The Man Who Bought 60,000 Oil And Gas Wells -- May 1, 2021

Updates

May 2, 2021: the reader continues with this:

Regarding the Bakken/Permian DSU differences ... both were/are one-square-mile 'squares' with the North Dakota regulators prudently expanding to two-square-mil (1,260 square acres) spacing units in the early years.

That single action - going from 640- to 1,280-acre DSUs  - was arguably one of the most crucial acts in boosting Bakken development.

The Permian still employs 640 square acre units - 'leases' being the common description - throughout the state ... as does Oklahoma, Louisiana, Colorado, and virtually every other state (excepting California) west of the Mississippi.

One interesting fact on this topic is the 'mineral rights' / Land Grants that the US government gave to prospective railroad builders in the late 1800s in efforts to encourage them to build new rail tracks. 

These legacy  mineral rights can be seen with the 'checkerboard' holdings in Texas and Colorado, especially, that company investor presentations usually show. [I believe I saw them at one time in presentations relating to North Dakota, also.]

Just as the little-recognized stripper industry plays a significant role in the oil/gas production world, the entire 'land/landmen' arena is almost completely overlooked, while being an extremely influential component of the industry.

May 2, 2021:  the reader who tipped me off to DGO, sent a follow-up:

That DGO outfit is certainly positioning itself as a premiere stripper, but that barely scratches the surface of what is taking place.

Eastern states, unlike the rest of the country, do not have pre-determined, geometric shaped drilling units. In fact, no DSUs exist at all. As a consequence, once a 640 acre holding is 'cobbled together' with willing mineral rights holders, an operator may get state approval to drill.

The shapes of these units (and the total size of contiguous acreage) is all over the place.

One consequence is that scattered, fragmented pads/holdings have little value to the Big Boys.

Enter DGO who was practically given over a dozen producing unconventional wells, engineering plans for maybe 30 more, and about half dozen developed pads which cost around $1 million each to prepare in Pennsylvania. 

The real value, it seems, with this company is that it offers a great outlet for the Big Boys to continue buying/merging without having to bother with the 'crumbs.' 

This is why EQT bought out CVX's Pennsylvania holdings for $735 million when CVX originally paid around $6-$8 billion for the stuff. EQT turned over the fragmented, unwanted producing pads/wells to DGO for peanuts. 

XTO - and others - are following CVX in leaving Appalachia.

Bottom line, consolidation continues apace. 

One consequence is the enormous benefit that some 'Little Guys' may receive. [Comment: again I am posting this to help understand how different plays, like Appalachia, are developed, compared to the Bakken. I assume the Permian is similar to the Bakken, but the Permian being a much older play, probably has some unique drilling unit issues.

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. 

Original Post

Brought to my attention by a reader. Quite a story. Link to BBC.

So in 2001, aged 32, Rusty bought an old gas well back in West Virginia for $250,000 (£200,000). He raised the money by remortgaging his home.

"It was a small old well, it had been in production for years, but it was like gold to me," he says. "I spent the next four years still also working in the bank, but any spare time I had I'd fly up to West Virginia to work alongside the one well tender that I had back then."

Fast-forward to today, and Rusty's company, DGO, now owns more than 60,000 gas and oil wells across West Virginia, Pennsylvania, Ohio, Kentucky, Virginia and Tennessee, a region called the Appalachia. Employing 925 people it has annual revenues of more than $500m. Some 90% of its operation is natural gas, with 10% oil.

The company's business model is a very specific one - it doesn't do any drilling to find new oil and gas reserves. Instead it buys up old oil and gas wells that bigger producers no longer want, because the initial large flow levels have fallen to low volumes.

He might feel right at home in North Dakota with the dreaded "Bakken decline."

Update Of The PetroShale Case Requesting Four Wells In An Existing 320-Acre Unit In Antelope-Sanish -- October 17, 2019

The case, not a permit:

• Case 28073, PetroShale, Antelope-Sanish, in an existing 320-acre unit; W/2  section 29-152-94, 4 wells; McKenzie County

The wells as of October 17, 2019:

• 31809, 2,581, EOG, Riverview 21-3021H, Antelope-Sanish, t8/19; cum 29K over 14 days; extrapolates to 61,358 bbls over 30 days; cum 225K 4/20; off line 4/20;
• 30286, 1,974, EOG, Riverview 102-32H, Antelope-Sanish, t6/15; cum 652K 4/20; off line from 6/19 to early 8/19; off line 5/20;
• 19247, 1,692, EOG, Riverview 01-32H, Antelope-Sanish, t11/10; cum 292K 3/20; off line from lat 5/19; to late 7/19; looks like a small boost in production but relatively uneventful; off line 4/20;

• 31446, conf, EOG, Riverview 110-3229H, Antelope,
• 31447, conf, EOG, Riverview 109-3229H, Antelope,
• 31448, conf, EOG, Riverview 112-3229H, Antelope,
• 31449, conf, EOG, Riverview 111-3229H, Antelope,
• 31450, conf, EOG, Riverview 113-3229H, Antelope,

The graphics:

Sometimes It's In The Very Fine Print -- Downspacing In The Bakken -- August 18, 2016

I'm going over the most recent Mike Filloon contribution to SeekingAlpha again. I don't think he mentioned this in his narrative, and I don't think I've seen it elsewhere. Here's the graphic. See if you can spot something fairly significant.

The graphic is from Goldman Sachs Global Investment Research, undated. Besides the obvious multiple formations that are highlighted, note the second bullet:

Middle Bakken and Three Forks-1 zones have been largely derisked. Confidence in downspacing from 320-acre well spacing is key catalyst for more resource credit for the play.

That one line could be interpreted a number of ways. But I think it's pretty clear, based on "downspacing from 320-acre well spacing," that analysts have already factored in 320-acre spacing for the middle Bakken and the first bench of the Three Forks.

I think regular readers of the blog have felt we've "always been there" -- at 320-acre spacing for both the middle Bakken and the first bench. I assume the analysts mean two middle Bakken wells/section and two TF-1 wells/section or eight wells per the standard 1280-acre spacing unit in the Bakken. If so, yes, we've been there for quite some time. (In fact, I already have a tag, "320_Acre_Spacing." See tags associated with this post for similar tags and similar posts.)

The analyst's do not specify "good" Bakken from "better" or "best" Bakken. This seems to imply an average across the basin. In some areas we are well beyond 8 wells in one standard 1280-acre drilling unit. In fact, if we can drill along section lines (in an overlapping 2560-acre unit, for example), the better and the best Bakken should easily be able to support six MB and six TF-1 wells in a 1280-acre unit. With 660-ft spacing, it's more than that.

Just idle chatter. Don't quote me on this. Keep it a secret.

At FAQs, question #2 (FAQs are not always updated; FAQs have opinions and facts are interspersed and I don't necessarily point that out):

2. How many wells will "they" drill in a section? How many wells in all in the North Dakota Bakken? It is estimated that up to 50,000 wells will be needed for the Bakken Pool. -- current as of May, 2013. The number of wells per section continues to increase. Goldman Sachs has a graphic, 2016, suggesting 320-acre downspacing is the norm in MB and TF-1. Back in August, 2012, the NDIC dockets suggest there would be up to 16 wells in a 1280-acre spacing unit in the "core" Bakken. In the June, 2013, dockets, the "norm" for 1280-acre spacing units seems to be increasing to 10 wells but CLR is moving toward 17, 24, or more wells per spacing units. In late 2013, CLR had pilot projects for 34 wells in a drilling unit of 1280 acres (two sections). And:

In a January, 2013, presentation, the Director, NDIC, suggested that it may take as many as 48 wells/spacing unit to drill out some areas of the best Bakken. At the time he said that, most spacing units were two sections. Therefore, Lynn Helms was suggesting as many as 24 wells/section in the best part of the Bakken which includes productive formations from the middle Bakken through ALL lower benches of the Three Forks.

Spend Some Time On This One -- May 5, 2015; White Butte Oil Operations With Three High-IP Dual Lateral Wells On 320-Acre Spacing In Antelope Field

Active rigs:

	5/5/2015	05/05/2014	05/05/2013	05/05/2012	05/05/2011
Active Rigs	86	186	192	210	177

Six (6) new oil and gas permits --

• Operators: CLR (4), Enerplus, HRC
• Fields: Brooklyn (Williams), Heart Butte (Dunn), Eagle Nest (Dunn)
• Comments: take a look at this HRC well in Eagle Nest -- almost 70,000 bbls in one month;

Nine (9) producing wells completed:

• 21385, 2,221, White Butte Oil Operations, LLC, Panzer 1-20MLH, 320-acre spacing, Sanish pool, Antelope, t4/15; cum 35K 6/15;
• 21386, 1,905, White Butte Oil Operations, LLC, Panzer 2-20MLH, 320-acre spacing, Sanish pool, Antelope, t4/15; cum 56K 6/15;
• 21387, 2,502, White Butte Oil Operations, LLC, Panzer 4-20MLH, 320-acre spacing, Sanish pool, Antelope, t4/15; cum 29K 6/15;
• 26388, 1,680, BR, CCU North Coast 31-25TFH, Corral Creek, t4/15; cum --
• 28288, 1,844, BR, Shenandoah 24-36TFH, Keene, t4/15; cum --
• 28391, 1,163, XTO, Lundin Federal 31X-9H, North Fork, t4/15; cum --
• 28392, 1,705, XTO, Lundin Federal 31X-9D, North Fork, t4/15; cum --
• 28393, 1,328, XTO, Lundin Federal 31X-9G, North Fork, t4/15; cum --
• 29471, 1,423, Slawson, Wolf 2-4MLH, Big Bend, t3/15; cum --

*****************************************

You May Want To Spend Some Time On This One

More information on White Butte Panzer wells here.

These are still the only three White Butte permits/wells (October 6, 2015):

• 21385, 2,221, White Butte, Panzer 1-20MLH, Antelope field, Sanish pool (Three Forks), 320-acre spacing; dual stacked laterals, t4/15; cum 53K 7/15;
• 21386, 1,905, White Butte, Panzer 2-20MLH, Antelope field, Sanish pool (Three Forks), 320-acre spacing; dual stacked laterals, t4/15; cum 70K 7/15;
• 21387, 2,502, White Butte, Panzer 4-20MLH, Antelope field, Sanish pool (Three Forks), 320-acre spacing; dual stacked laterals, t4/15; cum30K 7/15; off line almost all of 7/15; no production 8/15; 

There is no explanation in the file report why #21387 is off-line; there are no wells in the area that are being fracked or drilled. [Later: it turns out all three wells were re-fracked in 2016; it was the second lateral of each well that was being fracked. All three wells are back on line. Posted 1/18.]

***************************************

Some data points about those Panzer wells:

The White Butte Oil Panzer wells were originally Slawson permits, 320-acre spacing units; approved back in late August, 2011; in early 2014, Slawson requested that the permit be amended to allow for an additional lateral and to rename #21385, Panzer 1-20MLH. On October 10, 2013, the the three Panzer wells were transferred to White Butte from Slawson.

The narrative for the 1-20MLH is not yet available (unless I missed it).

The 2-20MLH is described as a single section dual-lateral consisting of two 4,504' - 5,234' long laterals drilled to the south. The first lateral accessing the second bench of the Three Forks was completed on November 11, 2014; while the second lateral that penetrated the middle Bakken was completed November 27, 2014. 

The second curve was landed at 10,972 feet into the middle Bakken, after drilling the Three Forks lateral and then coming back and milling a window in the casing of the vertical hole. 

While drilling the dual-lateral well, the initial curve was landed into the deepest of the two targeted intervals.

Panzer 4-20MLH is a single-section, dual-lateral accessing the first bench of the Three Forks; it appears the second lateral was also in the first bench of the Three Forks. 

I believe these are the only three White Butte Oil Operations wells in North Dakota at this time.  

White Butte Oil Operations, LLC, is a North Dakota Foreign Limited-Liability Company which filed on June 4, 2014. The Registered Agent for this company is located in Bismarck, ND; the company's principal address is in Wichita, KS. Its address is 727 N Waco Ave Ste 400, Wichita, KS.

Slawson Exploration has an address at 727 N. Waco Ste 400, Wichita, KS 67203. 

Just for the fun of it, google: stacked laterals slawson montana.

The purple areas are the only 320-acre spacing units in this area:

 The three Panzer wells:

************************************** Dry hole:

• 29280, dry, MBI Oil & Gas, Bahley, Stark County; 

One well coming off the confidential list Wednesday:

• 29254, drl, Zavanna, Sigurd 32-29 6H, Stockyard Creek, no production data,

KOG Reports A Nice Well On 320-Acre Spacing -- May 1, 2013

Permits

2014 (list is complete)
30020, loc, KOG,
30019, loc, KOG,
30018, loc, KOG,
30012, loc, KOG,
30011, loc, KOG,
29183, loc, KOG,
29182,  loc, KOG,
29181, loc, KOG,
29180, loc, KOG,
28076, conf, MRO,
28075, conf, MRO,

2013 (list is complete)
26063, 2,538, MRO, Swift Eagle USA 31-15TFH,
26062, 1,658, MRO, Two Crow USA 21-15TFH,
25898, conf, MRO, Azure USA 31-15H,
25897, conf, MRO, Chase USA 21-15H,
25738, drl, Enerplus, Sun 149-93-07D-12H,
25588, 2,750, KOG, Moccasin Creek 14-33-28-4H3, t1/15;
25587, 3,465, KOG, Moccasin Creek 14-33-28-4H, t1/15;
25586, drl, KOG, Moccasin Creek 14-33-28-4H3A,
25585, 3,122, KOG, Moccasin Creek 14-33-28-3H, t1/15;
25584, conf, KOG, Moccasin Creek 14-33-28-3H3,
25583, conf, KOG, Moccasin Creek 14-33-28-2H3,
25143, 950, Enerplus, Pygmy 147-93-18B-19H TF, a nice well, t12/13;
25142, 965, Enerplus, Pygmy 147-93-18B-19H TF, a nice well, t12/13;
24745, conf, MRO, Melvain Fox USA 14-4H,
24744, conf, MRO, Fox USA 14-1H,

2012
24058, conf, KOG, Moccasin Creek 14-11-2-4H3,
24057, 1,570, KOG, Moccasin Creek 14-11-2-3H3,
24056, 2,271, KOG, Moccasin Creek 14-11-2-3H,
23314, 1,224, WPX, Good Bird 36-25HA,
23313, 1,441, WPX, Good Bird 36-25HW,
23312, 690, WPX, Good Bird 36-25HB,
23311, 996, WPX, Good Bird 36-25HX,
23310, 1,365, WPX, Good Bird 36-25HZ,
23309, 1,140, WPX, Good Bird 36-25HD,
23308, 2,005, WPX, Blackhawk 1-12HD,
23307, 1,442, WPX, Blackhawk 1-12HZ,
23306, 1,508, WPX, Blackhawk 1-12HY,
23305, 1,480, WPX, Blackhawk 1-12HB,
23304, 1,444, WPX, Blackhawk 1-12HW,
23303, 1,697, WPX, Blackhawk 1-12HA,
23225, 2,169, KOG, Moccasin Creek 4-3-34-3H3,
23224, 2,473, KOG, Moccasin Creek 4-3-34-4H,
23085, 2,506, KOG, Moccasin Creek 16-10-3-3H3,
23084, 2,129, KOG, Moccasin Creek 16-10-3-3H,
22465, 2,095, KOG, Moccasin Creek 16-26-27-13H3,
22462, 1,941, KOG, Moccasin Creek 16-26-27-12H,
22432, 250, WPX, Paul Peter Coffee 35HD,
22431, 380, WPX, Paul Peter Coffee 35HA,
22430, 258, WPX, Paul Peter Coffee 35HC,

2011
21219, 401, WPX, Black Hawk 1-12H,
21111, conf, Enerplus, Anna g. Baker 6b-7-2H TF,
20974, 730, MRO, Boy Chief USA 11-15TFH,
20932, conf, Enerplus, Rocket 147-93-08D-05-2H TF,
20931, conf, Enerplus, Copper 147-93-17A-20-2H-TF,
20644, 1,221, MRO, Good Bear USA 31-14H,
20642, 1,137, MRO, Good Bear USA 21-14H,
20608, conf, Enerplus, Venus 147-93-16B-21-2H TF,
20606, conf, Enerplus, Saturn 147-93-09C-04-2H,
20405, 803, MRO, Boy Chief USA 11-15H,

Updates

Original Post

23225, 2,169, KOG, Moccasin Creek 4-3-34-3H3, Moccasin Creek, spacing: W2; t2/13; cum 28K 3/13; Three Forks; 16 stages; 2 million lbs; all ceramics, I believe,

A quick (very quick) look at the NDIC GIS map suggests that the only (?) 320-acre spacing units are in the reservation. I haven't looked everywhere, but that's the first impression, and it won't be far off.

Fields with 320-acre spacing include, but not limited to, inside the reservation:

• Squaw Creek (many units)
• Spotted Horn (two units)
• Mandaree (many units)
• Reunion Bay (one such unit)
• McGregory Buttes (many units)
• South Fork (several units)
• Heart Butte (several units, but not many considering how big the field is)
• Moccasin Creek (four such units)

This is the only 320-acre spacing unit I see outside the reservation:

• Bear Creek (one unit)