Peak Oil! What Peak Oil? Which Way Will It Go? -- April 22, 2015 -- $140 Million "Down The Proverbial Hole" -- Puts The Bakken Into Perspective

Seeking Alpha reports:

ConocoPhillips  is seeking to grow its presence in the Delaware Basin, one of the three basins that make up the Permian Basin.

By capitalizing on the stacked potential of the play, ConocoPhillips' output from the Delaware Basin is expected to jump from under 10,000 BOE/d in 2014 to 25,000 BOE/d in 2017. By boosting its Permian capex budget from ~$400 million this year to ~$700 million in 2017, ConocoPhillips will be able to increase its drilling activity in the area. For 2015, Conoco intends to operate two rigs in the Permian, which will double to four by 2017. The Delaware Basin isn't going to be a major driver of growth over the next few years due to Conoco's size, but it's an important asset to pay attention to due as Conoco seeks to extend its growth runway.

"[W]e're now focused on our acreage in three areas as you see on the map, the Maverick, the China Draw and the Red Hills. And then recall that we have a 4,500 foot stacked pay interval here that is shown in the graphic down at the bottom. And each of these white dots that you see on the page are the -- in each of the three areas those show you the zones that we've now appraised that make up this billion barrels that we now have in our resource base. So overall, you could summarize this by saying that the early appraisal wells we've now got about 70 wells into this acreage are meeting our expectations and are demonstrating to us that we are going to have a large scale development here with attractive returns."

And more:

ConocoPhillips is forecasting that the ~100,000 net acres it has in the Delaware Basin houses "1 billion BOE of resource opportunity", which includes the relatively small amount of hydrocarbons Conoco has pumped out so far. As of now, Conoco sees at least 25 years of drilling inventory left on its acreage. Keep in mind, however, that this will most likely change as ConocoPhillips ramps up its development of the various plays within the Delaware Basin.  [1 billion / 100,000 = 10,000 boe / acre.] [The Bakken sweet spots: 48 wells / 1280 acre drilling unit * EURs of 750,000 bbls = 28,000 bo/acre.]

This story comes on top of the Permian condensate story just posted a few minutes ago from RBN Energy.

Big oil's biggest fear: the future. Bloomberg at Rigzone is reporting:

As the oil patch grows accustomed to a new world of $50 to $60 crude, it’s now looking ahead to a different but equally daunting sort of cliff. Oil companies are warning there will be a price to pay -- a much higher price -- for all the cost cutting being done today to cope with the collapse in the crude market. Big projects intended to start pumping oil and natural gas 5 to 10 years from now are being canceled or put on hold as the price crash forced $114 billion in spending cuts on the industry. Energy giants from Exxon Mobil Corp. to Royal Dutch Shell say they’re taking a much more cautious approach to approving projects that cost billions and take years to complete. That’s setting the table for a future oil-price shock when a growing world population drives higher demand, said oil executives and financiers at the IHS CeraWeek Energy Conference in Houston.

An analyst:

U.S. output in shale formations is expected to fall as soon as next month, according to the U.S. Energy Information Administration. Oil production decreases due to spending cuts and decline from aging fields, combined with demand growth, are likely to push prices higher in the next six months to two years, said Ralph Eads, vice chairman and global head of energy investment banking at Jefferies Group Inc. “I don’t see how the market isn’t going to be in an undersupplied position,” Eads said in an interview. “If you look around the world, where’s the deliverability going to come from? That’s the head scratcher. You just don’t know. It’s hard to make the math add up.”

But:

Not everyone is anticipating higher prices soon. BP Plc CEO Bob Dudley and Exxon Chairman and CEO Rex Tillerson said Tuesday that they see oil staying lower for years into the future. Dudley said “lower for longer” has become the company’s mantra. 

BP CEO: oil prices will stay "lower for longer ( a video).

Consider the following items:

• Item: fracking accounts for 50% of oil production in the US. There are three big fracking plays in the US: the Bakken, the Permian, the Eagle Ford. The number of active rigs in the Bakken has dropped precipitously from 200 to 90 in less than a year; there are in excess of 900 wells waiting to be fracked in the Bakken; there are in excess of 1400 wells waiting to be fracked in the Eagle Ford. Fracked wells are "front-loaded."

• Item: huge storage complexes planned for western Canada in lieu of the Keystone.

• Item: Cushing at 80% capacity; forecast for US oil stocks increase almost double what was forecast last week. 

• Item: Saudi production flat. Russia production flat. Iran about ready to flood the market with oil if you listen to the pundits. 

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Only Because

Only because Conoco is in the news today, and perhaps to put the Bakken into a bit of perspective, Seeking Alpha is reporting:

ConocoPhillips says it expects to post $142M in dry hole expenses in Q1 related to two projects off the coast of Angola and the deepwater Gulf of Mexico.

COP says a deepwater exploration well offshore Angola was drilled to a depth of ~20.6K ft. and that a gas column of 525 ft. was encountered in the primary objective reservoir with no further activity planned, and the well has been plugged and abandoned.

A well in the Harrier prospect at the Gulf's Mississippi Canyon was drilled to a depth of 19.4K ft. but no commercial hyrdrocarbons were encountered, and the well will be plugged and abandoned.