Commentary -- 2021 -- Lots Of Work Left To Be Done In The Bakken -- February 23, 2021

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. 

This is not an investing site. I follow the operators in the Bakken to help me understand the Bakken. Different operators do things differently.

Three companies that seem best aligned to do well in an environment of rising oil prices. Two of the companies will by minimally impacted by a DAPL shutdown. I don't know about the third. It's very possible a DAPL shutdown could actually improve the situation for one or two of these three companies.

The three companies: CLR, Hess, and MRO, in alphabetical order. 

I am not recommending that individuals invest in these companies. I find them interesting from a "Bakken" point of view and not from an investing point of view. 

30-second elevator speech for these three:

• Hess: slow and steady; stay true; no sharp turns; lots of natural gas, production, gathering, and processing;
  
• MRO: some of the best sites in the Bakken; many fields are excellent fields for re-fracking;
• CLR: damn the torpedoes; full speed ahead; more rigs; a bit more fracking; "unitized" locations by another name;

Narrative to follow.

Graphic:

Compare with CLR in the Elm Tree:

Other graphics:

 

Links:

• CLR: 4Q20 earnings; corporate presentation; here;
• DUCs, monthly data;

Previously posted:

Running the numbers. 

The Bakken holds 500 billion bbls of OOIP. Ten percent is definitely recoverable. Harold Hamm once suggested the Bakken held upwards of one trillion bbls of OOIP but then backed off. The "500" number comes from a paper written years ago, never vetted, never published. With new data, one does wonder if 500 is off by half. 

Early in the boom, it was expected that 1 - 3% of OOIP would be recovered/produced through primary production. It didn't take long for Whiting to show that 10% was easily achievable, and now there are estimates that percent recoverable through primary production could be much, much higher. But let's stick with the conservative numbers.

• OOIP: 500 billion bbls
• primary production, 10%: 50 billion bbls
• Bakken production: one million bbls / day = 365 million bbls/year
• do the math: (50 billion bbls ) / (365 million bbls/year) = 50,000 / 365 = 140 years of drilling and CBR
  

Now let's assume primary production is 20% and let's assume OOIP remains the same. Let's assume that production drops to an average of 250 million bbls/year for various reasons (Biden policies; EVs; pipelines shut down, etc):

• 500 billion x 0.2 = 100 billion bbls
• 100 billion bbls / (250 million bbls/years) = 400 years and CBR
  

The law of big numbers.

If the numbers seem impossible, remember that they were drilling in North Dakota for sixty years before the Bakken became a "thing." And the Bakken dwarfs the other plays in North Dakota. 

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Work To Be Done

Some of the wells in the graphic above, working from west to east.

• 21450, 1,600, MRO, Jessica USA 21-6TFH, Reunion Bay, t3/12; cum 369K 1/21;
  

• 37771, conf, MRO, Plenty Horns USA 31-6H, Reunion Bay, 
• 37774, conf, MRO, Odell USA 41-6H, Reunion Bay,

• 18230, 552, MRO, Fisher USA 21-5H, Reunion Bay, t11/09; cum 323K 1/21; perhaps a subtle increase in production after coming back on line, 9/20;
  
• 37857, loc, MRO, Morgan USA 11-5TFH, Reunion Bay,

• 37654, drl, MRO, Albert USA 31-5TFH, Reunion Bay, 
• 37655, drl, MRO, Joba USA 31-5H, Reunion Bay,

• 21479, 1,753, MRO, MHA USA 11-4TFH, Reunion Bay, t6/12; cum 343K 1/21;
  
• 37787, drl, MRO, Watterberg USA 41-5TFH, Reunion Bay,

• 30512, 3,255, MRO, Gaynor USA 34-33H, Reunion Bay, t2/17; cum 405K 7/20; off line 7/20; remains off line 1/21; 
• 30516, 1,536, MRO, Hannah USA 31-4TFH, Reunion Bay, t9/16; cum 465K 1/21;
  

• 18191, 613, MRO, Raymond USA 41-4H, Reunion Bay, t12/09; cum 392K 1/21;
  

• 37799, drl, MRO, Gracie USA 11-3TFH, Reunion Bay,
• 37801, drl, MRO, Brusseau USA 11-3TFH, Reunion Bay,

• 18378, 577, MRO, Henry Charging USA 21-3H, Reunion Bay, t4/10; cum 559K 1/21;
  
• 29759, 2,456, MRO, Steinhaus 24-34H, Reunion Bay, t8/15; cum 312K 1/21;
  
• 29760, 2,267, MRO, Halvorson 34-34TFH, Reunion Bay, t8/15; cum 346K 1/21;