This post is not ready for prime time.
See this note from earlier today.
The reader's note allows me to post something I have thought about for years but have not previously posted.
It is conventional wisdom there are sweet spots in the Bakken Basin. Years ago I posted those "heat maps" and they remain linked at the sidebar at the right.
Sweet spots are determined by a host of factors, some theoretical, but at the end of the day, are confirmed by actual results.
Exhibit A: we have great "heat maps" for the middle Bakken but not similarly great "heat maps" for the second or third bench of the Three Forks. We have "heat maps" for the first bench based on limited completed well information.
The way the Bakken is administratively "organized," one often finds E&P operators drilling just one or two miles from each other and yet the results among operators can be incredibly variable. Across the basin, the results are fairly consistent for the same operator. If given the timeline, the IP, the first six months of production, and cumulative production after three years, it is generally possible to identify a BR well from a CLR well from an MRO well from a Petro-Hunt well.
On that continuum, Slawson wells look more like MRO wells than CLR wells. Oasis wells look more like CLR wells than MRO wells.
If, as a mineral holder, you disagree with me, ask yourself, whom would you rather have to drill "your" well in the Bakken: MRO, Petro-Hunt, CLR, Oasis, BR, Chesapeake, or OXY?
I agree that some locations in the Bakken are (much) better than other locations in the Bakken. But I don't think the geology alone explains some of the huge differences we often see in the Bakken.
Break, break.
Most analyses and discussions about tight oil field are very similar to that of conventional oil fields. There's a huge different between shale/tight/unconventional field development and conventional oil field development.
A lot of folks seem to think that the oil industry does not "learn" over time. These folks seem to think that E&P operators don't spend more on improving technology. There seems to be no talk about the expertise, experience, track record of the geologists and the guys and gals actually doing the drilling.
Thesis.
I think the emphasis on "sweet spots" and "heat maps" is over-rated.
My hunch is that over time as there is more consolidation in the Bakken, we will see more "Tier 3" and "Tier 2" drilling locations be re-classified as Tier 1 locations. The reclassification, of course, is based more on price of oil than anything else but if prices stay level or decrease, historically better operators acquiring "bolt-on" acreage will result in reclassification of these tiers.
Exhibit A: if a well's production is simply based on the geology, why do wells re-drill right next to a well that is plugged and abandoned for economic reasons?
Thoughts:
I have trouble believing that MRO and Slawson just "happened" to find the "best" areas in the Bakken. I think operators like MRO and Slawson are doing something others are not doing. Petro-Hunt in the Charlson may be an exception. The Charlson hseems really, really interesting, and Petro-Hunt doesn't drill many wells. But every Petro-Hunt well is watched with great anticipation.
Interesting how MRO, a big world wide entity based in Houston and Slawson, a family owned/operated company based in Wichita KS happen upon the same game plan. Having worked with both and not experienced any of the "horror stories" associated with other company's, I'd say they are the best players in the patch, by far
ReplyDeleteThank you so much. I don't have direct experience, only from the outside what I see. Nice to see someone with direct experience have similar thoughts. Thank you for taking time to write. Much appreciated.
Deleteearly on identification of the "fairway was critical for the land rush following news (secret or not) of initial EOG success. MRO Bailey area was one leading NNE up thru the Newtown/Parshall area. Early "fast followers" were Whiting, Slawson and MRO as well as a few others that have now sold out. Charlson has both some significant east-side faulting (open faults?) as well as an underlying Pronghorn sand reservoir to the ESE. I cant speak for MRO but ditto Mike in that being small, nimble and willing to listen and learn has advantages. Looking farther back you will see Slawson was the second operator in the Williston to drill a Hz Bakken test in 1991, followed by a dozen more. Then applied that knowledgebase to a new reservoir called the Middle Bakken in what is now Elm Coulee. Oddly it couldnt find partners in the 90's who believed the Middle Bakken would work. And while the revolving door of operators in the Williston came/went, they persisted as the basin yielded a new play every 2-3 years.
ReplyDeleteThat's where guys like you are right (correct) and I'm wrong.
DeleteThank you for a great note. You tactfully challenged me on my thoughts that geology is over-rated, suggesting that, in fact, geology is very, very important, and operators like MRO and Slawson were early and smart.
Thank you for an important note; great insight; much appreciated and adds a lot to the history that I had forgotten or did not know. I'm still impressed with Slawson.