Bakken 2.0 -- October 19, 2016

Note: Bakken 2.0 is important enough that the original post will remain at the top. Updates will be provided at the bottom. 

I think we've just entered Bakken 2.0 with the announced Oasis-SM Energy deal.

SM Energy presentations here.

The Montana Bakken mini-boom began in 2000. At that time, the spot price of WTI at Cushing: around $30 / bbl. There was no infrastructure and the land rush had not begun.

The North Dakota Bakken boom began in 2007. At that time, the spot price of WTI at Cushing: around $80 / bbl but quite a range. There was no infrastructure. The land rush would begin soon. Leasing rates were astronomical. Most wells were short laterals, costing upwards of $6 million/short laterals with EURs less than 300,000 bbls. The Bakken hit its stride about three to five years later. Between 2010 and 2012, the spot price of WTI at Cushing ranged from $70 to $105 / bbl with much volatility.

I am not sure what will define Bakken 2.0 in  hindsight, but these are the indications suggesting we may be in the early stages of Bakken 2.0, whatever that means:

• we're finally seeing some realignment of ownership of mineral acres in the Bakken; the SM Energy - Oasis deal
• completions are leaning toward mega-frack/high-intensity fracks (50 stages; 10 million lbs of sand) -- see Mike Filloon, and others
• the norm for Bakken wells has been long laterals; now costing much less than in 2007 
• the infrastructure is in place (pad drilling, pipelines, roads)
• spot price of WTI at Cushing is around $50 / bbl and trending upward

If we are in the early stages of Bakken 2.0, then we should see Bakken 2.0 hit its stride in three to five years, 2019 to 2021.

Supporting Posts

March 5, 2017: aspects of Bakken 2.0 --

• we're starting to see the survivors: EOG, Whiting, Petro-Hunt, Newfield, CLR, XTO but not all particularly active; Whiting, Petro-Hunt, maybe Newfield, seem more active than others
• we're seeing new names in the Bakken, but generally "hedge fund"-like mineral owners, not operators
• some operators sticking with 4-million-lb fracks; others moving toward 10 million; some to 15 million; EOG with some incredible 20+ million-lb fracks
• halo effect easy, easy to find: bump in production is huge in some cases
• operators will be able to do with 50 rigs what used to take 200 rigs (currently 45 rigs, vs 35 rigs one year ago)
• pad fracking now the norm
• DAPL almost ready to come on-line; if not shut down, it could be defining moment in Bakken 2.0 (if WTI remains near $55)

October 25, 2016: CLR's 2nd 10-well pad in two days.

October 25, 2016: Oasis -- when planning meets opportunity. 

October 24, 2016: Comprehensive Plan for Williston and Williams County (draft) released in mid-October, 2016. 

October 23, 2016: Filloon's article, which appears today, on the status of the Bakken/Three Forks supports my contention that we are in the beginning stages of Bakken 2.0.