Monday, December 30, 2019

Re-Fracking In The Bakken -- The Returns Are Going To Infinity -- December 30, 2019

With regard to the subject line: yes, I am inappropriately exuberant about the Bakken. My focus is on the mom-and-pop mineral owners in North Dakota.

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

Re-posting. This is mostly for newbies. Earlier today I posted:
Shale bust redux.
For those who subscribe to The WSJ, you probably saw the "as shale wells age, gap between forecasts and performance grows" by Rebecca Elliott and Christopher M. Matthews. If the story sounds familiar, it's because it is. This this has been previously posted. From the same writers, almost exactly one year ago, January 2, 2019, also in The WSJ, "fracking's secret problem -- oil wells aren't producing as much as forecast." And then again, September 29, 2019, by the same two writers, RE and CMM, "shale boom is slowing just when the world needs oil most."  Really? Two final nominees for the Geico Rock Award for 2019.
I don't know if the Permian is different than the Bakken when it comes to fracking, re-working, mini-fracks, halo effect, advantaged oil, major re-fracks, etc., but I think the jury is still out with regard to the thesis that Elliott and Matthews would suggest. Below is not an atypical example of what is going on in the Bakken.

In the data below, note:
  • from the original completion date, 6/08, to 5/18, ten years, this well produced 123,000 bbls of crude oil; 
  • then after the re-frack in early, 2018, the cumulative by 10/19, had jumped to 471,000 bbls of crude oil
  • this well, after a re-frack -- and a well that could have easily been written off, abandoned, and plugged -- came roaring back to produce 348,000 bbls of crude oil between in about eighteen months, and with oil about $20/bbl higher -- and the only cost -- the cost of fracking -- at a time when service costs and sand are at record lows
Good, bad, or indifferent, the mom-and-pop mineral owners are probably wondering what just happened when they opened their most recent royalty checks. Good for them.

*******************************
A Re-Fracked Well In The Bakken

The well:
  • 17100, 240, CLR, Mountain Gap 31-10H, Rattlesnake Point, t6/08; cum 123K 5/18; cum 471K 10/19;
We now have the re-frack data: 57 stages; 13.93 million lbs; test 3/18:

Production data before/after the re-frack:
BAKKEN9-20183025164252122623631413278813140
BAKKEN8-2018313599735753453744292442309210
BAKKEN7-20183141189414275749245918433442169
BAKKEN6-20183052661527136344257604528864326
BAKKEN5-20181726682264103645028245211007145
BAKKEN4-201856946945436137901379
BAKKEN3-20180000000
BAKKEN2-20180000000
BAKKEN1-20180000000
BAKKEN12-20170000000
BAKKEN11-20170000000
BAKKEN10-20170000000
BAKKEN9-20170000000
BAKKEN8-20170000000
BAKKEN7-20170000000
BAKKEN6-2017221712403388880
BAKKEN5-201731296239371221166

Production following original frack:
BAKKEN12-20083126452442285143014300
BAKKEN11-20082830423128407341634160
BAKKEN10-20083040063566101936453046599
BAKKEN9-2008252005229118717261545181
BAKKEN8-2008313844364352734843319165
BAKKEN7-20083139694095104330202952725
BAKKEN6-200830591456482002390303903
BAKKEN5-20083116002305000

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