Saturday, February 18, 2017

Whiting's Wells In The Bakken -- SeekingAlpha -- February 18, 2017

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here or what you think you may have read here. In a long note like this there will be typographical and factual errors. My notes are taken from the linked article and may not reflect what the author of that article wrote or intended. I am posting this for my use; if this is important to you, I would recommend you skip this post and go to the linked article. 

I'll have to come back to this later; family activities today. This is not a "Filloon" article but it is very, very similar to what Filloon does, so I will tag it with "Filloon."

Over at SeekingAlpha: leave no well left behind. Archived.

  • Whiting's recent portfolio of mega frac wells in the Bakken is producing impressive results among wells with 3 to 12 months of production, tracking a 947 MBOE type curve
  • WLL's more recent larger fracs of 7 to 15 million lbs of sand are clearly enhancing the early track of MBOE, many of them tracking a 1,200-1,500 MBOE curve
  • Whiting's larger production numbers will stabilize the production drops from its portfolio of 1,500 wells and push the company to break even on a faster pace given NYMEX at $60/bbl
  • 750,000; 900,000; and 1.5 million boe EUR curves
  • the author's results line with up within 2% or better of the data Whiting presents
  • the curves assume a 30-year life-cycle for the wells
  • 85-90% of the oil / gas will be produced in the first 15 years
  • Whiting has a number of older wells near 10 years old now that are producing 1,500 to 2,000 bbl/month on a consistent basis
  • many of these older wells will be re-fracked or worked over to enhance their current track of 300 or 400 mboe EUR
  • most important, these wells prove that Bakken wells have a minimum 15-year life minimum; some analysts suggest Bakken wells will only last ten years
  • apparently controversy regarding Whiting's December, 2016, presentation was focused on the company's use of the 900 mboe type curve and more recently its use of a 1.5 million EUR ttyp cure
  • anyone who has followed the Bakken since 2007 knows these EURs are "believable"
Data :
  • data has been collected on wells since 2015 
  • what is clearly making a difference is doubling the amount of sand
  • operators doubling up on sand: Whiting, CLR, MRO, Oasis, Burlinton Resources (subsidiary of COP) and EOG
  • the whole industry is moving to the "mega-fracks"
Summary data points:
  • all Whiting wells that were fracked in 2016, the average mboe EUR is tracking 952,000, therefore in line with Whiting's claim of 900 mboe
The 1.5 million boe EUR controversy:
All this fuss in the December piece about Whiting's wildly inflated claims of 1,500 MBOE carries some merit, but it's impact is very, very small. Whiting never claimed that ALL of its production would run at 1,500 MBOE, just some of the larger fracs from 2016. Looking closer at the 1,500 club reveals some interesting patterns. First, the 1,500 MBOE wells are actually popping up faster and more frequently now, especially in the last six months of 2016. Below is the table of the current members tracking a 1,500 MBOE curve and its current production as of 12/31/2016. Some of the numbers are eye-popping. Specifically, all of the Rolla wells seem to be screaming right out of the gate in terms of performance, with monthly oil volumes of 45,000 bbls or greater.
But even back in 2015, there are a few scattered 1,500 MBOE babies, in particular Flatland Federal in TRUAX field in McKenzie county. This well is a monster, generating nearly 600,000 barrels of oil equivalents in just over 15 months. If every well in the Bakken behaved this way, OPEC would be out of business tomorrow. Flatland Federal could be tracking (continuing its current pace or slope) nearly 2 million barrels of oil equivalent or more once the data is all in. Keep in mind the data behind these 1,500 MBOE wells is early, just 15 months or less, but unless these curves all start rolling over (many of them have not), it looks as though Whiting's production profile is going to greatly benefit even with fewer wells being drilled under a constrained capex/NYMEX environment.
As for Whiting's 1,500 MBOE claims, I would conclude this. It is early. That is the largest caveat. I would have preferred if it jumped to claiming 1,200 MBOE before making the leap from 900 to 1,500 MBOE! But, in its defense, it now has 20, that's right 20 wells that are tracking at or above 1,500 MBOE, albeit with half of them producing for four months or less. Not many operators can say that. Not Continental, and not Oasis. Yes, there is more data coming in, but Whiting has a very good start. However, there are some "doggy" or dodgy wells that were heavy fracs and are tracking a 600 or 500 MBOE curve with 10 million lbs of sand. Whiting should explain what is going on with these.
It is mostly in areas of Stark and Dunn Counties, and a few in Williams County. What this is telling me is that even if you force 10 million pounds of sand down a hole with massive pressures and temperatures, if the payzone/real estate was average or non-prime, to begin with the larger frac just enhances the original production profile. In support of this idea, if one looks back at 2015, there are a decent number of wells that performed at 900 MBOE or higher and only had fracs of 2 or 3 million lbs of sand. It wasn't the frac that generated that performance, it was the shale/rock payzone characteristics. Whiting needs to be careful of where it spends every $ of capex per pound of sand. Quantity is not always quality.
In summary, if Whiting continues at this pace, its well performance per well will have jumped roughly 100% on an average MBOE from 2015 wells to 2016 wells, from 560 MBOE TO 951 MBOE. The larger sand fracs have a clear advantage in production, as evidenced by the recent set in 2016, with some wells easily producing 1,200 MBOE (tracking after 6-12 months) and others tracking north of 1,500 MBOE. The claims in prior articles of Whiting's overstated data and inferior real estate look to be nothing more than misunderstood statistics and superior short sightedness. As more data arrives in 2017 behind this new crop of wells, it looks as if the company will benefit greatly at both the top line and the bottom line if the marginal frac cost is controlled on carefully selected leases.

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