Idle Rambling On A Friday Night -- November 2, 2018

From SeekingAlpha on CLR. And that is taken from a Platts article.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or think you may have read here.

Now, back to the linked article. Summary:

• Continental Resources doubles its estimate for oil recovery from North Dakota's Bakken shale, claiming 30B-40B barrels of the 250B barrels of oil in place will be recovered instead of the 20B barrels it estimated in 2011
• "With today's completion technology we are recovering 15% and potentially 20% of the oil in place on a primary basis," CLR President Jack Stark said during today's earnings conference call, "substantially higher than the recoveries that we thought possible back in 2011."
• "There's a lot more oil to come out of the Bakken," said Chairman and CEO Harold Hamm.
• Using a North Dakota industry estimate that ~50K potential wells remain to be drilled in the Bakken, Stark said each well would have to produce 570K barrels to reach CLR's new estimates for recoverable oil - "clearly a reasonable expectation for Bakken wells on average," according to Stark.
• North Dakota oil production averaged a record 1.29M bbl/day in August, and CLR says its output accounted for 12% of that production.
• Earlier: Continental Resources +2.5% as Bakken production reaches quarterly record (October 29, 2018) 

This is a keeper. Read those stats again.

OOIP: CLR is apparently sticking with 250 billions of original oil in place (OOIP) in the Bakken; that's a far cry from a trillion-bbl reservoir suggested at one time; but, I'm sticking with the Bakken being a 500-bbl OOIP reservoir, and wouldn't bet against a trillion bbls, but I'm inappropriate exuberant about the Bakken.

Primary production, defintion: in the early days of the Bakken, the consensus -- tight oil was called "tight" for a reason; drillers would only be able to recover 1 - 3% of OOIP in primary production. Primary production is all that production before enhanced recovery is required, such as water flooding and/or CO2 injection. Oil recovered after work-overs; re-fracks; etc, is still considered primary production. Primary production can go on for decades.

Primary production, Whiting, the early days: in the early days of the Bakken, the consensus was that drillers would get only 1 -3% of the OOIP by primary production. This blog was the first, as far as I am aware, that suggested drillers were getting as much as 4 - 6% even when pundits were still talking about 1 - 3%. Then Whiting, either intentionally or by mistake, mentioned in one of their conference calls that they were either already getting upwards of 12% or expected to reach that threshold before it was all over. That was a long, long time ago, and my memory may be faulty, but I vaguely recall something along that line.

Primary production, CLR, now: CLR says that "we are now recovering 15% of the OOIP and Harold Hamm thinks they could eventually get to 20%. Let's do the math:

• a EUR-type curve of 1 million bbls
• 15% of what = 1 million bbls
• OOIP: 6.7 million bbls  [check the math: 0.15 x 6.7 = 1 million bbls]
• so, let's go with 6.7 million bbls OOIP for any given well
• 20% of 6.7 million bbls OOIP takes us to 1.34 million bbls -- CLR is already reporting EUR-type curves of over 1.2 million bbls

Number of wells yet to be drilled in the Bakken: 50,000. The North Dakota Bakken boom began in 2007, and was headed for about 2,000 new wells/year but then plateaued at about 1,000 to 1,5000 new wells per year. Using 1,500 new wells / year, eleven years in the Bakken puts us at [11 x 1500] 16,500 Bakken wells. So, let's see what NDIC says. According to the most recent Director's Cut, there were 15,103 producing wells in August, 2018, which by the way, was an all-time record. Wow, not too far off the mark. So, we can safely say , one can expect about 1,500 new wells/year. 50,000 new wells / 1,500 = 33 more years of drilling.

Years of production: just for grins, let's assume the OOIP is actually 500 billion bbls -- again, I'm inappropriately exuberant with regard to the Bakken -- and let's assume that for whatever reason, North Dakota maxes out at 2 million bopd production. Let's do the math:

• 15% primary recovery
• 15% of 500 billion bbls = 75 billion bbls
• 75 billion bbls / 2 million bopd / 365 = 100 years of production
• Now if each well has a EUR of, let's say 1.5 million bbls, how many wells would that require?
• 75 billion bbls by primary recovery / 1.5 million bbls / well = 50,000 wells
• 50,000 wells -- interesting. We're back to the same number suggested above -- another 50,000 wells to drill out the Bakken

Disclaimer: math is not my first language. There will be simple arithmetic errors on this page. In addition, in a long note like this there will be factual and typographical errors. This is done for my benefit. No one should take any of this too seriously.