Things On My Mind: Six Months Later

The following commentary was written in February and updated in March, 2010. I've added updates/comment in bold red, September, 2010. 

UK faces 'oil crunch' within five years. February 10, 2010.

1. Everything points to continuing excitement in the Bakken. The number of active rigs is now up to 99 (March 6, 2010), 30+ more than when I first posted observations about the increase in rigs in North Dakota back in early November. The Grand Forks Herald reports (January 24, 2010) that there could be 110 - 120 rigs in North Dakota by mid-summer.  That estimate was low: the high was 146.

2. Oil takeaway capacity as of January, 2010, in North Dakota: 410,000 barrels/day. Pipeline takeaway capacity: 350,000 bbls/day. EOG railroad terminal: 60,000 bbls/day. New Dickinson railroad terminal, scheduled to be operational in October, 2010, another 60,000 bbls/day. I would be interested in hearing from Dickinson readers if this project remains on schedule.

3. My father says that vehicular traffic has increased significantly in  Williston (November 26, 2009).

4. Even the NY Times has noticed that mid-tier companies have been buying up great acreage in the continental US while the majors (like XOM) were ignoring the US, and looking for oil/gas in politically unstable areas overseas. December 15, 2009.

5. Five areas of significant drilling activity: a) Parshall-Sanish oil fields north of the reservation; b) the Van Hook / Big Bend areas inside the reservation, especially Slawson; c) the area immediately around Williston, especially to the west, to include eastern Montana; d) the Highway 50 Corridor: on either side of Highway 50 southeast of Kenmare, and north of Parshall, the Clearwater oil field, especially EOG; and e) Ambrose, a ways north of Williston. [Update: Slawson hit a great well in Van Hook: IP of 1,208 bopd and 42,000 bbls in first 59 days -- Fox 1-28H. Also, EOG announced a great Van Hook well, the Van Hook 100-15H, with a 1,390 bopd, and this targeted the Three Forks Sanish. February 9, 2010.] The Alger field should be added to this list; Ambrose taken off.

6.  Is EOG asking for 570 more wells in the Parshall? If you want excitement, look at the Ross oil field, T156N-R90W, section 27, where you will see six EOG wells spaced 50' from each other in a line, 500' from the section line. Follow this discussion thread regarding the two 2560-acre spacing units which will be allowed to have as many as six horizontal wells each. One spacing unit: sections 26, 26, 28, and 29. The other spacing unit: sections  20, 21, 22, and 23. January 24, 2010.

7.  The RS-Feldman well, about 4 miles northwest of Stanley. This appears to be the best Hess well in the Bakken and it may be due to multiple stage fracturing. The presentation by Harold Hamm, November 19, 2009, continues to support my opinion that the increased success in the Bakken is due to multiple fracturing. Some companies are still doing single-stage fracturing -- but I think single-stage fracturing is a thing of the past. Even EOG is studying the "right" number of stages. Wow, as late as March, 2010, we were still talking about single-stage fracturing. We are way beyond that. The norm appears to be 15 - 20 stages and BEXP's norm appears to be 30 stages, and now we have super-fracking, 40 stages.

8. GeoResources, Inc., announces an aggressive 2010 in North Dakota. GEOI is getting a lot of interesting comments on Yahoo!Finance message boards. Oil and Gas Journal has short article on GeoResources, March, 2010. This is really quite phenomenal. I had not heard much about/from GeoResources in the past six months, and then, all of a sudden, out of the blue, GeoResources is featured on Motley Fool -- just last week, Thursday, September 17, 2010. Go figure. GEOI has been added to the sidebar stock listing at the right.

9. Slawson may be the next big story. Look at the results of the the November 3, 2009, North Dakota state land lease auction. In 2007, Slawson had 7 permits in the Williston Basin; in 2008, Slawson had 27 permits; 28 in 2009; and 12, as of March 6, 2010. Of the 27 permits granted in 2008, we have yet to hear the outcome of 14 of those permits. The other 13 have resulted in very good wells with IPs ranging from 248 to 2,205 bopd with an average of 791 bopd. Of all the 2010 Enercom presentations, I was most energized by NOG's presentation. NOG said they are emphasizing Slawson and EOG for partnering.

10. There are now 99 active rigs in North Dakota up from a low of "around 33" in the of autumn, 2008. Many of the big producers are still bringing in new rigs. Harold Hamm, CEO of Continental Resources, says he might have 18 rigs in North Dakota this time next year (mid-2010), a significant increase over the 5 rigs CLR had in 2009. EOG has stated it could triple the number of rigs they have, from 5 to 15. March 6, 2010. I think CLR has about 20 rigs in North Dakota and there are 146 active rigs in North Dakota.

11. Look at the IPs of the wells reported on November 5, 2009 and the wells that reported on December 14.  Cut the IP in half, and assume that amount will be produced on a daily basis for the first year, and multiply by $70. Then assume that the wells will be productive for seven years (on a declining basis) but subject to re-fracturing. The numbers are staggering. And not all those IPs were exceptional, many well below 1,000 boepd. Yes, I know, the BEXP IPs seem to decline by as much as 90% three or four months out. Having said that, there are some monster wells out there.

12. The companies engaged in fracking are going to be very, very busy: it appears the norm is now 24-stage fracturing, +/- four stages. Some opine that we may soon see 60-stage fracturing. I have to study it again, but it appears the mathematical relationship between fracturing and oil production is initially exponential, but with increased stages, there comes a point of diminishing return. Regardless, it appears that fracturing increases the initial amount of production, delays the need for a pump (albeit a very short period of time), and increases the ultimate total recovery of oil from a well. (My hunch: frac stages remain somewhere between 14 and 20.) This is a moving target; without companies being more forthcoming with data, I don't know for sure where we stand. I do know BEXP reports many wells with 27 - 30 stage fracturing.

13. EOG typically has 70 - 80 wells on the confidential list. It has been opined that EOG could drill between 225 and 250 wells in 2010. And that's just one producer working in the Williston Basin, albeit the one with the most rigs (six now and going to 13 or 14 in 2010).

14. The area around Williston is very, very active. There are two areas: west of Williston, mostly BEXP. And then northeast of Williston, the Spring Brook area. In the Stony Creek field there are 11 wells/permits on the confidential list. The BEXP well on SE edge of Williston reported an IP of 3,394 bbls/day, which BEXP says is their largest IP reported to date. Since then, BEXP has reported two more wells with higher IPs: the Jack Cvancara and the Sorenson, both in the Alger and right next to each other; both with fracture stimulation approaching 30 stages. The Alger field is east of Williston, north of the Sanish field.

15. Harold Hamm, CEO of Continental Resources, opines there may be double the amount of recoverable oil in "the Bakken" forecast by the USGS in 2008. CLR's goal is to double its proved reserves in the Bakken over the next five years. CLR recently reported an increase of 21% of their proved reserves.

16. North Dakota is #4 in oil production in the United States, surpassing Louisiana. I never thought that would happen, ever. In December, 2006, Mountrail County produced 1,300 barrels of oil per day; this past October (2009), Mountrail County produced almost 100,000 barrels of oil per day. At $60/barrel, 43 wells in Mountrail County produced $100,000,000 worth of oil at the wellhead over a three month time period, ending in October. North Dakota hit a new record in July, 2010, producing almost 10 million barrels of oil (monthly production).

17. Reports that there is yet another formation, the Birdbear, amenable to horizontal drilling are intriguing, but statements saying this is a "new" formation are incorrect. This formation has produced oil, albeit not much, for decades. Incidentally, WLL re-entered an old well that was producing from the Birdbear Formation; exited with a horizontal and ended up with a 2,000 boepd IP in the Bakken (December 8, 2009). Haven't heard much since. In fact, I haven't heard anything.

Wildcat Bob

If "Wildcat Bob" is no longer posting, it's a huge loss.

He, too, has / had a non-commercial site blogging about the American oil industry, and being a retired petroleum engineer his posts are / were superb and much more credible than mine. In addition, his posts were focused on investing, which I assume most people who follow my blog are interested in. I write on the margins about investing.

He only posted a couple of months, earlier this year, but the information he provided was excellent. Hopefully he will get back in the game, even if it is just for a couple of posts. Having said that, it is interesting, and potentially rewarding, to re-read his few posts. Much of what he said about investing has not changed.

The Bakkenshale blog is another excellent example of infrequent but very interesting postings.  My hunch is that both of the authors have "proved" their point: the Bakken is very, very interesting to follow and now it's up to us individually to carry the torch. It would take another huge story in the Bakken to make it worthwhile for some authors, I suppose, to blog.



I Call Your Name, But You're Not There, Billy J. Kramer and the Dakotas. If this sounds like a Beatles song, that shouldn't be surprising. It was written by John Lennon and Paul McCartney.

Elk Oil Field

PERMITS

2016

2015 (the list is complete)
31594, loc, Triangle, Simpson 151-102-4-9-14TFH,
31593, drl, Triangle, Simpson 151-102-5-8-13H,
30927, 756, Triangle, Eckert Foundation 152-102-22-15-2HX, t7/15; cum 64K 11/15;
30875, drl, XTO, Roen 24X-23AXD,
30758, SI/NC, XTO, Roen 24X-23A,
30757, SI/NC, XTO, Roen 24X-23E,
30756, SI/NC, XTO, Roen 24X-23BXC,

2014 (the list is complete)
30230, drl, Triangle, Simpson 151-102-5-8-4H,
30229, loc, Triangle, Simpson 151-102-5-8-9TFH, 
30220, conf, Triangle, Eckert Foundation 152-102-22-15-1H, producing, a huge well; 11/15;
30219, 622, Triangle, Eckert Foundation 152-102-22-15-10TFH, t7/15; cum 41K 11/15;
30218, dry, Triangle, Eckert Foundation 152-102-22-15-2PA,
29989, conf, CLR, Lancaster 6-28H1,
29988, conf, CLR, Lancaster 7-28H,
29985, conf, CLR, Lancaster 4-28H1,
29984, conf, CLR, Lancaster 5-28H,
29956, loc, Triangle, Novak 152-102-35-26-6H,
28820, 755, Triangle, Simpson 151-102-5-8-10TFH, t5/15; cum 35K 11/15; only 9 days in 11/15; 
28819, drl, Triangle, Simpson 151-102-5-8-3H,  
28818, 605, Triangle,  Simpson 151-102-5-8-2H, t2/15; cum 59K 6/15; choked back;
28817, 818, Triangle,  Simpson 151-102-5-8-1H, t3/15; cum 43K 6/15; choked way back;
28751, 337, CLR, Miramar 3-32H1, t3/15; cum 16K 6/15; chocked way back;
28750, 441, CLR, Miramar 2-32H, t2/15; cum 32K 6/15; choked back;
28513, 725, Triangle, Britt 151-102-4-9-4H, t11/14; cum 86K 6/15;
28512, 994, Triangle, Britt 151-102-4-9-3H, t11/14; cum 80K 6/15;
28511, 600, Triangle, Britt 151-102-4-9-2H, t11/14; cum 89K 6/15;
28510, 412, Triangle, Britt 151-102-4-9-1H, t11/14; cum 91K 6/15;
28472, 435, Triangle, State 152-102-36-25-7H, t11/14; cum 92K 6/15;
28471, 533, Triangle, State 152-102-36-25-8H, t11/14; cum 81K 6/15;
28420, 868, Triangle, State 152-102-36-25-4H, t10/14; cum 107K 6/15;
28419, 671, Triangle, State 152-102-36-25-3H, t10/14; cum 97K 6/15;
28175, 613, Triangle, Wahlstrom 152-102-34-27-1H, t9/14; cum 108K 6/15;
28174, 640, Triangle, Wahlstrom 152-102-34-27-2H, t9/14; cum 76K 6/15;
28173, 836, Triangle, Wahlstrom 152-102-34-27-3H, t10/14; cum 85K 6/15;
28172, 955, Triangle, Wahlstrom 152-102-34-27-4H, t10/14; cum 50K 6/15;
27944, 678, Triangle, Eckert Foundation 152-102-22-15-3H, t8/14; cum 99K 6/15;
27943, 341, Triangle, Eckert Foundation 152-102-22-15-9TFH, t8/14; cum 66K 6/15;
27942, 661, Triangle, Eckert Foundation 152-102-22-15-4H, t8/14; cum 95K 6/15;
27687, 2,855, Whiting, Roen 34-10-2H, t5/14; cum 105K 6/15; 
27379, 657, Triangle,  Monson 152-102-35-26-2H, t7/14; cum 81K 6/15;
27378, 852, Triangle, Monson 152-102-35-26-3H, t6/14; cum 107K 6/15;
27377, 487, Triangle, Monson 152-102-35-26-4H, t6/14; cum 98K 6/15; 

2013
26723, 447, Triangle, State 152-102-36-25-5H, t4/14; cum 93K 6/15;
26722, 640, Triangle, State 152-102-36-25-6H, t4/14; cum 89K 6/15;
25269, 497, Triangle, State 152-102-36-25-2H, t10/13; cum 83K 6/14;
25036, 428, Triangle, State 152-102-36-25-1H, t10/13; cum 89K 6/14;
24913, 2,424, Whiting/Petro-Hunt, Roen 24-10-3H, t5/14; cum 33K 6/14;
24912, 2,607, Whiting/Petro-Hunt, Roen 24-10-2H, t5/14; cum 33K 6/14;
24911, 2,585, Whiting/Petro-Hunt, Roen Federal 24-10H, t5/14; cum 38K 6/14;

2012
24474, PNC, Murex, Dawn Hebert 22-15H,
23975, 535, Triangle, Monson 152-102-35026-1H, t7/14; cum 2K 6/14;
22930, 225, CLR, Lancaster 1-33H, t10/12; cum 117K 6/14;
22392, 1,382, Oasis/Zenergy, Wahlstrom 310H, t8/12; cum 101K 6/14;
22330, 3,050, Statoil/BEXP, Taylor 14-23 1H, t12/12; cum 133K 6/14;
22218, 804, Whiting/Petro-Hunt, Roen 34-10H, t7/12; cum 125K 6/14;

2011

• 20485, 762, SM Energy, Barnes 2-2H, Elk, s5/11; t7/11; cum 229K 11/15; off-line much of last three months;
• 20588, 1,492, BEXP, Mrachek Trust 22-15 1H, Elk, s7/11; t9/11; cum 135K 11/15;
• 20661, 302, SM Energy, Hoehn 2-13H, Elk, s9/11; cum 74K 11/15;
• 20867, 534, SM Energy, Stepanek -18H, Elk, s8/11; cum 155K 11/15;
• 20948, 745, XTO/Denbury, Stepanek 31-17SWH, Elk, 12K in 1/12; t1/12; cum 161K 11/15;
• 21190, 2,581, Statoil/BEXP, Lyle 21-16 1H, Elk, t4/12; cum 187K 11/15;
• 21470, 949, Zenergy, Monson 2-11H, Elk, t10/12; cum 132K 11/15;
• 21506, 934, Denbury, Roen 24-23NH, Elk, t2/12; cum 129K 11/15;
• 21566, PNC, CLR, Miramar 1-32H, Elk,
• 21601, 783, CLR, Miramar 1-32AH, Elk, 14K in January, 2012, t1/12; cum 164K 11/15;

This permit caught my eye when I saw it on the daily activity report, Friday (September 17, 2010).

• 19572, 342, Slawson, Bonanza 1-21-16H, Elk, s10/10; t5/11; cum 145K 11/15; off-line 2-3/2015;

This Slawson permit is one section east of two great BEXP wells:

• 18522, 2,616, Statoil/BEXP,  Papinaeau Trust 17-20 1-H, Elk, t3/10; cum 239K 11/15;
• 18653, 2,803, Statoil/BEXP,  Tjelde 29-32 1-H, (Glass Bluff oil field - see below),  t5/10; cum 188K 6/15;

In addition to these wells, Tracker has these permits:

• 19219, 811, Hess, Brostuen 6-1H, Elk, Bakken, s10/10; t12/10; F; cum 146K 6/15;
• 19885, 524, Hess, Tattu 19-1H, Elk, Bakken, s12/10; t4/11; cum 186K 6/15;

Other wells:

• 16321, 80, Statoil/Brigham Oil and Gas, LP,  Mrachek 15-22, Elk, Bakken; t12/06; cum 126K 6/15;
• 16542, 560, a Red River well, Whiting, Lindvig 11-13, Elk, Red River, t6/07; cum 387K 6/15;

Comments:

Tjelde 29-32 1-H is technically in Glass Bluff oil field but it's right on the corner/border and for all practical purposes is in the Elk oil field. Regardless which field it is in, it is right in the middle of a "hot" BEXP area.  Slawson saw that and went for a permit right next to the Tjelde, and got it Friday.  BEXP gets a bit of press regarding its high IPs; it will be interesting to see what Slawson does.

This field has been fairly quiet during this most recent boom (there was only one permit granted in 2009 in the Elk oil field), but it has been very active in earlier booms. That IP of 560 for the Lindvig 11-13 is very interesting: it was a conventional well targeting the Red River. The Mrachek well must have been a very early long lateral. It's a bit truncated and the GIS map server suggests there were challenges with that well. It should be noted that the Mrachek was drilled by Brigham Oil and Gas, LP, not BEXP, obviously a forerunner of the latter or otherwise related. My myth is that the Bud Brigham was "experimenting" early with long horizontal wells. If memory serves me well, and I'm going way back before I really started following the Bakken, I believe it was Marathon that gets much of the credit for going horizontal in an earlier mini-boom in western North Dakota, before the Bakken.

For investors, the best way to invest in Slawson, not publicly traded, is through NOG which partners with Slawson. Recently, at the 2010 Enercom conference, NOG said is will be maximizing opportunities to partner with EOG and Slawson.

ELK OIL FIELD

The Elk Oil Field has been active for about as long as the oil industry has been around in western North Dakota. It includes most of two townships, 151-102 and 152-102. The field is on the south side of the river, directly south of Williston (North Dakota). Going south on US 2, the field is on your right; from the highway you can see wells in the Elk oil field, but US 2 does not go through the field. I remember that area very, very well, passing it every time we drove to the North Unit Theodore Roosevelt National Park, or farther south to the South Unit or to catch Interstate 94. (Of course, I didn't know it was a named oil field at the time. I just remember my dad pointing out wells "in the grasslands." There's something magical about the phrase, "in the grasslands.")

Until recently (September, 2010) the Elk had been a relatively quiet field, but with two big BEXP wells (Papineau Trust and the Tjelde) it is now garnering new interest. Tracker has a confidential well in the field and Slawson was just granted a permit in that field (September, 2010).

To the best of my knowledge, there are no towns or villages "in the grasslands"; nothing but wonderful farmland, mostly grain.

On Google maps, satellite views, one can see lots of oil pads in this area.

Google Maps -- Satellite View

I could be wrong, but it seems like the satellite view on Google Maps has improved immensely. It seems one can zoom in closer and see the images more clearly.

This is so good, I have to post it again. I posted it earlier today but I can't get enough of it, so here it is (again):




Gene Simmons' (KISS) Military Salute

For Investors: KOG -- Nice Move Up in Two Weeks

KOG has quietly moved back up without much fanfare. After KOG's announcement to issue more shares, its share price dropped fairly quickly and predictably.

Just two weeks ago, on August 31, 2010, KOG sold for as low as $2.46. Since then KOG has risen quietly, up more than 25 percent, and is now back up to $3.10.

If I could turn back time, I would take back those words I said about KOG. Smile.

For newbies, there's an incredible amount of information on this site, and it's all ad-free, unless something's embedded in a link that's not mine. I would direct you first to "Running With Oil" if you want to know what the Bakken is all about. 


If I Could Turn Back Time, Cher