Saturday, January 16, 2016

A Good News Story -- January 16, 2016; Case Study For The Bakken -- A Learning Case

In addition to all the other disclaimers, this has turned into a very long post; there are likely to be typographical and factual errors. I will correct them as I find them. This is for my benefit only. Feel free to read it but do not quote me on anything. I have not proofread this post.

It took awhile but finally there is some good news. A long, long time ago a reader asked when "they" would start drilling in a certain location. The following is a "cut and paste" from another post, as is, with the question, the original follow-up, and the update all together:

Well file #17077; when will they start drilling more wells in this section? October 24, 2013; they are doing a lot of drilling in Alkali Creek, but no other drilling in this section where 17077 is sited -- May 10, 2014. Still no new drilling in this section -- 5/8-154-94 -- as of October 24, 2014. [Update, January 16, 2016: I noted that there are four wells in this area -- these are 4-section spacing -- section 4/5/8/9 - 154-94:
  • 27680, 1,110, Hess, EN-Pederson-LW-154-94-0408H-1, Alkali Creek, t12/14; cum 109K 11/15;
  • 27681, 892, Hess, EN-Pederson-LW-154-94-0408H-2, Alkali Creek, t1/15; cum 89K 11/15;
  • 27682, 1,183, Hess, EN-Pederson-LW-154-94-0408H-3, Alkali Creek, t1/15; cum 108K 11/15;
  • 27683, 762, Hess, EN-Pederson-LW-154-94-0408H-4, Alkali Creek, t1/15; cum 75K 11/15;
In addition there are four more wells on/near the same pad, all still confidential:
  • 32029, 1,258, Hess, EN-Pederson-LW-154-94-0408H-5, Alkali Creek, 4-section spacing; sections 4,5,8, and 9; t1/16; Three Forks, 50 stages, 3.5 million lbs; cum 79K 4/16; API: 33-061-03842;
  • 32030, 917, Hess, EN-Pederson-LW-154-94-0408H-6, Alkali Creek, 4-section spacing; sections 4,5,8, and 9, a middle Bakken well; 35 stages, 2.5 million lbs; t2/16; cum 38K 4/16;
  • 32031, 1,275, Hess, EN-Pederson-LW-154-94-0408H-7, Alkali Creek, 4-section spacing; sections 4,5,8, and 9, Three Forks, 50 stages, 3.5 million lbs; t2/16; cum 63K 4/16;
  • 32032, SI/NC, Hess, EN-Pederson-LW-154-94-0408H-8, Alkali Creek, 4-section spacing; sections 4,5,8, and 9;
See first comment below: it looks like there are four more wells that will also be drilling into these sections but in a slightly different 2560-acre (4-section) spacing unit. These wells are still on confidential list but based on their name, all of them are sited in section 07. Three of the horizontals will "end" in section 5, and one horizontal will "end" in section 6. When I look at the NDIC GIS map server it looks like the overlapping 2560-acre spacing unit for these four wells will be sections 5/6/7/8-154-94, and thus "draining" the same 1280-acre unit that has the "index" well, #17077, which started this whole conversation. Again, these four wells are all confidential but my hunch is they are 2560-acre wells, in overlapping 5/6/7/8-154-94:
  • 30259, conf, Hess, EN-Madisyn-LE-154-94-0706H-1, Alkali Creek, 4-section spacing; sections 5/6/7/8-154-94,
  • 30260, conf, Hess, EN-Madisyn-LE-154-94-0705H-2, Alkali Creek, 4-section spacing; sections 5/6/7/8-154-94,
  • 30261, conf, Hess, EN-Madisyn-LE-154-94-0705H-3, Alkali Creek, 4-section spacing; sections 5/6/7/8-154-94,
  • 30262, conf, Hess, EN-Madisyn-LE-154-94-0705H-4, Alkali Creek, 4-section spacing; sections 5/6/7/8-154-94,
Again, I type this stuff quickly and there may be typographical and factual errors. If this is important to you, go to the source.

A big "thank you" to the reader for noting the additional wells that impact this area. This has turned into a great "learning case" for me. See below.

Learning Case

This is a nice "learning case" for me. Most of what follows is a "guess." Do not assume this is all accurate. There's a lot of "stuff" here but it helps me to understand the Bakken.

The first graphic is of the general area that we are talking about. This area is just north of the river and east of Williston. The well with file #17077, which I call the "index well" for this post, started this entire discussion.

The second graphic is of the 4-well pad just to the east (and slightly north of the index well. In addition, there is a 4-well pad that has been completed. Although one can't see it in this graphic, the horizontals from the completed 4-well pad run to the south-southwest, which one will see in a graphic below. The "green arrow" is a guess: I think, based on the legal names of these wells still on the confidential list, that this is the direction the horizontals will take from this pad:

The third graphic is really, really busy. Start with the index well, #17077, at the top center. This well is on 1280-acre spacing. Immediately to the right, to the east is the 4-well completed pad and the 4-well pad still on the confidential list, seen in the second graphic above. The general direction of the four horizontals, shown in green, will likely be in this direction. Again, I could be wrong.

This graphic has a lot of "purple" in it. That's because I highlighted overlapping 2560-acre spacing units. If you look closely, you will also see "2560" at the intersection of four sections -- which are the four sections that make up the particular 2560-acre spacing unit.

Then, in the lower left-hand corner is another 4-well pad, all wells still confidential, that a reader pointed out to me, that I had missed. Again, but this time in red, I've shown the likely direction the horizontals from these wells will take.

If you look closely you can see the dotted line to the far left: this is the county line -- Williams County to the west, Mountrail County to the east. The area under discussion appears to be in Mountrail County.

Finally, the last graphic, and the one that I think makes this a great "learning case" for me. This is where I could be really wrong. But it looks like the two overlapping 2560-acre spacing units are as noted: spacing unit A and spacing unit B. One spacing unit is outlined in black; the other spacing  unit in red. From this, one can see why overlapping spacing units are so incredibly important.

About six years ago, after having following the Bakken for two years, I told folks if "they had one well," they were definitely going to have four wells, probably eight wells, and possibly 16 wells. That has come true. But it's likely folks who have one well will eventually have 32 wells or more.

Again, so much of the above could be wrong. If this is important to you, go to the source. Do not use this post or any of the blog to make financial, investment, or travel decisions.

Seven (7) New Permits -- January 15, 2016

Active rigs:

Active Rigs49157187185200

Seven (7) new permits --
  • Operators: BR (4), SM Energy (2), Sinclair
  • Fields: Corral Creek (Dunn), Ambroses (Divide), Little Knife (Dunn)
  • Comments:
Four (4) permits renewed, including:
  • BR, 3, a Jerome and two Merton wells in McKenzie County;
  • MRO, 1, a permit for a Veronica USA well in McKenzie County;
  • still no reports of wells transferred
  • very few DUCs being added this past week
  • seven new permits in one day considering the pricing environment is pretty good

North Dakota Oil Production Defies Calls For A Decline -- Rigzone -- January 16, 2016

This is pretty cool. This was the top story at Rigzone yesterday, and the headline: North Dakota Oil Output Defies Calls For A Decline:
North Dakota's oil production once again defied expectations for a decline in November, even seeing a slight uptick for the second consecutive month, as unusually warm weather helped offset the deepening decline in fracking activity.

Production in the second-largest U.S. oil producing state rose by 5,000 barrels per day (bpd) to 1.18 million barrels, monthly data from the Department of Mineral Resources showed.

Last month, it also rose 5,000 bpd. Output in North Dakota's Bakken shale fields has generally outpaced expectations even as oil prices have plunged to about $30 a barrel this week from over $100 in mid-2014.

Despite repeated forecasts for a decline, even from the U.S. government itself, output has remained surprisingly resilient. Last October, the U.S. Energy Information Administration forecast that Bakken output would slide by 23,000 bpd to 1.16 million bpd.

"Looking at the weather, we had relatively few days where there was too much wind and (there was) no precipitation in November. It was a very dry month, and it was not a cold month," Lynn Helms, director of the state's Department of Mineral Resources, told reporters on a conference call on Friday. 
Ah, yes, global warming: nice weather explains the production curve in North Dakota. Lynn Helms is the perfect commissioner for North Dakota: quiet, unassuming, taciturn, reserved. He easily could have pointed out that the real reasons North Dakota has maintained its production (so far) is due to some of the following factors:
  • ISIS cells in western North Dakota have been pretty much shut down; kudos to the overworked police department responding to fights at the stripper clubs
  • Turkish Kurds sabotaging pipelines into Johnson Corner have never been (much of) a problem
  • Libyan revolutionaries have had minimal success taking out pipelines going into Hess' Tioga plant
  • the Port of North Dakota has not seen any Teamster strikes in quite some time
  • earthquakes did not shut down any North Dakota operations this past summer
  • tornado alley is well south of North Dakota
  • the hurricane season is relatively short in the entire Bakken region
  • the state has pretty much secured the northern border without having to resort to a "wall"
We're not hearing much from Peak Oil folks any more. By the way, I was firmly in that group of "Peak Oil" folks prior to the Bakken.

Geico Rock Award: Best In Show 2012

We Can't Drill Our Way to Lower Gas Prices -- President Barack Obama with best advice money can buy:

one minute sixteen seconds of fathomless ignorance
same guy who "believes" in global warming

  • Presdident Washington: I won't run for re-election; the country does not need a king
  • President Lincoln: so, you're the little lady that started this war
  • President Truman: the buck stops here
  • President Kennedy: to the moon and safely back before the decade is out
  • President Nixon: certainly in the next 50 years we shall see a woman president, perhaps sooner (1972 -- 43 years ago)
  • President Reagan: Mr Gorbachev, tear down this wall
  • President Obama: we can't drill our way to lower gas prices

Week 2: January 10, 2016 -- January 16, 2016

Wow, talk about a miserable week for the oil and gas industry. North Dakota hit a new post-boom record for the number of active rigs -- now down to 49. In addition, I don't know if folks saw this, Bakken oil is now priced at $20/bbl. But this was most incredible: the Red Queen is still pedaling -- despite active rigs at an all-time post-boom low, completions plummeting, permitting hitting new lows, the amount of crude oil produced by North Dakota actually increased month-over-month.

Top North Dakota oil producers for 2015
The Bakken has a new operator: Petroshale (USA)
Oil company working the Bakken forfeits well / produced oil for drilling "wrong" location; first time ever -- NDIC
Month-over-month production increases despite completions falling; rigs hitting new post-boom low
Top four oil-producing fields in the Bakken 
Post-boom low: active rigs at 49
John Kemp's weekly energy tweets; gasoline demand plummets; oil glut increases
Whiting transferring wells to Fundamental Energy Management ; and, here
Reuters predicts minimal decrease in January, 2016, month-over-month production

BNSF trains in Willmar, MN, could be traveling in both directions


Bakken economy
Williston strip clubs stripped
Tax revenue plummets

John Kemp explains this week's energy tweets

Vern Whitten photographs
Poll: price of oil going forward, long-term trend
NDSU wins fifth consecutive NCAA Division II football title

Crude oil exports
Several links to national stories