A Reader Has Several Questions Regarding The Bakken -- August 14, 2024

Locator: 48419B.

In a long note like this, there will be content and typographical errors. This is the first iteration for this post. It will go through several iterations, updates, corrections. The usual disclaimer for the blog still applies. 

My comments are a bit disjointed below because I was updating things, and going back and forth while studying the maps and production data. But I think the reader can get the gist of what I'm saing.

A reader had a question: how will four new wells affect three existing wells?

The graphics are below.

The three existing (older) wells are identified with red ovals.

The four new wells, still on confidential list, are on a 4-well pad, the pad identified with a blue oval.

The existing wells are in three adjacent stand-up 1280-acre spacing units; the three wells run south to north.

The new wells, on a four-well pad, as noted, are on a laydown 1920-acre (three section) spacing unit; the horizontals run from west to east.

First question: how will the new wells affect the existing / producing wells in regard to their "status" once the new wells are completed?

Answer: this is crucial -- all wells "stand alone." It does not matter that new wells are being drilled in the same area -- in the sense that the old wells will still exist, regardless of new wells being drilled. So, ignore the new wells; the existing wells keep "doing their thing."

In this case, the new wells are not even in the same spacing units as the existing (older) wells.

Second question: how will the new wells affect the existing / producing wells in regard to "actual production"?

1. If the reader has minerals in all six sections of the existing wells, the reader will participate in oil royalties from the four new wells.

2. If the reader has minerals only in the south sections (sections 4, 5, and 6) the reader will not collect royalties from the four new wells. [This applies to the reader.]

3. If the reader has minerals only in the north sections (31, 32, and 33), the reader will collect royalties from the four new wells. [This does NOT apply to this reader.]

4. In this case, the reader says he/she has a mineral interest only in the south section. This means that the reader will not participate in the new horizontal wells.

Break, break.

Now, how will the new wells affect the production of the existing wells/ To some extent, it depends on whether the existing wells and the new wells are targeting the same formation. Based on the names of the wells and the reader's input, it appears that the existing wells and the new wells are all middle Bakken wells.

Assuming they are all middle Bakken wells, it is likely that the new wells will "enhance" the production of the existing wells. In some Bakken fields in North Dakota, new wells have a huge "positive" effect on existing (older) wells, whereas in other Bakken fields, new wells have little effect on existing (older wells).

These wells are in the Painted Woods oil field. In this field, newer wells tend to have little to no effect on existing (older) wells.

So, what's likely to happen:

1. The operator will take the existing (older) wells off line while the newer wells are fracked. Generally, once the wells are drilled to depth, the operator will frack the four wells in short order. Existing (older) wells may be taken off line for a short time -- as little as one month in some cases -- or much longer -- sometimes months.

2. Once the new wells are fracked and associated work on these wells completed, which may be several months from now, the existing (older) wells will be brought back on line. This does not always happen; this will be discussed in greater detail below.

3. When the older wells are brought back on line, initial production may be less, the same, or more than what the production was prior to being taken off line. But within a few months, production from the older wells will be back to what the production was before they were taken off line.

4. All things being equal, the new wells should have much better production than the old wells because the operators have gained a huge amount of experience over the years of drilling the Bakken.

What could happen?

If the new wells are really, really, really good, and the old wells are "petering out" and getting too expensive to maintain for the amount of oil being produced, the operators could take the older wells off line permanently.

What else is likely to happen?

If the wells are really, really, really good -- and even if only pretty good -- the operator will drill four more horizontal wells in a laydown 1920-acre unit consisting of sections 4, 5, and 6. 

These are the graphics:

 

Everything above is a mixture of fact and conjecture (opinion) based on my experience following the Bakken since 2007. I have no formal training in oil exploration / production, and no background in the oil business or geology. Everything above could be absolutely wrong, and/or interpreted incorrectly by readers. But I'm pretty sure I know what's going on. If I'm wrong, I will be quite surprised, though absolutely anything is possible.

Later, I will look at the production profiles of the existing wells and see if anything else comes to mind.

I doubt I will spend much time on the new wells because they are still on confidential list, but we'll see.

Once I post this, I will wait for the reader to see if he/she has more questions, or if something needs clarification, but I probably won't get to those questions for another 24 to 48 hours.

Bottom line: because the reader has a mineral interest only in the south section in the 2-section, 1280-acre unit, the reader will NOT receive royalties from the new horizontal wells to the north BUT and this is a huge "BUT" -- the operator will eventually drill four similar horizontal wells west to east, cross the south unit, and the reader will participate in those four wells. There is no way to guess when the operator will drill these four wells -- it could be next year or ten years from now, but it will happen (conjecture) based on how things are being done in the Bakken.

I will correct the formatting of this post later. 

The original question from the reader (with some mild editing):

We have an interest in a well that is in a 1280-acre standup drilling unit. Our interest is in the south section of this two section drilling unit. This well was drilled in 2010 and is still producing as of the last royalty payment received.

Apparently, a new 1920-acre extended lateral drilling unit was formed but in a lay down configuration. This lay down drilling unit runs through the north section of our drilling unit but not in the south section where we have an interest.

Back in May, Grayson Mill began drilling four new wells from west to east in this new drilling unit. The question is, does this new drilling unit negate our current drilling unit and well altogether possibly leaving us hung out to dry? Answer: no. The new spacing unit, the new wells, do not "negate" your current drilling unit. Your drilling unit exists forever for the existing well. That can't be changed. 

Would our well likely be shut in permanently due to this new unit configuration? Answer: yes, it's possible but not likely.

Our well and the new four wells are all middle Bakken wells so at some point the well bores will cross and being that the MB seam is not that thick, you would think there will be some drinking of each other's milkshake? Answer: impossible to quantify. But in all my years of looking at production profiles, I have come to certain conclusions but it's an opinion with which most folks would disagree with me, so I won't opine.

And think what the effect could be on our well when fracking occurs on the new wells. I realize they shut existing surrounding wells in while fracking occurs close by, but this is an actual well bore crossing. At the end of the day, I have a feeling this is not a positive situation for our interest. Yes, they will take the wells off line while the new wells are being fracked -- in fact they are already off line -- see below. No one can predict whether the wells will be brought back on line but my hunch is that they will be brought back on line -- see below -- but it is very iffy.

The area of concern: sections 4, 5, and 6 - T154N R102W (Wing, Mortenson, and Jack Erickson) and sections 31, 32, 33 - T155N R102.

The four new wells are sited  in section 31-T155N  R102W. (Marilyn wells). I believe all these wells are currently Grayson Mill wells. Yes, they are all Grayson Mill wells.

With regard to the "milkshake" analogy, there's no way to quantify that. I can opine on that but I doubt anyone would agree with me. The new wells are too far away to affect the south section (some may disagree with that) so if the operator shuts in the existing wells, he is shutting in a lot oil, suggesting to me, the operator won't shut in the older wells at this time. [I just checked the production profile of the existing wells. Those three older wells were shut in the last 17 days of May, 2024, and the entire month of June, 2024. Prior to being taken offline, the wells were each producing around 800 bbls off oil / month which is getting pretty low. The good news is that the operator still shows these wells as active. I'm betting they come back on line but not 100% comfortable in that bet.]

The worse thing that could happen, is YES, the operator could shut in the reader's well. But, long term, the operator, as mentioned above, will eventually drill four new horizontal wells across the south section where the reader has minerals. 

From the reader's perspective, this is likely to be bad news -- these new wells being drilled. From my perspective, it's great news. It tells me the operator is interested in this area. It's unfortunate for this reader that the new wells were not one mile to the south but eventually wells will be drilled there also (conjecture).

One last thought: if the new wells really, really affected the older wells positively, then it's even less likely the operator would shut in the older wells. But again, in the Painted Woods oil field I have not seen much of a halo effect. I would love to be pleasantly surprised in this situation.