Sunday, July 14, 2019

Trends In The Bakken -- July 14, 2019

Trends in the Bakken:
  • permitting seems to be picking up over the past few weeks
  • the number of active rigs are dropping from 60 - 65 range to 55 to 60 range during best drilling months of the year (see below; this is actually good news for investors)
  • EOG is back to work in the Bakken (EOG generally ceases new activity during the winter months)
  • CLR is "carrying the water" in the Bakken right now
    • very few other operators are reporting new wells
    • CLR seems to be accounting for about 75% of new wells coming off the confidential list
  • new areas in the Bakken not being reported with regard to wells coming off the confidential list
    • most new wells reporting are from established pads
  • although I haven't checked recently, earlier this year wells were being completed with fewer stages (35 - 45) than last year (40 - 60)
    • most wells were being completed with moderate amounts of sand (small amounts when compared to what I recall being used in the Permian); there are exceptions, EOG, for example, reported huge amounts of sand in some of its wells recently coming off the confidential list
  • the narrative suggests that production in the Bakken is being held up by lack of infrastructure; the problem is not so much pipeline or CBR as it is flaring; the state has become more tolerant of flaring but even so
  • this is most interesting: corporate presentations and news in the business sections of newspapers suggested this was the year (2019) that operators were going to concentrate on their bottom lines: cutting debt, maximizing free cash flow, etc. Apparently, some operators were getting "feedback" from their bankers and their investors that it was time to focus on finances
    • that may explain some of the reason for the decline in the number of active rigs during the best part of the year for drilling in North Dakota
    • Lynn Helms did mention some weeks ago -- before the decline -- that there would be a decline in the number of rigs this summer
  • the Director's Cut for May, 2019, data is scheduled to be released tomorrow
    • I would be surprised if the crude oil production for April, 2019, was not revised upward -- in which case it would have set a new all-time record for crude oil production in North Dakota
    • I anticipate another great report tomorrow
  • if we get another great report tomorrow, it will again suggest that the number of active rigs is not a big issue right now
    • by the way, month-after-month, North Dakota is setting new all-time production records for BOE which is not being reported by the Bismarck Tribune or other outlets; 
    • this corroborates the problem the operators and the state is having: even with flat crude oil production, the amount of natural gas production keeps increasing and NG gathering and processing companies cannot keep up with the increased production (a nice problem to have, by the way; I'm not complaining); in this business, you never want to have excess infrastructure
  • what little I know suggests that smaller operators who moved out of the Bakken to the Permian are facing huge challenges; it was incredibly expensive to buy into the Permian and the infrastructure problems were similar to the early days of the Bakken
  • it would be nice to see an analysis by Wood Mackenzie or Rystad comparing parent-well uplift and/or parent-daughter interference in the Bakken with that in the Permian
    • it's my impression that with regard to the "halo effect," the Bakken is doing just fine
    • if you don't believe me, look at this most recent post, or this blog; with regard to that latter blog, I simply can't keep up with all the examples
  • when I get the chance, I will talk about CLR and its "damn the torpedoes, full speed ahead" philosophy
Disclaimer: I remain inappropriately exuberant about the Bakken

Note: I continue to appreciate all the feedback I get from readers; I learn a lot from the readers

Shout-out: to all the roughnecks and truckers -- enjoy your summer -- summers are not long enough in North Dakota; use lots of DEET

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