Saturday, February 14, 2015

Halo Effect Of Fracking, A Case Study In Truax Oil Field, The Wood Wells -- February 14, 2015


April 10, 2016: this area has been updated at this post.

Original Post
This should be fun for newbies and long-time readers. This is going to be a long post. I recommend getting out the popcorn and a beverage of your choice. Remember, I have no formal training or background in the oil and gas industry. This is simply my observations, my opinions, and they could be way wrong. I'm sure there will be landmen and roughnecks that laugh at my observations but that's fine. For all their hard work under very, very tough conditions, they deserve a bit of entertainment. However, if this information is important to you, talk to an expert.

We will start with the screenshot:

Here is the production profile for #19857, for the past year , completed / tested back in late 2011:
  • 19857, 1,533, Whiting, Wood 5-15H, t11/11; cum 220K 12/14; 
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
Look at the jump from September / October to November / December, 2014.

In the full month of 31 days in August, 2014, only 3,000 bbls. In November, almost 30,000 bbls.

By the way, did the well ever produce this much before November, 2014? Nope, not even immediately after the original frack -- production never got above 20,000 bbls, and here, after three or four years, this well produces almost 30,000 bbls in one month. This is the production profile for the first three months of this well, completed back in late 2011:


So much for "the dreaded Bakken decline rate." It maxed out at 18K its first month, and then several years later jumps to 30K in one month.

What's the story?

Go back and look at the screen shot of the GIS map where this well is located.

Note the horizontals that run alongside it: #28407 and #28386 or #28385. I can't tell from the GIS map for sure, but it's my hunch that the two horizontals running alongside are #28407 and #28386. (Whether it's 28386 or 28385 will make no difference.)

Here's 28407:
  • 28407, 1,339, Whiting, P Wood 154-98-4#-26-15-4H, 28 stages, 3.4 million lbs, t3/15; cum 51K 10/15;
Here's #28386 (similar profile to #28385 -- again, I can't tell for sure whether the horizontal parallel to the well in question is #28386 or #28385) (most likely it's #28385 based on legal description):
  • 28386, 1,930, Whiting, P Wood 154-98-1-27-34-16H, 19 stages; 4.8 million lbs; t10/14 cum
The production profile:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Now #28385 (in case it's not #28386; #28385 is the more likely well):
  • 28385, 2,241, Whiting, P Wood 154-98-1-27-15-1H3, 22 stages; 4.6 million lbs sand; t10/14; cum
The production profile:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

And that, folks, is called the halo effect of fracking.

Note the following:
  • the "old, existing" well  (#19857) was originally drilled/fracked in late 2011
  • the "old, existing" well (#19857) was taken off-line in mid-September and brought back on line in mid October, 2014
  • a "new, neighboring" well (#28385 or #28386) was fracked/completed/tested in October, 2014
  • the other "new, neighboring" well (#28407) is still on DRL status; it will be interesting to see when it was fracked, or the production profiles of neighboring wells if yet to be fracked
  • note the relatively low number of stages (19 stages for the old well; 22 stages for the new well); this tells me that there must be a fair amount of natural fracturing present (or other reasons for great production in the Truax (porosity, permeability, seam thickness, TOC, high pressure, etc)
  • note that the "old, existing" horizontal runs northwest to southeast
  • note that the "new, neighboring" horizontals run southeast to northwest 
The last two bullets are very, very interesting. I opined a long, long time ago that running new, neighboring horizontals in the opposite direction (heel-to-toe vs toe-to-heel) might have more of a halo effect than running in same directions.

Some other points to make:
  • again, there are only a few horizontals in these spacing units -- 3, 4, 5, 6 or so across the Bakken. Imagine the halo effect when 24 wells (and more) are drilled in one spacing unit (remember, there is a case on the NDIC dockets requesting upwards of 60 wells in one spacing unit
  • these particular wells were part of the KOG package bought by Whiting
So, now "we" have two things to think about when talking about "the dreaded decline rate" in the Bakken:
  • halo effect of fracking new wells near existing wells (not only horizontally separated, but also vertically separated); and,
  • re-fracking existing wells
And we haven't even begun to talk about EOR.

By the way, back to the halo effect of fracking. This opens up a whole new area of discussion. Is it more cost effective to re-frack an old well, or more cost effective to drill and frack a new well that neighbors older wells. At some point, they will drill/frack a horizontal midway between two older neighboring wells and perhaps get a jump in production in the two older wells as well as great production in the new well.

The Bakken has a lot more stories to tell.

And this is another story, 7-month-old Sophia:

Richard Zeits Crude Oil Review, Seeking Alpha, February 14, 2015

Richard Zeits crude oil review over at Seeking Alpha.
The overall neutral U.S. petroleum inventory report [February 11, 2015] was hardly a rational excuse for the sharp drop in the price of crude oil on the day of the data release.
On the other hand, the continued recovery in the oil price that has continued is not totally surprising. I would argue that the lack of bad news in terms of continued overall inventory build is positive news for the price of oil which still remains at an extremely depressed, and therefore unsustainable, level.
The market may be anticipating an inflection point in the supply/demand fundamentals which at some point must begin to reflect supply contraction in response to the macro environment.
Having said that, the price of oil remains very vulnerable and difficult to predict in the short term. In the event inventories continue to build, another leg down in oil price cannot be ruled out as storage remains at extremely high level. The deepening short-term contango would add to the pressure on the prompt month crude price.
Lots of data; I'm not sure how much it adds to the discussion when so much about "oil" seems to be "emotional," if that make sense. If tomorrow, Saudi Arabia says they will cut production in half, the market will react ... immediately and emotionally.
Just How Crazy Were Elon Musk's Comments

Bloombergview is reporting:
Musk took his trademark “vision” to audacious new levels, telling analysts this week that he expects revenue increases of 50 percent a year for the next 10 years, which would bring the electric-car maker’s market valuation to an Apple-esque $700 billion by 2025, far from its current valuation of about $25 billion. According to Musk’s numbers, Tesla would have to generate about $350 billion in annual revenue at that valuation, implying sales volume of well over 5 million vehicles per year. That would have Tesla surpassing the 2014 sales of such familiar names as Nissan, Honda and Fiat-Chrysler — at significantly higher profit margins — within a decade.
Musk’s growth projections are feverishly optimistic compared to that of the broader auto industry, which faces flattening global demand, brutal competition and near-certain consolidation. But with less than $2 billion in cash left after burning through nearly half a billion in its fourth quarter, Tesla is also rapidly running out of runway. Though the company expects to burn through less than half its remaining cash this year, true profitability is still five years away.
Musk denied any plans to raise capital “right now,” but it’s unclear how Tesla will make its last billion and change last until profitable volumes are reached in 2020.
From CNBC/Jim Cramer:
Cramer's dreams were crushed in practically every aspect after listening to Musk's conference call Wednesday evening. The company missed the mark on sales, earnings and cash flow and guidance. It is swimming in debt, with a negative $455 million cash flow.
"It is burning money like crazy. It is spending money like crazy. No way the balance sheet can support the investment needed," said the "Mad Money" host.

But the real kicker was the responses provided by Musk to valid questions about earnings.
When asked why sales were weak, and how manufacturing problems held back the company, Musk responded that it was "physically impossible due to a combination of customers being on vacation, severe winter weather and shipping problems."
Customers on vacation?!
Musk then referred to his employees as being "brain-dead" when clarifying that the perceived issue in China was that his sales team gave the incorrect perception that it was difficult to charge cars in China, though it was not.

Fracking -- It's Going To Be A Busy June -- February 14, 2015

Four things to look forward to:
  • price of oil claws its way back to something better than it is now
  • the end of winter
  • the end of spring road restrictions
  • the return of the swallows to San Juan Capistrano
Oh, and, fracking in June. Five things to look forward to.

Even with the slump in oil prices, it looks as if North Dakota will continue to add a minimum of 150 new wells each month between now and June. It looks like about half of all new wells go to DRL status (waiting completion/fracking) after they reach total depth. In best of times, the was a backlog of 250 to 450 wells waiting to be fracked.

Now, because of ...
  • new conditioning rules
  • new flaring rules
  • low price of oil
... the backlog of wells waiting to be fracked has gone to 750. It's hard to believe that number won't be higher when we see the February data (to be released in the April Director's Cut).

Mt Kennedy

For the Kennedy clan who were so concerned their children and grandchildren would never see snow again, this is Mt Kennedy, on the MIT campus in Cambridge (across the Charles River from Boston) and just down (up?) the street (within walking distance of) Harvard University. 
Meanwhile, Back At Grand Central Station

NYC braces for coldest day in ... drum roll ... two decades.
An arctic cold front packing dangerous winds of up to 60 mph could make it feel like it’s 20 below zero by Sunday — the coldest wind-chill factor since 1993’s “Storm of the Century,” forecasters warned.
“You better snuggle up,” AccuWeather meteorologist Tom Kines said, noting the arctic blast will blow through after another snowstorm slams the already hard-hit Northeast this weekend.
The blizzard to the north will skirt the city Saturday into early Sunday but could leave up to 3 inches of snow on the ground in the metro area.
Saturday’s high will be about 35 with a low of 17, but by Sunday morning conditions will be downright dangerous.
The thermometer will plummet to 6 degrees or lower.
Rumor has it these thermometers, because they are not "official UN thermometers" will not become part of the Official Global Warming Data Bank.

Playing Out The Clock -- February 14, 2015

I think President Obama's only goal now is to get out of the last two years of his presidency without a another disaster on his hand. He's playing out the clock. That's the only way I can interpret his recent actions as noted by Charles Krauthammer in The Washington Post -- hardly Fox News.
His secretary of defense says, “The world is exploding all over.” His attorney general says that the threat of terror “keeps me up at night.” The world bears them out.
On Tuesday, American hostage Kayla Mueller is confirmed dead. On Wednesday, the U.S. evacuates its embassy in Yemen, a country cited by President Obama last September as an American success in fighting terrorism.
Yet Obama’s reaction to, shall we say, turmoil abroad has been one of alarming lassitude and passivity. [Fathomless ignorance, also comes to mind.]
Not to worry, says his national security adviser: This is not World War II. As if one should be reassured because the current chaos has yet to achieve the level of the most devastating conflict in human history. Indeed, insists the president, the real source of our metastasizing anxiety is . . . the news media.
Russia pushes deep into eastern Ukraine. The Islamic State burns to death a Jordanian pilot. Iran extends its hegemony over four Arab capitals — Beirut, Damascus, Baghdad and now Sanaa.
And America watches. Obama calls the policy “strategic patience.” That’s a synonym for “inaction,” made to sound profoundly “strategic.”
Take Russia. The only news out of Obama’s one-hour news conference with Angela Merkel this week was that he still can’t make up his mind whether to supply Ukraine with defensive weapons. The Russians have sent in T-80 tanks and Grad rocket launchers. We’ve sent in humanitarian aid that includes blankets, MREs and psychological counselors.
How complementary: The counselors do grief therapy for those on the receiving end of the T-80 tank fire. “I think the Ukrainian people can feel confident that we have stood by them,” said Obama at the news conference.
Indeed. And don’t forget the blankets. America was once the arsenal of democracy, notes Elliott Abrams. We are now its linen closet. 
Strategic patience: basketball players call is playing out the clock. 

Anwar Province in Iraq may fall to ISIS this weekend.

Saturday Morning -- February 14, 2015; TransCanada Looking To Transport 300,000 BOPD Of Light, Sweet Bakken Crude Oil INTO Canada; ObamaDrones To Be Made In North Dakota

TransCanada, the Keystone XL folks, are looking to build a new pipeline to transport Bakken crude oil INTO Canada. Can't make this stuff up. The Dickinson Press is reporting:
Pipeline company TransCanada Corp. is planning to ask the U.S. government for a permit to build a new 200-mile pipeline from North Dakota across the border into Canada, the Wall Street Journal reported, citing an unnamed source.
The company expects to announce the $600 million Upland Pipeline Project proposal in its earnings report on Friday, the newspaper reported. The project aims to transport up to 300,000 barrels a day of North Dakota crude to a connection in Saskatchewan and on to TransCanada's planned Energy East pipeline.
If approved the Upland Pipeline won't be in service until 2018. I'm not holding my breath. At 300,000 bopd, that would account for about a third of North Dakota's current production. You really think Warren Buffett is going to sign off on this for the president? LOL.

For Investors Interested In Dividends

I added a link to a nice article over at Seeking Alpha on dividends, sent to me by Don after my earlier article on dividends. Remember: 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.

JV Team Is Beating Global Varsity Players
New Coach Needed?

CNN is reporting
An Iraqi tribal leader said Saturday that ISIS militants are gaining ground in Anbar province, predicting a "collapse within hours" of Iraqi army forces there if tribal forces withdraw.
Sheikh Naim al-Gaoud, a Sunni Muslim leader of the Albu Nimr tribe, called for more U.S. intervention -- including ground troops, arming tribes directly or at least pressuring the Iraqi government to give the tribes more firepower.
While U.S. officials have said that ISIS, which calls itself the Islamic State, is on the defensive in Iraq and Syria, al-Gaoud says that's definitely not the case where he is.
"In Anbar, we are losing ground, not gaining," he said.
Downright scary. Maybe we will know in time for tomorrow's Sunday morning talk shows. I assume Brian Williams is embedded with ISIS.

ObamaDrones: Hecho In Nord Dakota

The Bismarck Tribune is reporting:
A partnership was announced Friday that would launch the state’s first manufacturing agreement to produce unmanned aerial systems.
... the joint venture between Wahpeton, ND-based ComDel Innovation Inc. and Gainesville, FL-based Altavian.
North Dakota was among six national UAS test sites announced in late 2013 by the Federal Aviation Administration. The site, located in Grand Forks, was given FAA certification in April.
$350 To Opt Out
It's An Opportunity To Share

Cornell students have to pay $350 for school's health insurance program to opt out.
Students who do not opt in to the $2,352 per year plan must pay the $350 fee, which “most likely” won’t be covered by financial aid, according to campus newspaper The Cornell Review. The newspaper also said the university plan is run through Aetna, whose CEO, Mark Bertolini, is a Cornell MBA grad. In addition the fee, students will have to pay a $10 co-pay fee when visiting the school’s health center.
Ah, yes, welcome to the "real world."  I assume illegal immigrants attending Cornell on a full scholarship are exempt.

Even Denmark Won't Meet Goal

The New York Times reports on the obstacles that Denmark faces to end all "fossil fuel burning" by 2050. Even Denmark knows it can't be done ... unless they give up cars completely. Without a subscription, one can access 10 free articles at the New York Times every month. If you don't have a subscription, I would not waste one of your free ones on this article.
The trouble, if it can be called that, is that renewable power sources like wind and solar cost nothing to run, once installed. That is potentially a huge benefit in the long run.
But as more of these types of power sources push their way onto the electric grid, they cause power prices to crash at what used to be the most profitable times of day.
That can render conventional power plants, operating on gas or coal or uranium, uneconomical to run. Yet those plants are needed to supply backup power for times when the wind is not blowing and the sun is not shining.
With their prime assets throwing off less cash, electricity suppliers in Germany and Denmark are on edge. They have applied to shut down a slew of newly unprofitable power plants, but nervous governments are resisting, afraid of being caught short on some cold winter’s night with little wind.
The governments have offered short-term subsidies, knowing that if they force companies to operate these plants at a loss, it will be a matter of time before the companies start going bankrupt.
Don't you just love that word, "subsidies." Where do these writers think that money comes from. Taxpayers. So the Danes get to pay more in taxes to support more expensive wind energy and smaller, inefficient coal-burning cars.

Europe And Energy

Statoil to spend $29 billion on developing North Sea field:
Norway's Statoil is moving ahead with plans to develop a giant $29 billion oil field, Europe's costliest offshore energy project, expecting to produce some of the world's cheapest oil that will be profitable even after the recent price crash.
Statoil said on Friday it would start the Johan Sverdrup field in the North Sea by 2019 and expected to produce up to 3 billion barrels of oil equivalents (boe) over 50 years, giving Norway's fading oil industry a second life. The project is expected to break even at under $40 per barrel, giving Statoil a huge margin even after Brent crude plunged to around $60 from over $100 last June.
Once the project is running, operating costs are seen under $5 per barrel.
EU again says "no" to shale:
The European Union's top court has clarified EU rules on shale gas exploration in a judgment that could require some member states to change their legislation, lawyers said. The court confirmed impact assessments are not obligatory, but could be required depending on particular circumstances.
The case, heard at the EU's Court of Justice (ECJ), was referred by an Austrian court after a complaint from the municipality of Strasswalchen, where shale gas exploration has taken place. Industry and environmental campaigners said they welcomed the ECJ ruling published on Wednesday and the Austrian Environment Ministry issued a statement saying the court had backed the Austrian position.
"Failure to take account of the cumulative effect of one project with other projects must not mean in practice that they all escape the obligation to carry out an assessment when, taken together, they are likely to have significant effects on the environment," the court said.