A Reader Asked About The Murphy Creek Oil Field -- An Answer That Is Not Ready For Prime Time -- October 10, 2019

A reader asked me about the Voss well in Murphy Creek. The reader was curious if Marathon would be drilling more wells in this area. My reply below the graphic.

Disclaimer: the reply is not ready for prime time. It's a casual conversation that one might hear in the coffee shop on Main Street in Williston. In fact, I will disavow that what is written below the graphic is mine. I will say that I heard this in the coffee shop and paraphrased what I heard. LOL. Everyone has an opinion on the Bakken; everyone has a worldview (myth) of the Bakken. This is how someone (I know not whom) sees the Bakken on October 10, 2019 (below the graphic).
 
The graphic:

A reader asked: do you think this is a good area, where the Voss well is located? Do you think there will be more wells drilled in this area?

The reply, paraphrased, that I overheard:

I think the better question to ask is "how does this area compare to other areas in the Bakken or how does this area compare to the [best wells in the Bakken]?"

I suggest asking the question that way because if Elizabeth Warren is elected president (or any of the current Democrats, for that matter), fracking in the US is dead. Seriously. They don't have to ban fracking outright. They can ban new pipelines; mandate huge EPA regulations shutting down flaring; etc, etc., and thus killing fracking. And they can do that on state land, not just federal land.

So, the better way to ask the question is, "how does the Voss area compare to other areas in the Bakken?"

1. The Murphy Creek oil field is a huge, huge oil field in central, west Dunn County.

2. The Voss area is surrounded by perhaps some of the best oil fields in the Bakken: Chimney Creek, the Cabernet, Jim Creek, and without question, one of the best of the best, the Bailey field.

3. So, you might ask, if the adjoining areas are so good, why is there so little drilling in this area of the Murphy Creek oil field. The operators, in this case, Marathon (MRO) manage their assets. They do this in an orderly fashion.

4. In the boom, the drilled every section they could as fast as they could to save (hold) the lease by production. They also drilled every section to find out what they had. In the early boom, the operators had no idea where the Bakken was good and/or how to frack it.

5. Now that they know all that stuff, they are drilling out the Bakken based on long-term strategic plans. They would prefer NOT to drill any more of the Bakken but, instead, spend their money on looking for new fields around the US, and the world, for that matter. They know what they have in the Bakken and they want to "manage" it for the long term. There are many, many factors regarding "management." Think of the Bakken as their savings account. Some operators are using the Bakken as their checking account or ATM to pay for drilling wells in the Permian (Oasis, for example).

6. MRO is an incredibly good operator. I think they have an entire division of the company dedicated to drilling out the Bailey. They are methodically going back into the Bailey and re-fracking every old well, and hardly putting in any new wells. For MRO, the Bailey is huge and will only get bigger.

7. The Cabernet, southwest of Murphy Creek is incredible. Some other blogger noticed that in 2010 and that's what got me exciting about blogging; I was able to see what he saw; I knew I was on the right track. The first operator in the Cabernet was Occidental (OXY) and they completely blew it; they did not know how to drill / complete a Bakken well. Someone else now owns all of OXY assets in the Bakken (not MRO) and doing a great job, but they are a smaller company, less capital so they cannot drill as fast.

8. Chimney Butte is an incredibly good field. I think CLR has some great wells there, but I forget.

9. Bottom line: MRO has a long-term strategic plan and it appears Murphy Creek is not yet on their radar scope. But when they do start drilling Murphy Creek, I think it will be on par with the [best wells in the Bakken].

10. But they might not get to Murphy Creek until your unborn grandchildren (if you have any) are teenagers. If the MRO Bailey division were to move west into Murphy Creek, it could happen a lot sooner. So a lot of folks will get bored watching this area, and a lot of folks will be tempted to sell their mineral rights, but if one has a long horizon, and the world still needs oil, this is going to be huge. [By the way, a rule of thumb that seems to work when I see what folks write me is that landmen generally offer one-fourth of what the mineral acres are likely to produce. From my perspective, that is not necessarily bad. We can discuss it some other day.]

11. If you look at the Voss / Murphy Creek inside the oval, you will see that there is only one horizontal well in every drilling unit (every two sections). There will eventually be 12 wells in each of those drilling units, and very likely many more.

12. CLR is drilling the heck out of the Bakken right now, but that's because CLR only has the Bakken and Oklahoma, and Oklahoma is not that great compared to the Bakken. The Bakken is making Harold Hamm/CLR a ton of money every month. I think he's a lot like my father. Harold Hamm is now in in his 70's and I think he wants to go out with a bang. I've never seen any operator in the Bakken drill like he's drilling now. My dad did the same thing as he got older, taking many more investment risks than he did when he was younger and raising a family. Harold Ham is 73 years old; one wonders if he set some kind of target for his 75th birthday?

13. On the other hand, MRO has very, very deep pockets and has many oil plays outside the Bakken. They split up their capital spending among the Bakken and their other plays. So they go slower and manage their assets differently.

12. Anyway, someone else's worldview. I'm just paraphrasing.

Disclaimer: those espousing the opinions above are obviously inappropriately exuberant about the Bakken and their comments should be taken with a grain of salt. But it does make entertaining reading.