Talking About The Bakken -- July 25, 2021

Note: 

• I remain inappropriately exuberant about the Bakken.
• This is not an investment site.  
• I often misread things.
• I often see things others do not.
• I often make huge mistakes. I generally acknowledge huge mistakes unless they are opinion pieces, if that makes sense.
  
• I have a hidden agenda: to promote the Bakken and the state of North Dakota. And Montana. And the United States.
  
• I have three ads on each page because that's what the google app / google demands if one monetizes a blog; the only reason I monetized my blog was a challenge by one of my granddaughters to see if I knew how to do it. I have no control over the ads that are placed on the blog. Generally, I don't like the ads that show up. I would like to get rid of the ads, but it was such a complicated process, I don't want to go through it again if I change my mind.
  
• I often make simple arithmetic errors.  
• I regularly make typographical and content errors; I correct them when I find them. I appreciate readers not pointing them out unless they are really, really egregious.
  
• "milliondollarway" is a reference to US Highway 2&85 north of Williston which was my metaphorical, figurative, and literal way of leaving Williston after high school; it has nothing to do with me personally.
  

The following: simply some random notes and links thrown together after seeing Whiting's recent Bakken announcement. 

Re-posting:

From Geoff Simon's top North Dakota energy stories this week:

Whiting Petroleum announced this week it has entered into an agreement with an undisclosed seller to acquire 8,752 net acres in Mountrail County for total cash consideration of $271 million.

 

The Bakken acreage includes 61 undrilled locations, five drilled but uncompleted (DUC) wells, and currently produces 4,200 BOE/day, of which 80% is oil. Company officials say there is significant upside from Whiting Petroleum’s existing operations in the Sanish field. 

Peterson said the company estimates that in a mid-$50s oil environment, it has more than six years of high-quality drilling inventory, assuming a two-rig drilling program.

 

$271 million / 8,752 net acres = $31,000 / acre. Figures rounded. 

 

8,752 acres / 640 acres = 14 sections.

 

8,752 acres / 1280-acre  units = 7 drilling units

61 undrilled locations / 7 drilling units = 9 additional wells in existing 1280-acre units; 

Graphics pending. 

This is what the Sanish looks like today. The first graphic, well sites only, horizontal legs removed. The second graphic, well sites with horizontal legs added back in. In the first graphic, the Sanish is outlined in a heavy red border.

 

The Sanish is about 5.5 townships in size, or about 36 sections/township x 5.5 townships = 198 sections, rounding to 200 sections, or about 100 1280-acre drilling units.

Note: two rigs in the Sanish:

• 32123, drl/loc, Whiting, Niemitalo 31-15-3XH, Sanish,
• 37344, drl/loc, Kraken/Kaiser-Francis/Fidelity (MDU), Bigfoot 23-11 6TFH, Sanish,

Projections: number of wells in each 1280-acre drilling unit (includes 2560-acre section line wells), in the Sanish:

• currently: averaging about six wells were drilling unit, I suppose; range: two to twelve, or thereabouts;
• for sure: "the norm" will eventually be twelve wells per drilling unit; this does not mean every drilling unit will have twelve wells but in general that's what I expect to see; there will be exceptions;
• probably: there will eventually be an expectation of twenty-four wells per drilling unit; not all twenty-four wells will remain active more than ten years;
  

Wells per drilling unit:

• the number of wells in a drilling unit is still an important metric, but as technology improves, the number of wells per drilling unit becomes less important
• more important: the EUR (primary recovery) from a given drilling unit
• starting in 2018 or thereabouts, it appeared EURs of one million bbls in the better Bakken were required to justify drilling; I will continue to use that number: one million bbls EUR per well in the better Bakken, which includes the Sanish
• primary recovery: in the early days, it was assumed primary recovery was in the range of one- to three-percent of original oil in place (OOIP)
• when the Bakken was reaching its stride, let's say about 2010, I saw reports that suggested primary recovery was in the eight percent range, and some suggested it was significantly higher;
• I now assume primary recovery is in the range of twelve percent among the better locations by the better operators. 
• [For comparison, I recently ran the numbers based on publicly available information, that the Saudis were getting about 30% recovery in their biggest field, where they are currently using waterflooding in conventional drilling.]

The numbers regarding OOIP in the Bakken do not add up.

• the most recent USGS survey of the Bakken was released in 2013; that survey is linked at the sidebar at the right;
• we were promised an update in 2020 -- never happened -- which was good, in hindsight -- 2020 was a very, very bad year to complete a new assessment; 2020 will be known as the year the Bakken stood still.

The weirdest thing:

• according to Investopedia, oil reserves are the amount of crude oil a country or region has that can be reasonably extracted; but yet,
• according to BP, global proved oil reserves were 1732 billion barrels at the end of 2020, down 2 billion barrels versus ‎‎2019. How did that happen?
  
• Investopedia does not mention "price/cost" in its opening definition, but most agree -- in fact, I think all agree -- that price/cost of oil is a significant part of the discussion.
• wiki probably says it best, first line at this link: oil reserves denote the amount of crude oil that can be technically recovered at a cost that is financially feasible at the present price of oil.
• which leads us to situations like Venezuela; it seems in addition to technology and price of oil, a third component necessary is political will; if the US bans all oil production in the United States, would our reserves matter? Would our reserves zero out?

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Annual North Dakota Oil Production

Link here. 

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Crude Oil Reserves -- A Commentary

Link here.

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900 vs 300

Link here.