Tuesday, May 5, 2015

Bakken As Laboratory -- May 5, 2015 -- Refracking May Not Be The Best Way To Go -- EOG

Reuters via Rigzone is reporting:
HOUSTON/WILLISTON, N.D., May 5 (Reuters) - Refracking, the practice of fracking an oil and gas well a second time, is still too unpredictable to rely on as a way to slash costs and increase output during the oil price slump, top U.S. shale oil executives said on Tuesday.
Oilfield service companies, including Schlumberger NV and Baker Hughes Inc., have touted refracking as a cheap way to revive output from existing shale wells. Output from existing wells, measured in barrels per day, normally drops as much as 70 percent in the year of operation. Also, some wells were not thoroughly fracked the first time.
But executives from producers say the refracking technology, while promising, remains tricky. "We have not tried any refracks. Our outlook on that is that it is really technical," said Bill Thomas, CEO of EOG Resources Inc., widely regarded as one of the most efficient U.S. shale oil producers.
"We believe that just drilling a new well, and kind of starting fresh ... is probably the preferred way to go." 
I like the byline: Houston/Williston, ND. Hoo-ahh!

But, then, of course, this article on Whiting's opportunity for re-fracks

Years ago when it took 45 days to drill a well, re-fracking looked like a better option. Now, when they can drill a well in 10 - 15 days, EOG/CEO may be completely correct. But whether one re-fracks, or starts all over, either way should be beneficial to the oil service companies.

The Bakken as laboratory.

Halo Effect Revisited -- May 5, 2015

Update

May 6, 2015: after writing all of that below, there's always the possibility of mis-allocation if production was commingled; I'm not going to follow-up on this for now; just something to be aware of; [a reader reminded me of that some time ago in a different post: large production number could be due to 'mis-allocation' during early commingling; random update, March 20, 2015]. 

Original Post

This is why I love to blog about the Bakken.

I don't think I've blogged about this one before; if I have, I've forgotten.

This is really, really cool.

First, look at this production profile, only the last eleven months or so:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN3-201519515052526671156211328197
BAKKEN2-2015288427844210971934519025264
BAKKEN1-2015311208212158197325910207535095
BAKKEN12-20143115002148752250294281760611760
BAKKEN11-2014291228912438260420878237718446
BAKKEN10-2014177005671319911175617829942
BAKKEN9-20140000000
BAKKEN8-2014183980399240179597745179
BAKKEN7-201431712872223731457013727781
BAKKEN6-2014308107806731815769129532756
BAKKEN5-2014318503848036114081129341085

Notice anything unusual about it? Yup, in August, 2014, it was taken off-line and was put back on-line in October, 2014. When it went off-line it was producing 7K bbls/month and production was decreasing.  When it went back on-line in October, it produced 12K and then 15K the following month. Four things can explain the increase (and a pump is not one of them):
  • the well was re-worked
  • the well was re-fracked
  • the halo effect of a neighboring well being fracked
  • "build-up" which occurs when a well is taken off-line
The production profile above was from this well:
  • 20589, 4,815, Whiting, Tarpon Federal 21-4H, Twin Valley, middle Bakken, t10/11; cum 518K 3/15; 
This well was fracked back 10/10/11 (October, 2011). It was not re-fracked in September, 2014, to explain the jump in production.

There is nothing in the file report to suggest why the increase in production in October 2014. It was not a work-over rig and it was not re-fracked; I can say that with almost 100% certainty; I'll explain later.

One possibility is the "halo effect" of a neighboring well being fracked. So, let's check the nearest horizontal well (laterally, not vertically). That would be:
  • 27520, 6,002, Whiting, Flatland Federal 11-4TFH, t10/14; cum 311K 3/15;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN3-20153146708462864808181103180141900
BAKKEN2-201528468814742041871461031437972250
BAKKEN1-2015315243052198409314190112851613323
BAKKEN12-201431521035190436641239711151658744
BAKKEN11-201430508235126841551120694242869581
BAKKEN10-20143161727606151221311729111381105860
BAKKEN9-2014270004400

And, yes, indeed, it was fracked in the September, 2014, time frame which explains why # 20589 above was taken off-line.

The only problem: #27520 is a Three Forks well. It's hard to believe that fracking a Three Forks well would affect a middle Bakken well, at least according to some / many.

So, we move to the middle Bakken well that was fracked at the same time:
  • 27521, 5,002, Whiting, Flatland Federal 11-4HR, t10/14; cum 259K 3/15;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN3-2015312699826811315710023099670498
BAKKEN2-2015283186532428317492376908981422
BAKKEN1-20153145023449213898104257944089787
BAKKEN12-201431506095039840361117061037657879
BAKKEN11-20143047947483344104981623716060942
BAKKEN10-20143056457554401551212967012583117038
BAKKEN9-2014270004400

By the way, what happened to another older well in this same area when these two new wells were fracked? Take a look at #22361; it was taken off-line at the same time as #20589, when #27520 and #27521 were fracked. When it came back on-line, production was significantly increased:
  • 22361, 4,971, Whiting, Tarpon Federal 21-4-3H, t12/12; cum 363K 3/15:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN3-201531710270898621725116895294
BAKKEN2-201528670866848481610815832220
BAKKEN1-20153180458094117618163145333568
BAKKEN12-20143199299900161120821124468313
BAKKEN11-2014281110511506138520222230217864
BAKKEN10-201422112841077766619804300316759
BAKKEN9-20140000000
BAKKEN8-201419468847006301128110990255
BAKKEN7-2014318257833931320234190861086
BAKKEN6-2014308204815232620321167073554
BAKKEN5-2014318013802237422733209171754
BAKKEN4-20143089718962433253712451080

Pretty nice bump up in production, huh?

I think I read somewhere that when a well is taken off-line, its production jumps when it comes back on-line simply because of the "build-up" that occurs. That could explain everything.

It's hard to believe that the "build-up" could result in production by that amount - it seems to be a pretty healthy increase.

But then note this: the increase in production, for whatever reason, is very short-lived -- only two to three months.

In addition to the "explosion" what else is required for a successful frack? Proppant. The propannt is there to help maintain the pores or the channels. A neighboriing frack does not put additional proppant into the neighboring well.

Whether the jump in production is due directly to a neighboring frack or is due simply to a "build-up" while the index well is off-line, the fact is that we see a jump in prodution.

Now, think about that.

During the slump in the price of crude oil (since October, 2014), Bakken operators are circling the wagons, putting their wells in the best spots from Williston to Watford City to the Parshall area. In other words, the wells that have been drilled in the past few months and likely to be drilled in the next twelve months are concentrated where older Bakken wells already exist.

In addition to "circling the wagons" (concentrating the wells to a more limited area), the operators are delaying completion (fracking) of these wells. There may be upwards of 1,000 wells waiting to be fracked (well above the expected 250 wells).

Obviously these 1,000 wells won't be fracked all at once, but we're going to see a lot of new wells fracked with newer techniques (including much more pressure and proppant) in an area already congested with producing wells sometime in the next twelve months.

Even if the production increase per well lasts only two to three months, there could be a significant increase in production overall in older Bakken wells simply because:
  • there are so many wells already there, and
  • these wells are in some great areas
Part of the reason some of these areas are so good is because of natural fractures; if so, the "halo effect" should be even more evident.

To complete the narrative, earlier I said: the increase in production was not a work-over rig and it was not re-fracked; I can say that with almost 100% certainty.

They don't do work-overs on wells near a well that is being fracked; in fact, they take those wells off-line completely (as they did above) for safety reasons. Also, there has been minimal interest in re-fracking in the past few months with the slump in prices; these wells were not coincidentally re-fracked. 

My narrative may be completely off base; that's fine. But the numbers don't lie.

Total vertical depth of three of the wells:
  • 27520: 10,678 feet (Three Forks)
  • 20589: 10,579 feet (Middle Bakken)
  • 22361: 10,560 feet (Middle Bakken)
A graphic of the wells under discussion:


The distance between #27521 and #22361 is 0.68 miles, about 3,600 feet. That distance certainly speaks against a "halo effect" but if there is already a lot of natural fracturing in this area ...

... don't get hung up on whether this is due to the "halo effect" of fracking. The bigger point is the potential for a significant jump in production from older wells as the backlog of unfracked wells start getting fracked, regardless of the reason.

Note: I think I have the laterals identified correctly, but I do make mistakes more often than not. If I find I've made a mistake, I will update the graphic.

Spend Some Time On This One -- May 5, 2015; White Butte Oil Operations With Three High-IP Dual Lateral Wells On 320-Acre Spacing In Antelope Field

Active rigs:


5/5/201505/05/201405/05/201305/05/201205/05/2011
Active Rigs86186192210177

Six (6) new oil and gas permits --
Nine (9) producing wells completed:
  • 21385, 2,221, White Butte Oil Operations, LLC, Panzer 1-20MLH, 320-acre spacing, Sanish pool, Antelope, t4/15; cum 35K 6/15;
  • 21386, 1,905, White Butte Oil Operations, LLC, Panzer 2-20MLH, 320-acre spacing, Sanish pool, Antelope, t4/15; cum 56K 6/15;
  • 21387, 2,502, White Butte Oil Operations, LLC, Panzer 4-20MLH, 320-acre spacing, Sanish pool, Antelope, t4/15; cum 29K 6/15;
  • 26388, 1,680, BR, CCU North Coast 31-25TFH, Corral Creek, t4/15; cum --
  • 28288, 1,844, BR, Shenandoah 24-36TFH, Keene, t4/15; cum --
  • 28391, 1,163, XTO, Lundin Federal 31X-9H, North Fork, t4/15; cum --
  • 28392, 1,705, XTO, Lundin Federal 31X-9D, North Fork, t4/15; cum --
  • 28393, 1,328, XTO, Lundin Federal 31X-9G, North Fork, t4/15; cum --
  • 29471, 1,423, Slawson, Wolf 2-4MLH, Big Bend, t3/15; cum --
*****************************************
You May Want To Spend Some Time On This One

More information on White Butte Panzer wells here.

These are still the only three White Butte permits/wells (October 6, 2015):
  • 21385, 2,221, White Butte, Panzer 1-20MLH, Antelope field, Sanish pool (Three Forks), 320-acre spacing; dual stacked laterals, t4/15; cum 53K 7/15;
  • 21386, 1,905, White Butte, Panzer 2-20MLH, Antelope field, Sanish pool (Three Forks), 320-acre spacing; dual stacked laterals, t4/15; cum 70K 7/15;
  • 21387, 2,502, White Butte, Panzer 4-20MLH, Antelope field, Sanish pool (Three Forks), 320-acre spacing; dual stacked laterals, t4/15; cum30K 7/15; off line almost all of 7/15; no production 8/15; 
There is no explanation in the file report why #21387 is off-line; there are no wells in the area that are being fracked or drilled. [Later: it turns out all three wells were re-fracked in 2016; it was the second lateral of each well that was being fracked. All three wells are back on line. Posted 1/18.]

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

Some data points about those Panzer wells:
The White Butte Oil Panzer wells were originally Slawson permits, 320-acre spacing units; approved back in late August, 2011; in early 2014, Slawson requested that the permit be amended to allow for an additional lateral and to rename #21385, Panzer 1-20MLH. On October 10, 2013, the the three Panzer wells were transferred to White Butte from Slawson.

The narrative for the 1-20MLH is not yet available (unless I missed it).

The 2-20MLH is described as a single section dual-lateral consisting of two 4,504' - 5,234' long laterals drilled to the south. The first lateral accessing the second bench of the Three Forks was completed on November 11, 2014; while the second lateral that penetrated the middle Bakken was completed November 27, 2014. 

The second curve was landed at 10,972 feet into the middle Bakken, after drilling the Three Forks lateral and then coming back and milling a window in the casing of the vertical hole. 

While drilling the dual-lateral well, the initial curve was landed into the deepest of the two targeted intervals.

Panzer 4-20MLH is a single-section, dual-lateral accessing the first bench of the Three Forks; it appears the second lateral was also in the first bench of the Three Forks

I believe these are the only three White Butte Oil Operations wells in North Dakota at this time.  

White Butte Oil Operations, LLC, is a North Dakota Foreign Limited-Liability Company which filed on June 4, 2014. The Registered Agent for this company is located in Bismarck, ND; the company's principal address is in Wichita, KS. Its address is 727 N Waco Ave Ste 400, Wichita, KS.

Slawson Exploration has an address at 727 N. Waco Ste 400, Wichita, KS 67203. 
Just for the fun of it, google: stacked laterals slawson montana.

The purple areas are the only 320-acre spacing units in this area:




 The three Panzer wells:



**************************************
Dry hole:
  • 29280, dry, MBI Oil & Gas, Bahley, Stark County; 
One well coming off the confidential list Wednesday:
  • 29254, drl, Zavanna, Sigurd 32-29 6H, Stockyard Creek, no production data,

Released Today By EIA: Implications Of Increasing Light Tight Oil Production For US Refining -- May 5, 2015

Link is here.

This would have been nice to have several years ago to help folks understand the types of crude oil being produced.

The full report is 149 pages but I believe the summary is found in three sections (on one page):
2.1: Overview
2.2: Low production case
2.3: High production, current crude export restrictions
2.4: High production, no crude export restrictions
This is the type of data that Congress will use to defend whatever position they take with regard to exports.

Snippet From Today's EOG Conference Call -- 1Q15

  • EOG Resources  plans to increase drilling activity as soon as oil prices stabilize at $65/bbl - probably in Q4 2015 - CEO William Thomas said on today's earnings conference call.
  • Thomas anticipates EOG would return to double-digit growth in 2016, and in this year's Q3 may begin finishing wells that it has left half-drilled, with a decision likely in July
  • "We don’t want to get in a hurry... We don’t want to jump-start completions" and then see the price fall, the CEO said.
  • Thomas joins Pioneer Natural Resources, whose CEO Scott Sheffield said last month he was preparing for a return to growth and may begin adding rigs as soon as June.
One word: amazing. 

Transcript here

Staggering; Random Update On Two Huge Bakken Wells -- May 5, 2015

Updates

September 20, 2015: production profile for this well updated:
  • 21963, 4,447, HRC, Fort Berthold 148-95-26A-35-2H, Eagle Nest, application specified Three Forks but it appears to be a middle Bakken well, originally 1280-acre spacing; originally Petro-Hunt application, then G3; changed to 4 sections; this well is on a 6-well pad; most of the wells have similar production profiles; still lots of flaring, no geology report; 49 stages, 5.1 million lbs; t3/15; cum 80K 3/15; 
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN7-20153117994181341130717100149011982
BAKKEN6-20152919674195471221518356156582495
BAKKEN5-201515144371454973181330512509691
BAKKEN4-20153041425414001884940867383142343
BAKKEN3-20153168893690493264966141580387886
BAKKEN2-2015241139110953834777997440191

Original Post
 
Posted just for newbies to show just how exciting the Bakken can be. Look at the production from this well in one month in the table below:
  • 21963, 4,447, HRC, Fort Berthold 148-95-26A-35-2H, Eagle Nest, application specified Three Forks but it appears to be a middle Bakken well, originally 1280-acre spacing; originally Petro-Hunt application, then G3; changed to 4 sections, no geology report; 49 stages, 5.1 million lbs; t3/15; cum 80K 3/15;The HRC Fort Berthold well produced more oil in one month than the "best well in the basin" to date:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-201515144371454973181330512509691
BAKKEN4-20153041425414001884940867383142343
BAKKEN3-20153168893690493264966141580387886
BAKKEN2-2015241139110953834777997440191
  • 27520, 6,002, Whiting, Flatland Federal 11-4TFH, Twin Valley, 97 stages, 4.2 million lbs, t10/14; cum 311K 3/15;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-20152728754291523567130024129332640
BAKKEN4-201530369763708440126796167354547
BAKKEN3-20153146708462864808181103180141900
BAKKEN2-201528468814742041871461031437972250
BAKKEN1-2015315243052198409314190112851613323
BAKKEN12-201431521035190436641239711151658744
BAKKEN11-201430508235126841551120694242869581
BAKKEN10-20143161727606151221311729111381105860
BAKKEN9-2014270004400

Think of all the story lines:
  • middle Bakken vs Three Forks
  • significant difference in IPs
  • first month production vs record second month protection
  • 91 stages vs 49 stages
  • similar amounts of proppant

Terrorists On Verge Of Taking Baghdad Refinery (Again); Iraqis Rushing In Troops -- Radio -- May 5, 2015

Subject line says it all -- that was on radio a few minutes ago.

Breitbart's report four days ago, ISIS storms Iraq's largest refinery:
A spokesman for U.S. Central Command, which oversees American-led airstrikes against the Islamic State (ISIS/ISIL), told reporters that that the jihadist group was on the defensive and losing territory in Iraq.
Air Force Col. Patrick Ryder, a Centcom spokesman, briefed reporters last Friday on U.S. operations against ISIS, discounting the terrorist group’s ability to mount major attacks.
“When you look across the entire battle space and look at where ISIL was last summer and look at where ISIL is today, [they] continue to be on the defensive in Iraq and they’re losing territory,” according to Ryder (just last Friday -- four days ago).
“While initial reports may sometimes give the impression [ISIL is on the offensive], we see no evidence that they’re able to do so,” he added.
Fast forward to a week later: some news reports are painting a different picture.
Various news outlets are reporting that ISIS has seized most of the Baiji oil refinery, the largest in Iraq, located north of Baghdad in Salahuddin province.
Oil is trading a little bit over $60; a 2.6% increase for the day.

****************************
Canadian CBR

Bakken.com is reporting:
A growing share of Canadian oil-by-rail traffic is made up of tough-to-ignite undiluted heavy crude and raw bitumen, say industry executives, as companies scramble to cut expenditures with the price of crude down more than 40 percent since June.
By eliminating the cost of diluting with ultra-light condensate, heavy oil offers rail shippers an opportunity to claw back a few dollars per barrel in transportation costs.
Official data does not break down the different Canadian crudes shipped by rail but interviews with industry executives suggest undiluted heavy and raw bitumen shipments now make up roughly a quarter of the estimated 200,000 barrel per day (bpd) oil-by-rail market.
An added bonus is that heavy crude and bitumen are far less combustible than the Bakken and Canadian synthetic crudes involved in fiery crashes that spurred the Canadian and U.S. governments on Friday to tighten safety rules for trains carrying oil.
With very high boiling and flashpoints they fall outside Packing Groups 1 and 2, used to classify the more volatile types of crude oil for transport, and are already shipped in double-hulled cars, meaning they should be unaffected by last week’s tank car phase-out rules.

This Is Not An Investment Site; Do Not Make Any Investment Decisions Based On What You Read Here -- May 5, 2015

These are short 30-second sound bites; there will be typographical and factual errors. These are for my own enjoyment; if I were you, I would not read these. If you came here for the Bakken, move on. Nothing to see here. I'm just waiting for the coffee to brew.

A lot of companies of interest reporting earnings after hours including Halcon.

SRE reported this morning: beat forecasts:
Shares plummet. Don't you just love investing? Profits rise 77%; huge potential in Mexico; and shares fall. Paying 2.5%.

And from Seeking Alpha: Sempra Energy beats by $0.33, misses on revenue
  • Sempra Energy: 1Q15 of $1.71, beats by $0.33
  • Revenue at $2.7B (-3.6% Y/Y) misses by $390 million 
*********************************

Archer Daniels, similar story.

Baytex, on the other hand, reports a bigger loss, and share prices rise significantly.

Sprint: gained subscribers; lost more money than forecast. Lost 6 cents/share; forecast a loss of 4 cents/share.

US trade deficity jumps to 6-year high! I remember when much of the trade deficit was due to all that OPEC oil that was being imported. Now imports have dropped substantially and the trade deficit his a 6-year high. The strong dollar is to blame. There was also pent-up demand due to work stoppages at west coast ports that are now "back to normal."

*************************
After Hours


SM Energy misses by $0.08, misses on revs; Co maintains production guidance at 60.4-63.5 MMBOE : Reports Q1 (Mar) earnings of $0.21 per share, excluding non-recurring items, $0.08 worse than the Capital IQ Consensus Estimate of $0.29; revenues fell 42.2% year/year to $365.9 mln vs the $543.15 mln consensus.

WPX Energy beats by $0.47, beats on revs : Reports Q1 (Mar) earnings of $0.32 per share, $0.47 better than the Capital IQ Consensus Estimate of ($0.15); revenues fell 36.0% year/year to $572 mln vs the $554.3 mln consensus.

Devon Energy misses by $0.03, misses on revs; raises production, lowers cap-ex: Reports Q1 (Mar) earnings of $0.22 per share, excluding non-recurring items, $0.03 worse than the Capital IQ Consensus of $0.25; revenues fell 12.3% year/year to $3.27 bln vs the $3.74 bln consensus. 

SolarCity beats by $0.08, beats on revs; guides Q2 EPS below consensus, revs below consensus: Reports Q1 (Mar) loss of $1.52 per share, $0.08 better than the Capital IQ Consensus Estimate of ($1.60); revenues rose 6.3% year/year to $67.5 mln vs the $57.73 mln consensus.

Newfield Expl misses by $0.06, misses on revs; Company reiterates 2015 production and capital investment guidance : Reports Q1 (Mar) earnings of $0.02 per share, excluding non-recurring items, $0.06 worse than the Capital IQ Consensus Estimate of $0.08; revenues fell 38.9% year/year to $349 mln vs the $440 mln consensus.

Plains All Amer beats by $0.03, misses on revs : Reports Q1 (Mar) earnings of $0.57 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus Estimate of $0.54; revenues fell 49.1% year/year to $5.94 bln vs the $10.65 bln consensus. 

Halcon Resources misses by $0.02, misses on revs : Reports Q1 (Mar) loss of $0.04 per share, excluding non-recurring items, $0.02 worse than the Capital IQ Consensus Estimate of ($0.02); revenues fell 50.5% year/year to $136.2 mln vs the $227.61 mln consensus.

CBR To East Coast Refineries Setting New Records -- EIA; May 5, 2015

Folks may be interested in looking at some of the nice wells QEP will be reporting today, from the Grail. Link here.

Active rigs:


5/5/201505/05/201405/05/201305/05/201205/05/2011
Active Rigs85186192210177

RBN Energy: the Marcellus/Utica, again -- risk of huge oversupply to the northeast this summer.

Daily EIA "energy cookie":
Monthly rail receipts of crude oil accounted for more than half (52%) of the crude oil supply to East Coast refineries in February. As U.S. and Canadian production of crude oil has increased, crude supply by rail to East Coast (PADD 1) refineries has grown, displacing waterborne imports of crude oil from countries other than Canada, such as Nigeria. While refinery utilization in Petroleum Administration for Defense District (PADD) 1 in early 2015 has been below typical levels, this still marks the first time in EIA's dataset that crude deliveries by rail have accounted for such a high percentage of East Coast refinery supply. --- EIA
Tesla update in today's WSJ. Subdued remarks in Japan. Elon Musk:
“We don’t have supergrand ambitions. It’s not like we expect to be, like, the leading seller or even remotely close to that,” he said, according to a transcript of the interview. “If you look at our sales last year, world-wide, it was only about 32,000 cars. That was for the entire world. And this year, maybe, we’ll be a little bit above 50,000 cars. So, we’re only talking a few thousand cars here. It’s not a huge number.”
I wouldn't make a lot of this; folks are very humble in Japan.

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