The Million Dollar Way (The Bakken Oil Blog)

Saturday, September 20, 2014

Correction: Hamm's Beer Is Still Around -- September 20, 2014

A reader corrected me. The other day I mentioned that Hamm's beer was no longer around. How wrong I was: Hamm's is still around (link: http://www.millercoors.com/CMSPages/PortalTemplate.aspx?brand=1_498&aliaspath=/Our-Beers/Great-Beers).

We have a store down the street that features a huge beer selection. First thing I'm going to do tomorrow (if they are open on a Sunday in Texas, in a previously dry county) or Monday is stop by the store and see if they have Hamm's. This should be fun.

A huge "thank you" to the reader for catching my error. Wow, just one more reason why I love blogging.

Idle Chatter On Costs Of Completed Wells In The Bakken -- September 20, 2014

About a week or so ago, a reader sent me an e-mail regarding the high cost of a CLR well in the Bakken. I replied at the time:

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:

2012: $9.2 million
2013: $8.0 million
1H14: $7.8 million
But then, starting earlier this year, the price of completed CLR wells increased from $7.8 million to $10 million, due to higher proppant volumes and slickwater.

It looks like we're back to $10 million wells. Remember, these are long laterals. I believe wells were costing in the neighborhood of $4 - $6 million for short laterals when the boom first began in the Bakken. In other words, the costs of completed wells is still in the same ballpark as when the boom began, but the wells are much, much better, and the time from spud to first production has decreased significantly.

Whiting has differentiated itself in the Bakken as the "low cost operator' in its corporate presentations. It will be interesting to see if that continues to be a bullet in their presentations once they acquire KOG, with their very expensive wells.

Slides 20 - 21; Updated Bakken OOIP And Estimated Recovery; CLR Analyst Day Presentation

CLR, Investor and Analyst Day, September, 2014
Updated Bakken OOIP and Estimated Recovery

Slides 20 - 21

Did CLR change the size of the Bakken Pool reservoir. At least two earlier CLR presentations suggested a trillion-bbl reservoir.

Slide 20: CLR updated estimates

413 - 643 billion bbls OOIP (P50 - P10)
estimated recovery factor: ~ 15%
potentially recoverable reserves: 62 - 96 bbls of oil (note -- not boe, but "bo")

Slide 21: Potential undrilled net wells

2012, analyst day: 9,200 wells
2014, analyst day: 11,800 wells of 600K+ boe
8+ years of 600K+ boe wells

Slides 13 - 17, The Lower Three Forks; CLR, Investor And Analyst Day, September, 2014

CLR, Investor and Analyst Day, September, 2014
Middle Bakken, TF1, and Lower TF (TF2, TF3, TF4)

Slides 13 - 17

Slide 13: middle Bakken and TF1

2003: 0 Bakken wells; 0 TF wells
2014: 6,808 Bakken wells; 2,495 TF wells
OOIP and type curve EUR models support up to 8 wells per zone

Slide 14: lower Three Forks (LTF) -- TF2, TF3, TF4

73 wells completed in LTF to date; 59% are CLR-operated
as of September, 2014: TF2 - 53 wells; TF3 - 18 wells; TF4 - 2 wells

Slide 15: 603K boe model for LTF
in the sweet spot of the Bakken; along with the middle Bakken
all of Williams County, northeast McKenzie, west Mountrail, northwest Dunn

Slide 16: defining the LTF fairways -- graphic
Slide 17: current Bakken Petroleum System

inner area: Watford City, Stockyard Creek area: MB, TF1, TF2, TF3; maximum overpressure + structure
near inner area: Williams County, sliver of McKenzie; much unexplored northwest Dunn: MB, TF1, TF2; maximum overpressure
outer fairway of North Dakota: all of Divide County, extends into eastern Montana, all of McKenzie, all of Dunn; transitional area
eastern Montana fairway: current Montana play; MB or TF1; more normally pressured area

Recovery Rate Of Original Oil In Place Through Primary Production In The Bakken, A Poll -- September 20, 2014

I'm going to do a longer post on this subject in a few days. Hopefully my patience will hold. Before posting the "story," I am curious what readers think.

So here's the poll, based on your knowledge of the Bakken, what do you think is the recovery rate of original oil in place through primary production from the Bakken?