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Tuesday, November 17, 2015

How Good Are The Drillers These Days? -- November 17, 2015

In a Bloomberg/Rigzone article linked earlier today, this was reported:
Oil production in the Permian is forecast to rise 0.6 percent in December to 2.02 million barrels a day, even as drillers have idled 59 percent of the rigs there in the past year. Output in rival shale fields like the Bakken and Eagle Ford has fallen 12% and 25%, respectively, as drillers pulled out after oil prices crashed last year.
North Dakota has gone from 200 rigs to 60 rigs --
  • 60 rigs represents about 30% off the high
  • 70% of 200 = 140 -- the number of rigs lost since the high
So, I suppose one could say that there has been a lot of 70% of rigs and yet the amount of production has held up:
  • September, 2015:  1,162,253 (preliminary)
  • August, 2015: 1,187,631 (final, revised)
  • July, 2015: 1,206,996 (final, revised) 
  • June, 2015: 1,211,328 (final)(second highest; highest was December, 2014)
  • May, 2015: 1,202,615 (final)
  • April, 2015: 1,169,045 (final)
  • March, 2015: 1,190,502 (final); 1,190,582 bopd (preliminary)
  • February, 2015: 1,178,082 bopd (revised, final); 1,177,094 (preliminary)
  • January, 2015: 1,191,198 bopd (all time high was last month)
  • December, 2014: revised, 1,227,483 bopd (preliminary - 1,227,344 bopd - preliminary, new all-time high)
But it's more than just the number / the percent of rigs laid down. The 60 rigs are drilling to depth but the wells are not being completed; they are being shut in; the operators will come back later to complete / frack them. The wells that have been completed and are producing are seeing producers hold back production at these low prices.

At the risk of beating a dead horse:
I think this is the most under-talked about story in the Bakken right now, the fracklog. Everyone is concentrating on the "number," when, in fact, that's just a small part of the overall story. Here some things to keep in mind when thinking about these 1,000+ wells waiting to be fracked:
  • they are all in the sweet spots of the Bakken
  • operators have spent 7+ years perfecting completion techniques, resulting in huge 90-day production, and then 1-year production profiles
  • every well in the Bakken -- especially in the sweet spots -- will create a halo effect on neighboring wells 
  • the infrastructure is most robust in the sweet spots of the Bakken
  • 3 - 5 days to frack; once decision is made to frack, oil will moving fairly quickly after that

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