It probably was an expensive well. The operators all say they are bringing prices of completed wells down, to the neighborhood of $7 - $8 million but I don't put much faith in those estimates. The biggest problem is figuring out what is being paid for; too many things that can be hidden in numbers like that. I think we will continue to see "cost containment" in the corporate presentations, but with a) huge proppant volume; and, b) slickwater adding 35% to the average EUR in the Basin, I think the emphasis is going to be on raising EURs this year and next (despite the cost) and then get back to trying to contain costs. Operators will see savings in pad drilling and leasing costs, offsetting completing/fracking costs.I wrote that on September 18, 2014. Tonight, while reviewing the most recent CLR presentation, my thoughts were confirmed. Slide #50 of the presentation shows the cost of completed CLR wells. Between 2012 and early 2014, operators were talking about decreasing the cost of completed wells. CLR was reporting the following:
“If OPEC hopes to maintain any semblance of its cartel pricing power now would be the time for its members to boost their oil output, drive prices down, bankrupt marginal American producers and regain market share for the long-term,” says Ed Hirs, a lecturer in energy economics at the University of Houston, and a member of the Yale Graduates In Energy study group.A long time the MDW presented that as the basis for a poll. That possibility rated very low, if I recall correctly the results of that poll.
So how much oil you need to produce in order to cover $4.5 billion, and how much additional cash you’ll have to deploy in drilling costs to get that oil? Here’s some back-of-envelope calculations: First, dilling a well costs about $8.5 million. Each Bakken well will produce a cumulative 500,000 barrels or so over 10 years — about 450,000 after deducting royalty payments to landowners. That works out to drilling costs of roughly $19 per barrel.
Then there’s roughly $5 a bbl in taxes and $3 a bbl for pipelines and infrastructure and a couple bucks for seismic and other overhead, for total costs of about $29 per barrel. Assuming that Statoil can sell its oil for about $75 a barrel (after transportation costs and accounting for differentials to WTI), that leaves about $46 per barrel after all those costs to go towards that $4.5 billion.
All told that works out to roughly 100 million barrels Statoil needs to produce just to break even. And to get those 100 million barrels Statoil will have had to lay out an additional $2.9 billion or so in drilling expenditures. Add it all up and Statoil will have had to lay out about $7.4 billion over five years before they produce enough oil to start making a profit in the Bakken.My hunch: there are a few data points we are not considering.
Similarly, Newfield Exploration said that it's currently drilling and completing wells in the range of about $8 million-$8.5 million, even recently completing a best-in-class well for $7.4 million. That's a massive improvement over the company's average first-quarter gross completed well cost, which came in at $9.8 million.Most of the other Bakken operators are also mentioned, including KOG:
And last but not least is Kodiak Oil & Gas, a company whose operations are almost exclusively focused in the Williston Basin. Though Kodiak pays more per well than the aforementioned firms since its wells tend to be much deeper, it too managed to bring well costs down to the $9.7 million-$10.2 million range, a roughly 15%-20% reduction from year-ago levels.
As a result of the smoother wellbore, the operator had a trouble-free casing run in Well #1. The system consistently achieved more than 93% rotation in the lateral in both wells. This was a significant improvement from previous wells, which achieved roughly 70% rotation. On the first well, sliding time was reduced from 30% to 8%, saving seven days of rig time and the associated drilling costs.
As drilling progressed, these wells required frequent directional updates, due to formation faults. Consequently, this required many target changes for geosteering. ROPs in the first Bakken well were higher than the second well, since more time was spent sliding to correct the well path on #2 without TBS technology. Use of TBS technology on Well #1 enabled the operator to have precise steering control and drill a smoother wellbore. The second well reached TD early, due to an inability to overcome high frictional forces in the lateral leg.From the linked article, this is the technology:
To improve performance in these [Bakken] laterals, operators have been looking for a while now, for an economic alternative to rotary steerable systems (RSS’s), while still retaining their basic benefits.
Lead author Wendell Bassarath said that a new system to achieve 3D directional control was developed to improve drilling efficiency, using targeted bit speed (TBS) technology. The system uses a conventional positive displacement motor with a bent housing and an MWD tool that mimics many of the features offered by an RSS. The steering technique was achieved by accurately modulating the flow of the drilling fluid through the drillstring.
This allowed rapid variations in the drilling parameters to accurately control the bit speed along the desired toolface setting. If wellbore objectives could not be achieved in rotary mode using TBS technology, then the mud motor could be oriented in a conventional manner to follow the well plan.
The rush to tap into these gas-rich formations is proving a bonanza for Tulsa, Okla.-based Helmerich & Payne, the dominant supplier of high-performance drilling rigs able to extract gas from the shale pockets. Last month, Helmerich & Payne announced plans to build 16 high-performance rigs, many under multiyear contracts commanding day rates in the mid-$20,000s to service the most promising oil and gas shale basins in the U.S. The latest orders bring the company's total to 19 rigs for this fiscal year, ending Sept. 30, 2010.Again, note: this article is two years old. It is being placed here for archival purposes.