Friday, October 30, 2015

Putting OXY's Exit From The Bakken Into Perspective -- October 30, 2015

OXY never did "crack the Bakken code." Sounds like whining from The Wall Street Journal:
Occidental said it will net $600 million by selling its Bakken acreage to an undisclosed buyer and will turn its attention to the Permian Basin in West Texas.
“With this $600 million we could run four to five rigs in the Permian for a year and generate more production than we would get out of the Bakken,” said Steve Chazen, the company’s chief executive. “We just don’t see how it competes for capital inside the company in any reasonable price scenario,” he told investors and analysts Wednesday on a conference call to discuss earnings.
So wrong on so many levels. One really has to wonder. Assets worth $3 billion a year ago and they gave them away for $500 million (as reported earlier) but said to be $600 million by the CEO.

Undisclosed buyer? I think the buyer has been disclosed. It is interesting that this is not yet mentioned on the Lime Rock Resources website; makes me wonder? But I digress.

More from the WSJ article:
The Bakken has a reputation in the energy industry of being an expensive place to operate, and it is still plagued by a lack of pipelines to move oil to refineries on the East and West coasts of the U.S.
The break-even costs in the best spots in the Bakken are among the lowest in the world, which we've already gone over several times, and I'm not interested in looking for the links. Again. And the qualifier "best spots in the Bakken" can't be used as an excuse: I would assume that operators are only drilling the "best spots" in whatever play they are in.

Meanwhile, COP had this to say about the Bakken in their earnings call:
In the lower 48 third quarter, [COP/BR] production averaged 551,000 BOE per day.
That's a 1% increase from the same period last year and a 1% decrease sequentially. Importantly, though this represents a 12% increase in our crude oil year-over-year.
We're currently running 13 rigs in the lower 48, six in the Eagle Ford, four in the Permian, four in the Bakken and three in the Permian, one of which is in the unconventionals.
And we're delivering more for less across our programs. In fact, we have seen 20% to 30% lower drilling and completion costs compared to a year ago. About half of that’s driven by program efficiencies and about half is from deflation capture.
Production from these three unconventional plays was 249,000 BOE per day this quarter. That's an increase of 28,000 barrels versus the third quarter last year but a decrease of 6,000 barrels a day sequentially.
249/551 = 45% from unconventional

OXY exits the Bakken and XOM (XTO) is seeking permits for close to another 500 wells (see November's NDIC hearing dockets). Just some of the XTO cases:
  • 24640, XTO, North Fork-Bakken, establish an overlapping 2560-acre unit; 14 wells, McKenzie
  • 24641, XTO, Garden-Bakken, establish an overlapping 1280-acre unit; 6 wells; 3 wells on an existing 640-acre unit, McKenzie (9 wells total)
  • 24658, XTO, Haystack Butte-Bakken, i) ten wells on each of 12 existing 1280-acre units (120 wells); ii) 2 wells each on 16 overlapping 2560-acre units (32 wells); McKenzie, Dunn (120 + 32 = 152 wells)
  • 24659, XTO, Heart Butte-Bakken, 12 wells on each of 19 1280-acre units (228 wells) 
  • 24660, XTO, Lost Bridge-Bakken, i) 12 wells on an existing 640-acre unit; ii) 12 wells on each of 7 1280-acre units (84 wells); iii) 2 wells on each of 9 overlapping 2560-acre units (18 wells), Dunn (12 + 84 + 18 = 114 wells)
(Note: these numbers could be way off; I may be misreading something. If this is important to you, go to the source. 14 + 9 + 152 + 228 + 114 = 517 wells.)

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