The Extraordinary Bakken; In Less Than A Year, This Well Produced More Oil Than The Preceding Nine Years -- October 2, 2019

30-second sound bite: this well produced more oil in the past year than it did the entire preceding nine years and it was not re-fracked. It was simply taken off line for two months and then put back into production (wink, wink, or tongue-in-cheek).

Note: in a long note like this there will be typographical and factual errors. I may have made huge errors in simple arithmetic.

Note: I am using $30/bbl for price of crude oil in some examples; in others, $40 oil. I am making assumptions in some examples.

The definition of an ideal well: a well that pays for itself in six months and then provides free cash flow for the next 35 years.

The following well is NOT an ideal well. It took many years to pay for itself. But in the past year it appears to have generated millions of dollars in free cash flow. 

This gets back to a discussion we had months ago. This was addressed by the CEO of some oil company operating in the Bakken some months ago when asked about the "return on investment." I don't remember his specific words, but they were something to the effect that in some cases the return on a well in the Bakken can only be defined as "infinite." Some readers took issue with that. That's fine.

Yes, I know how the return can be calculated, but this is the problem. How do you "carry this on your books" when considering return on investment?

The well:

• 17799, 457, BR, Guadalupe 11-23H, Charlson, t3/09; cum 542K 8/19; not re-fracked; for full production profile, see this post;

This well produced 230,608 bbls between 3/09 and 5/18 when it was taken off line for two months. By 5/18, production had leveled off at about 1,500 bbls/month. Forgetting about the natural gas, at $40/bbl crude oil this well had produced $9.25 million in revenue. Probably about what the well initially cost.

It was then taken off line for two months. It came back on line in July, 2018, about a year ago. In the past year, this well produced 311,226 bbls. As far as I can tell it was not re-fracked.

At $40/bbl = $12.5 million this past year. For a well that had zeroed out. For a well that was taken off line. For a well that was no longer producing (wink, wink).

So many story lines. Back in 2009 this well might have been considered "uneconomic." But the operator keep it on line.

Now, let's say the original owner of these minerals never sold his 160 acres of minerals (the typical size of a farm in this area). This is a 640-acre-spaced well. The owner controlled/owned 25% of the production, and probably received 18% royalties for the production.

In April, 2018, the mom-and-pop mineral owner would have received roughly:

• 1,157 bbls x 0.25 x 0.18 x x $30 =  $1,500.

Not bad but not great. The mom-and-pop mineral owner probably thought this was pretty much what this well was going to be from here on out.

Then, in August, 2018:

• 28,578 x 0.25 x 0.18 x $30 = $38,580.

That was a check for one month.

For the entire past year:

• 300,000 bbls x  0.25 x 0.18 x $30 = $400,000 in royalties this past year alone. 

Oh, one more thing. The owner with mineral rights for this well now has another dozen or so wells. Those wells are spaced at 1280- and 2560-acres so the decimal will be less, but all the same.....

So many story lines.

Again, this well was not re-fracked according to the NDIC and according to FracFocus. I don't think it was re-fracked.
 
This well has not been refracked:

Recent production:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	8-2019	31	8220	8416	2909	35274	35169	28
BAKKEN	7-2019	31	9802	9556	2530	30326	30058	191
BAKKEN	6-2019	30	13347	13680	2269	33120	33046	0
BAKKEN	5-2019	23	14244	14229	1350	24852	24066	729
BAKKEN	4-2019	30	22406	22430	1996	23490	22854	562
BAKKEN	3-2019	31	29673	29576	2600	25049	24972	0
BAKKEN	2-2019	28	28054	28231	2077	27395	27325	0
BAKKEN	1-2019	31	29921	30008	2390	29361	29284	0
BAKKEN	12-2018	30	29567	29553	2462	27767	27693	0
BAKKEN	11-2018	30	28924	28924	2715	26246	26172	0
BAKKEN	10-2018	31	26945	26520	2271	27609	27532	0
BAKKEN	9-2018	30	25088	25570	2155	26978	26904	0
BAKKEN	8-2018	31	28814	28578	2947	32269	32192	0
BAKKEN	7-2018	31	16221	15949	2552	17136	17059	0
BAKKEN	6-2018	0	0	0	0	0	0	0
BAKKEN	5-2018	0	0	0	0	0	0	0
BAKKEN	4-2018	30	797	1173	73	1025	951	0
BAKKEN	3-2018	31	1376	1157	112	1981	1904	0
BAKKEN	2-2018	28	1290	1186	123	1742	1672	0

Initial production when this well was first drilled / completed back in 2009:

BAKKEN	10-2009	31	4657	4443	279	6258	0	6258
BAKKEN	9-2009	28	4289	4597	256	6494	4948	1546
BAKKEN	8-2009	31	5468	5305	419	8661	7609	1052
BAKKEN	7-2009	31	6383	6446	579	8164	5829	2335
BAKKEN	6-2009	23	5908	6000	588	7737	5963	1774
BAKKEN	5-2009	31	7296	7028	568	8979	8247	732
BAKKEN	4-2009	30	8520	8716	871	9571	4969	4602
BAKKEN	3-2009	29	9594	9177	1774	8376	0	8376