUNT, L.L.C.
Current Well Name: USA 153-95-4B-9-1H
Field: CHARLSON
Spud Date(s):  8/3/2011
Cumulative Production Data
   Pool: BAKKEN     Cum Oil: 578,455     Cum MCF Gas: 850,155    Cum Water: 32672
Production Test Data
   IP Test Date: 11/22/2011     Pool: BAKKEN     IP Oil: 1430     IP MCF: 1713     IP Water: 74
Monthly Production Data
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN6-20140000000
BAKKEN5-20140000000
BAKKEN4-20142000000
BAKKEN3-20140000000
BAKKEN2-20140000000
BAKKEN1-20141236873884267605105967
BAKKEN12-2013319592969374615683015655
BAKKEN11-201330961793336721911890969818
BAKKEN10-20133110431103507371571097765718
BAKKEN9-20133010349101607091555485896755
BAKKEN8-20133110993118577961953925919063
BAKKEN7-20133111322106858322078811820453
BAKKEN6-201330113671172685720668146918989
BAKKEN5-201331122961179289921189240418569
BAKKEN4-201330125591262989922272357218490
BAKKEN3-201331132391323495720581148105554
BAKKEN2-201328125831282795620032186461190
BAKKEN1-20133114595144421100248271213812472
BAKKEN12-2012311554815648114726279511120951
BAKKEN11-20123016056159161259281491214415795
BAKKEN10-20123117610177671331310201963611167
BAKKEN9-20123018315183661573357041397721517
BAKKEN8-2012312136921695184035574296215735
BAKKEN7-2012302113020982165435137267478180
BAKKEN6-2012302467924635201239531365682753
BAKKEN5-201231270392753019213779637465114
BAKKEN4-2012302874228340208238850318876753
BAKKEN3-20123128251280471752367981798118601
BAKKEN2-2012292550125435138130823280372582
BAKKEN1-2012313003430262155340472345735689
BAKKEN12-20113133358333241563404522146218774
BAKKEN11-2011142128420366117724965024867
BAKKEN8-20110000000

So, why was it taken off-line in January, 2014? Most likely because Petro-Hunt is beginning to frack the five new wells placed on that pad. Here are the wells on this pad [this 5-well pad is about two miles west of #16059]:
  • 20342, 1,430, Petro-Hunt, USA 153-95-4B-9-1H, Charlson, F,  t11/11; cum 578K 6/15; 
  • 26446, dry, Petro-Hunt, USA 153-95-4B-9-2H, Charlson,
  • 27209, drl, Petro-Hunt, USA 153-95-4B-9-2HR, Charlson,
  • 27918, 1,167, Petro-Hunt, USA 153-95-4B-9-1HS, Charlson, Three Forks, 4 sections, 33 stages, 4 million lbs, t12/14; cum 144K 6/16; F;
  • 27208, 2,262, Petro-Hunt, USA 153-95-4B-9-2HS, Charlson, middle Bakken, 4 sections, 33 stages, 4 million lbs, t12/14; cum 174K 6/15;
Regular readers will recall that a monster well is located in this field:
  • 16059, 729, Petro-Hunt, USA 2D-3-1H, Charlson field, t10/06; cum 1.51 million 6/15; still producing 5,000 bbls/month 
By the way, where in the Charlson is this monster well located in relationship to this pad?

The 5-well pad is 2.6 miles to the northwest of this Petro-Hunt monster well

It took the USA 2D-3-1H (#16059) 8 years to reach 1.44 million bbls; the newer well, #20342, reached almost half-a-million bbls before it was taken off-line after only 2.5 years. The older well was free-flowing for a very long time, but it is now on a pump; the newer well (#20342) is still shown to be on a pump, but Teegue pointed out a long time ago that sometimes the paperwork lags events (in other words, the newer well might have a pump; the paperwork simply hasn't caught up; my hunch: no pump yet).

The older well (#16059) has never been taken off-line and is still producing about 7,000 bbls of oil per month. It's best month was its 16th month of production when it produced 30,931 bbls of crude oil.

The best months for #20342, were the 1st full month of production (33,358 bbls) and the second full month (30,034 bbls). At 25 months or so, it finally went below 10,000 bbls / month.

Before they bring this well back on line, they better resolve the flaring issue. Maybe they should just plug and abandon these wells if they continue flaring.

CLR Announces 2-1 Split -- August 18, 2014; No New Permits Issued Today

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

It was an interesting day for the stock market investor today. A huge run-up in the Dow but I couldn't find any real winners that caught my eye. Here are some hitting new highs today:  DIS, EEQ, TSO, UNP.

Close, but no cigar: AAPL continues to creep toward $100.

Active rigs in North Dakota:


8/18/201408/18/201308/18/201208/18/201108/18/2010
Active Rigs193183199193137

Wells coming off the confidential list Tuesday:
  • 26397, drl, CLR, Limousin 7-3H, Sanish, no production data,
  • 26885, drl, Abraxas, Ravin 26-35-4H, North Fork, no production data,
  • 27209, drl, Petro-Hunt, USA 153-95-4B-9-2HR, Charlson, Three Forks B2, sections 4, 5, 8, 9 - 153-95; TVD, 9,978; TD, 19,839; 2560-acre spacing; azimuth 214 degrees; orig app permit name: USA 153-95-4B-9-1HS, February 14, 2014: request rec'd to change well to be under spacing order #22895, 1280-acre spacing; so I believe the "R" is a revised request/permit to change from 2560-acre spacing to 1280-acre spacing; same date, request rec'd to change name to "2HR" -- same target; it looks like TD was reached at a measured depth (MD) of 8,767 feet on March 18, 2014; in limestone; depths, prognosis: Lodgepole - 9,061; Bakken Shale - 9,767; Middle Bakken - 9,791; Target Horizon - 9,814; geology report said this was a Middle Bakken well; frack data not yet posted;
  • 27358, drl, XTO, Franchuk 24X-19B, Murphy Creek, no production data,
  • 27625, 85, Enduro, NSCU 1-706H,  Newburg,Spearfish/Charles, t4/14; cum 3K 6/14;
There were no new permits issued today.

Petro Harvester Operating picked up about a dozen older wells, two from Open Range, Inc., and the others from Wapiti Operating. The most recent permit was #18902; the oldest was 03231.

Apache Discovers "Largest Oil Discovery Of Oil Off The Coast Of Western Australia In 20 Years" -- August 18, 2014

Putting the Bakken into perspective. Bloomberg is reporting:
Apache Corp., the U.S. oil producer, weighing plans to sell international assets after investor pressure, announced the largest discovery in 20 years off the coast of Western Australia.
The Canning Basin may hold as many as 300 million barrels of oil, according to six samples from a well about 110 miles north of Port Hedland, the Houston, Texas-based company said today in a statement.
Apache holds a 40 percent stake in the area that includes the Phoenix South-1 well. One of its partners, Carnarvon Petroleum Ltd., rose the most in 24 years on the news.
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here. 

But let's put this in perspective. This is the "largest discovery in 20 years off the coast of Western Australia." 

300 million bbls.

I assume that's recoverable bbls.

"They" will produce 300 million bbls of oil from the North Dakota Bakken in less than one year at a million bopd.
  • Lowest estimates in the Bakken: about 7.4 billion recoverable bbls (USGS Survey, 2013)
  • Higher estimates in the Bakken: 25 billion (with a "B") bbls (500 billion bbls OOIP; 5% recovery). 
  • Even higher estimates in the Bakken: 27 billion bbls (903 billion bbls OOIP; 3% recovery)
That's an interesting figure: 7.4 billion bbls.

7.4 billion / 1 million bopd = 7,400 days / 365 days = 20 years.

The 2013 USGS survey included the middle Bakken and the upper Three Forks. It did not include the lower benches of the Three Forks.

New Town CBR Terminal To Connect With Hiland Crude Oil Pipeline System -- August 18, 2014

Updates

September 2, 2014: press release on new storage capacity at this terminal
 
Original Post
From Yahoo!In-Play:

Dakota Plains and Hiland Crude announce Bakken gathering pipeline to Pioneer Rail Terminal:
  • Dakota Plains and Hiland Crude jointly announced the execution of an interconnection agreement that links Dakota Plains' Pioneer Rail Terminal in New Town, North Dakota, with Hiland's Market Center Gathering System crude oil pipeline network. Construction for the final link is underway and is expected to be commissioned by October 31, 2014. 
  • The connection to the Pioneer Terminal is expected to have an initial capacity of greater than 15,000 barrels a day and easily expanded to supply approximately 60,000 barrels of oil per day.
Regular readers know the principal owner in Hiland.

Screen shot of satellite view (Google maps) of the Dakota Plains' Pioneer Rail Terminal in New Town, North Dakota:


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Meanwhile, More Coal To China From The US
The Good News: Chinese CO2 Does Not Reach The US

Coal exporters are having a devil of a time expanding coal shipping terminals from US ports in Washington and Oregon ports. What does one do?

Expand capacity at west coast terminals in Canada. If the terminals cannot be physically enlarged, simply end agreements with non-coal shipping companies, and use that new capacity to ship coal.

That's exactly what Cloud Peak Energy is doing. Casper Star-Tribune is reporting:
Cloud Peak Energy announced a $37 million deal aimed at boosting its Asian exports by freeing space to ship its coal at an existing Canadian port.
The Gillette-based company paid Coal Valley Resources, a subsidiary of Westmoreland Coal, to terminate its existing shipping agreement with Westshore Terminals in Roberts Bank, British Columbia. The deal also extends Cloud Peak's contract at the facility from 2022 to 2024. 
The company said Friday that it expects Asian sales to increase to between 6 million and 6.5 million tons in 2015, up from an anticipated 4 million to 4.5 million tons this year. Asian exports are expected to increase 7 million to 7.5 million tons beginning in 2019, Cloud Peak said.
Westmoreland is consolidating its shipping operations in the Canadian port of Prince Rubert.
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So, Where Do We Stand On This Anthropogenic Global Warming?
In the last 48 hours ....

It appears that Chinese and Indian CO2 does not reach the US: more and more coal is being shipped to Asia and India as more and more coal plants are built.

It also appears that European CO2 does not reach the US, as Germany returns to the coal standard.

Natural gas futures are falling because summer is cooler than forecast.

The "warmists" model failed to predict the 18-year pause in warming because ... the model was too complex...if you simplify the model (change the fudge factors, as we used to say in college biology), the problems go away and everything can be explained ...

Snow is set to blast Scotland -- as forecasters predict the coldest August spell in a century.

Somewhere in Canada they're still dealing with an 18-foot high mount of snirt which hasn't melted -- despite August ...

Record amounts of rainfall across the US --- as predicted by warmists ....

Antarctic sea ice extent setting new records.

But without question, the most amazing thing is the fact that the "warmists" model failed to predict the 18-year pause (or can't explain the pause) because climate is just too complex, and yet, the model can predict the earth's temperature a hundred years from now.

I keep putting my popsicle sticks, with millimeter hashmarks, into the Pacific beach sand to track the rise in ocean levels --- but the sticks keep getting washed out to sea. 

Whatever.

[Hours after posting the above, I was mindlessly surfing the web when I came across this over Carpe Diem:
4. Some Inconvenient Weather Facts: a) the frequency Of 100 Degree readings in the US is the lowest since 1906; b) Arctic Sea ice coverage is the highest since 2004 – close to 1974 levels; and c) the frequency of 90 degree days in the US has been plummeting for 80 years, and is the lowest on record this summer; d) there’s been a massive increase In Arctic Ice over the past two years; and, e) 90-degree days are running 40% below normal in DC this summer.
Wow.]

KOG In The News Again; This Time In Nebraska -- August 18, 2014; COP Dependent On North American Shale To Keep Growing

Disclaimer: this is not an investment site. Do not make any investment / financial decisions based on anything you read here or think you might have read here. 

For investors only, from SeekingAlpha:
  • Synergy Resources  receives a Buy rating from Canaccord Genuity, which initiates coverage of the oil and gas company with a $17 price target, 33% above the stock's Friday closing price.
  • The firm describes SYRG as "Kodiak 2.0" - Kodiak Oil & Gas has jumped 33% YTD, 53% from a year ago, and 11-fold over the past five years.
  • Separately, SYRG enters into a joint development agreement with KOG to drill wells and develop acreage in Nebraska.
From Yahoo!In-Play:
Synergy Resources enters into joint development agreement to drill wells in Nebraska Oil Play : Co has entered into a Joint Development Agreement with Johnson Production Corporation and Kodiak Petroleum, Inc., both Colorado corporations, to drill oil wells and develop acreage in Dundy County Nebraska.
  • The Agreement covers a defined area of 8,011 net mineral acres in Dundy County, Nebraska, and provides for the drilling of up to ten wells. 
  • It has an initial term of one year, and annual extension provisions for an additional four years. JPC or Kodiak will be the operator for all wells. 
  • For each well that JPC and Kodiak drill, they will pay 5/8ths of the costs to drill and complete, and will thereby earn a 50% working interest in the well and the spacing unit. 
  • In addition, for each well that they drill, they will earn a 5% interest in Synergy's interest in the remainder of the Contract Area. 
  • If all ten wells are drilled, JPC and Kodiak will earn a 50% interest in Synergy's interest in the Contract Area. Synergy will pay 3/8ths of the cost of each well and will retain both a 50% working interest and an overriding royalty interest.
*********************************
COP: Dependent On North American Shale To Keep Growing

From Seeking Alpha:
Despite the strong 38% production growth in the Eagle Ford and Bakken during 2Q14, ConocoPhillips is only projecting volume growth of 3 to 5%.
The shale plays combined for 208 MBoe/d for the quarter so the production isn't immaterial. Along with other North American unconventional plays, the company expects growth in this segment to average 22% through 2017 to reach production totals of over 350K boepd.
With all the major plays struggling, the unconventional growth comes at a cost of not focusing on the major projects and further constraining production from the established areas. The main set back comes from North American natural gas production that is forecast to decline up to 6% on an annualized basis.

New Thoroughfare In Williston Completed; Connects North Housing With South Retail On West Side Of Town -- Huge Addition, August 18, 2014; Other Bakken Projects Announced -- Williston Wire

I'll be looking for this when I visit the Bakken in September. From the press release I can't say for sure where this "new thoroughfare" starts and finishes, but I think they are talking about the road -- 32nd Avenue West -- running north/south: north from the roundabout northwest of Williston (near the Statoil/BEXP four-well pad), south to Highway 2 & 85 west of Williston (see first comment).

Google maps, of course, don't show it yet, but this is what I think they are talking about:


The long, unlabeled arrow points out the new thoroughfare connecting housing and retail on the west side. I assume they are still working on the underpass under the bypass, highway 2, which will connect "old Williston" with "new Williston."

I thought of trying to drive this new thoroughfare last spring -- all dirt and mud -- when I last visited, but thought better of doing that.

Meanwhile, the new bypass around Alexander, 25 miles south of Williston, has also been completed.  This is the first leg of the new four-lane highway 85 between Watford City and Williston.

Killdeer, southeast of Watford City, the sweet spot of the Bakken, is also looking to build a bypass around the city.

Down here in Grapevine/Southlake, Texas, contractors have spent more than a year improving an existing intersection, and it looks like they won't be done for another year, and yet in the Bakken, new roads are going in "overnight."

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Construction Soon To Begin On $15 Million Downtown Williston Project: press release. 

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MHA transload and refinery project construction has begun: click here

Epping, A Dying City Northeast Of Williston, Is Now Booming -- August 18, 2014

The Bismarck Tribune is reporting:
The tens of thousands of workers who have flocked to high-paying jobs have driven huge demand for housing in oil patch towns. Now, a half-mile from town, developers are building Epping Ranch, a subdivision that will have 400 cookie-cutter homes, a contrast to the western facades of Main Street.
“There will probably be a few thousand people there — that’s a small city,” said Lee Luscht, a listing agent for the agency handling Epping Ranch. “I think the little post office there is about to get pretty crowded.”
Small towns like Epping sprouted across North Dakota’s plains around a century ago as homesteaders settled the rugged land. Many followed a familiar pattern over the decades: losing population, eventually surrendering their post offices and ZIP codes before seeing their buildings melt into the prairie grass. Places like Trotters, Angie and Temple, where the state’s first batch of oil was loaded onto a train, no longer exist.
And all that's about to change.

 *********************************************

A great article sent to me a week or so ago when I was traveling. A must-read. The (London) Telegraph is reporting:
The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry.
The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets.
This is a major departure from historical trends. Such a shortfall typically happens only in or just after recessions. For it to occur five years into an economic expansion points to a deep structural malaise.
The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions.
The EIA said the shortfall between cash earnings from operations and expenditure -- mostly CAPEX and dividends -- has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011. 
And then this:
The latest data shows that “tight oil” production has jumped to 3.7m barrels a day (b/d) from half a million in 2009. The Bakken field in North Dakota alone pumped 1m b/d in May, equivalent to Libya’s historic levels of supply. Shale gas output has risen from three billion cubic feet to 35 billion in just seven years. The EIA said America will increase its lead as the world’s largest producer of oil and gas combined this year, far ahead of Russia or Saudi Arabia. 
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Train Wreck
The operative word: plummeting

The numbers keep plummeting. The Daily Caller is reporting:
The number of Obamacare enrollments for top health insurer Aetna is plummeting, according to a report from Investor’s Business Daily.
Aetna’s enrollment reached 720,000 by May 20, after the final end to the the extended open enrollment period. But by the end of June Aetna had less than 600,000 paying customers, IBD reports, and the company expects paying customers to fall to “just over 500,000″ by the end of 2015. That would be a drop of just under 30 percent from the May sign-up numbers — the last time the Obama administration released its official Obamacare enrollment tally.
Aetna’s reported drop-off rate appears to be more extensive than other companies. Cigna reported that between both its exchange customers and those in the private individual market, it expects to lose around 20,000 paying customers throughout the year, out of 300,000.
Dying on the vine. 
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Pop Quiz

Name the world's #3 economy.  China, #1; US #2 -- the third is ....

Japan