"Advantaged Oil" -- October 13, 2019

See this post for background on "advantaged oil."

I would like to find a better discussion of "advantaged oil" but these seem to be the parameters involved:

• short-cycle projects
• digital technology, perhaps including AI
• types of oil, heavy vs light; turning on a dime; producing the oil refiners want/need
• low risk, low cost
• high margin

I am absolutely 1000% convinced that there are several examples of operators focused on "advantaged oil" in the Bakken.

One. The most obvious is what Whiting and CLR have already suggested. Whiting has been much more upfront about it: parent-daughter uplift. I doubt there is any better example of "advantaged oil" as defined by BP.

Two. The second example is what MRO is doing in the Bailey oil field and CLR is doing in the Brooklyn oil field: methodically drilling it out.

In the Brooklyn oil field, I haven't noticed anything particularly striking but in the Bailey oil field, I have, and that would be a third example of "advantaged oil" in the Bakken (but sort of a combination of the first two examples): methodically drilling out an oil field that shows huge promise for "parent-daughter uplift."

Three. Another field that appears likely to be the best ever oil field in the universe to benefit from the "parent-daughter uplift": the Charlson oil field in the Bakken. Again, "advantaged oil." There is a very, very subtle reason why I separate the Charlson out from the others.

Four. A fourth example of "advantaged oil" in the Bakken: CLR's mega-density projects such as the Long Creek Unit -- low price, high margin returns -- 60 wells in ten sections drilled out by two rigs and completed by two or three frack spreads. It appears CLR is doing that in several places in the Bakken but simply not marketing with the same headline-grabbing news like the LCU.

Five. Interestingly, if "advantaged oil" is closely associated with "digital outcome" as mentioned at the post linked above by BP (Thunder Horse), then I would argue that the world's largest microseismic array which is located in North Dakota is another example of "advantaged oil." [Note: the microseismic array was the largest at one time; I don't know if that still holds true. I would argue that the "core library" at the UND - Grand Forks may be the most comprehensive oil-related library in the world, depending on how one measures these things.]

Six. One can argue that my sixth example is similar to the ones already mentioned, but I would argue that it's different. The Williston Herald already had a story on it this past week: re-fracking will be the next big thing in the Bakken. Operators will use digital information to sort out where best to begin re-fracking. MRO has the lead from what I can tell but others are starting to join in. 

From an earlier post: some comments with focus on the Bakken:

• manufacturing: it was a local Willistonite that first coined the phrase, "... manufacturing stage in the Bakken..." -- said perhaps six years ago; now an industry standard concept
• predictable: 
• "no dry holes" -- I said that from the very beginning about the Bakken -- the Bakken is simply unique in this regard -- something oil companies had not experienced before -- knowing that they will strike oil when they drill a Bakken well
• not only are there "no dry holes," operators can predict with near 100% accuracy the potential of a new well based on "offset" wells; provides innumerable benefits
• flexible
• modular: operators can acquire neighboring acreage easily; operators can easily sell non-core assets
• small capital costs (relative to off-shore projects)
• scalable: here's a word I've not yet seen in the discussion regarding the Bakken (again, I'm using the first definition of the "Bakken" -- but unlike huge offshore projects that take years of planning; huge outlays; etc., the "Bakken" is 100% scalable. I'm not talking about production, I'm talking about drilling/completing new wells
• timeliness, from time to concept to spud to production
• offshore: measured in years
• Permian: measured in months
• the geographic Bakken: measured in weeks
• new paradigm
• conventional oil: boom and bust
• shale: manufacturing ups and downs