Three Stories To Start Your Day -- March 14, 2021

Day rates: Helmerich & Payne to change way it determines lease rates.

• Bakken revolution: from 60 days to 6 days to drill a horizontal well; a data point few talk about;
• cost to drill and complete a well:
• at one time, drilling / completing: about 50/50
• now, some suggest drilling, one-third of total cost; completion, two-thirds of total cost;
• what is not said, the total cost to drill / complete a well may be around 60% of what it was during the boom

Shell's shale sale: say that quickly fifty times; it seems I've posted this before; can't remember; link here;

• buyer: Calgary-based Crescent Point, a common name in the Bakken;
• $707 million deal
• for sale: Shell's Kaybob Duvernay assets for $550 million in cash and 50 million Crescent Point common shares
• assets: about 35,000 boepd by 2Q21
• latest in a string of western Canadian deals:
• Seven Generations Energy Ltd and ARC Resources Ltd agreed to merge;
• Tourmaline Oil Corp purchased rivals Jupiter Resources Ltd and Modern Resources Inc, last fall
• earlier, the much larger deal in which oil sands producer Cenovus Energy Inc took over Husky Energy
• Crescent Point: free cash flow in 2021 -- between $300 and $475 (US)
• Shell, which sold most of its oil sands operations in 2017, said this sale allows it to focus on its "core" upstream positions such as the Permian
  

Oxymoron: OXY's Permian output slump drives millions in midstream losses. Link here. 

The decline in Occidental Petroleum Corp.’s oil production in the Permian Basin has left the company with so much unused capacity on pipelines to the Gulf Coast that the problem will drive a midstream loss of as much as $750 million this year.

Occidental said Tuesday that total Permian production is expected to be about 485,000 barrels of oil equivalent a day this year, well short of the 800,000 barrels of pipeline space it’s committed to. That means the company needs to buy the balance elsewhere, adding to costs.

Occidental has long held more pipe space than it needs from the Permian, in the hope that its shale business would eventually grow big enough to make use of it. But last year’s oil-price crash, and, more recently, the winter freeze in Texas, caused the company to cut investment and production in an effort to prioritize near-term cash flow for debt reduction. That has left its pipeline position exposed.

Reminder:

• Biden XL doesn't matter; western Canada oil supplies to reach record highs;

A Nice OXY USA Well in Fayette Field -- 22K Bbls The First Month -- Bakken, North Dakota, USA

I've updated the IPs of a few wells that OXY USA acquired when it purchased Anschutz over a year ago.

When you get to that site, nothing has changed, except I've added the IPs (in red as usual). One exception: file # 19710, Alina Tormaschy 1-32-29H-143-96, in the very exciting Fayette field, has not yet reported an IP, but first month's oil runs (April, 2011) was an astounding 22,072 bbls of oil (it does not say how many days in April the oil flowed, but I assume with that kind of number, it was the full month).

Thirteen (13) New Permits -- Bakken, North Dakota, USA

This is very, very exciting. I think we have had new permits touching double digits each day this week; that may be a record in North Dakota in recent history.

Drillers: Enerplus (8),  Slawson (2), North Plains (2), Hess.

Fields: McGregory Buttes, Van Hook, Truax, and Dollar Joe.

Eight of the Enerplus wells will be on one pad in McGregory Buttes oil field.

The two Slawson wells will be on one permit in Van Hook oil field.

Today's daily activity report also show a change of operator from Anschutz to OXY USA for about 85 wells, including some great wells, including the Stroh wells.

Also, two nice wells reported -- one for BEXP and one for Slawson, reported elsewhere.

Details of the OXY Acquisition in North Dakota -- Private Seller: Anschutz

More on the OXY acquisition in North Dakota.

A big "thank you" to Suzanne for alerting me to the OXY presentation referenced below.

This is an OXY presentation; when you get there, go to slide 12 first to see the acreage they acquired in North Dakota. On slide 12 of that presentation, OXY has two prospects: the South Coteau prospect and the Russian Creek prospect. If I understand the previous slides (slide 10 and 11) correctly, OXY already controlled the South Coteau prospect and was not part of the most recent acquisition.

For the moment, the South Coteau prospect in southeastern Burke county is not particularly noteworthy or active in the current boom, though that could change.

Again, if I understand the presentation correctly, the OXY acquisition is the Russian Creek prospect in the southwest quarter of Dunn County. (OXY's presentation says the newly acquired acreage is in Stark, Billings, and Dunn counties. That's technically correct, but the acreage in Stark County (according to the slide) is so tiny as to be not worth mentioning; and there is only slightly more acreage in Billings County. For all intents and purposes, the Russian Creek prospect is entirely within Dunn Country.)

By the way, if anyone wants to "play around" with a map of North Dakota's counties, click here, and then compare that map with the map at the OXY presentation. 

This was the subject of a very interesting blog some months ago; I highly recommend you take the time to go back and read it if you are interested in the OXY acquisition.

The net acreage in the Russian Creek is about 180,000 net acres; the net acreage in the South Coteau is about 20,000 acres.  According to MarketWatch, OXY acquired 180,000 acres for $1.4 billion ($7,800/acre, but of course, there was already producing assets there). 

Since then there has been more clarity regarding the potential in the Russian Creek prospect area. This area is at the southern edge of the Bakken, where it starts to thin out, but the Three Forks formation pinches out in this area. More interestingly, this is near the area where Oil for America is using new technology to target Lodgepole reefs. In the most recent federal lease auction, Lodgepole Land Services paid $11,600/acre for a 720-acre tract.

Right now, the Russian Creek Prospect is very active. In one area there are six rigs on site, and several of the sites are multi-well pads (two wells/pad):

• 19430 / 19431: one rig on site, a multi-will pad; 33-144-97, Little Knife oil field; Anschutz permit
• 19396: rig on site, 33-144-96, Murphy Creek oil field, but right on the edge of Fayette oil field; will probably drill into the Fayette oil field; Marathon permit; 82
  
• 18823 / 18822: one rig on site, a multi-well pad; 9-143-96; already drilled going south, Fayette oil field; Anschutz permit, 906 / 1,304
• 19438: rig on site, 21-142-97; Willmen oil field; southwest of Fayette; Anschutz permit, 756
• 19710 / 19711: one rig on site, a multi-well pad; Fayette oil field, southern end of the field; Anschutz permit (19710 is in Fayette; 19711 is in Manning oil field; 22,072 first month / DRY
• 19113 / 19114: no rig on site; a multi-well pad; right next to 19710 / 19711 (32-143-96); Anschutz permit; like 19710 and 19711, 19113 is in Fayette and 19114 is in Manning oil field.

Again, that is just one local area within the Russian Creek prospect. There is a Russian Creek oil field in the area, by the way.

According to the OXY presentation:

• The acquisition includes 44 operated and 17 non-operated wells producing approximately 5,500 boe/d from the Bakken and the Madison formations
• Currently there are five active drilling rigs operating on acreage with plans to increase the rig count to eight during 2011
• Five wells are awaiting completion
• OXY controls 200 operated spacing units and interest in an additional 110 non-operated spacing units
• 98% of the spacing units are 1280-acre units
• The Russian Creek prospect encompasses Three Forks formation and deeper objectives across the entire prospect
• Net risked reserve potential: 250 million boe
• This acquisition plus existing OXY assets in the Williston Basin: over 200,000 net acres; 50 operated wells producing over 6,000 boed
• OXY's goal is to grow production in the Williston Basin to at least 30,000 boepd over the next five years

250 million bbls net risked reserve at $50/bbl = $12.5 billion. OXY paid $1.4 billion

Note in bold above: deeper objectives across the entire prospect -- the only two formations deeper than Three Forks that I can see are the Birdbear and the Red River.  Both the Tyler and the Lodgepole lie "above" the Three Forks formation

In addition, in this transaction, OXY also increased its interest in its ownership in Plains All-American (PAA) by 13% to approximately 35%; this is a major pipeline serving the Williston Basin