Technology and Unconventional Shale

A short op-ed in PennEnergy for newbies. For regular readers, nothing new.

Two data-points:

• The large quantities of water injected and produced pose a problem primarily in non-water rich states. The northeast, where the Marcellus Shale is located, is water rich. Supply is not as much of a concern as safe disposal.
• The API reports that in 2004, the United States EPA stated, “the injection of hydraulic fracturing fluids into coal-bed methane wells pose little or no threat to underground drinking water.”

For Investors Only: COP Provides an Interim 1Q12 Update

Link to PennEnergy here.

For investors, this is an important update.

Just one data point:

• Prior guidance: 1.55 - 1.60 million boepd for the full year; 1Q12 guidance of 1.62 million boepd is consistent with earlier guidance according to COP.

Analysts will no doubt say that the estimate is at the "high end" of previously announced guidance.

Mega-Pads in the Bakken: QEP and WPX in Heart Butte and Deep Water Creek Bay

Mike Filloon mentioned that QEP has finished drilling all the wells on its 10-well pad. There are two fields in which QEP has a number of multi-well pads: Heart Butte and Deep Water Creek Bay.

Heart Butte is an interesting field, a very active field, and one with much history -- for a boom that's in its early stages. The oil field first caught my eye back in March, 2010, when I was transcribing the NDIC hearing dockets for that month:

• 12284: Questar, extending the Heart Butte Field and creating 24 640-acre spacing units in Dunn, McLean and Mountrail Counties, with two horizontal wells in each (48 wells)

This was before Questar split of QEP.

The Heart Butte oil field was also the focus for the Arrow Pipeline, a huge deal at the time for many reasons.

So, now we wait for the IPs for the ten wells that QEP has just completed.

Here are some multi-well QEP pads and WPX pads in Heart Butte and Deep Water Creek Bay:
Two 5-well pads, section 3-149-92:

23331, 2,282, QEP, MHA 1-03-34H-150-92, Heart Butte, 4 sec, t3/13; cum 42K 5/13;
23332, 2,348, QEP, MHA 3-03-34H-150-92, Heart Butte, 2 sec, t3/13; cum 48K 5/13;
23333, 2,310, QEP, MHA 1-03-35H-150-92, Heart Butte, 4 sec, t3/13; cum 40K 5/13;
23334, 1,949, QEP, MHA 3-03-35H-150-92, Heart Butte, 4 sec, t3/13; cum 35K 5/13;
23335, 1,791, QEP, MHA 2-03-35H-150-92, Heart Butte, 4 sec, t3/13; cum 27K 5/13;
23336, conf, QEP, Heart Butte,
23337, conf, QEP, Heart Butte,
23338, conf, QEP, Heart Butte,
23339, conf, QEP, Heart Butte,
23340, conf, QEP, Heart Butte,

Two 5-well pads:

• 23093, conf, QEP, Heart Butte, 
• 23094, conf, QEP, Heart Butte, 
• 23095, conf, QEP, Heart Butte, 
• 23096, conf, QEP, Heart Butte, 
• 23097, conf, QEP, Heart Butte, 
• 23098, 1,632, QEP, MHA 4-06-32H-150-92, Heart Butte, t2/13; cum 24K 5/13;
• 23099, 1,994, QEP, MHA 2-06-32H-150-92, Heart Butte, t2/13; cum 33K 5/13;
• 23100, 1,922, QEP, MHA 3-06-32H-150-92, Heart Butte, t2/13; cum 52K 5/13;
• 23101, 1,777, QEP, MHA 1-06-32H-150-92, Heart Butte, t2/13; cum 107K 5/13;
• 23102, 1,966, QEP, MHA 4-06-31H-150-92, Heart Butte, t2/13; cum 51K 5/13;

Two 5-well pads, 31-150-91
(I don't know if this is the 10-well pad Filloon is referring to), Heart Butte:

• 21551, 2,757, QEP, MHA 3-31-25H-150-92, 4 sec, t10/12; cum 89K 5/13;
• 21552, 2,351, QEP, MHA 2-31-25H-150-92, 4 sec, t10/12; cum 74K 5/13;
• 21553, 2,202, QEP, MHA 4-31-25H-150-92, 4 sec, t10/12; cum 85K 5/13;
• 21554, 2,430, QEP, MHA 1-31-30H-150-91, 4 sec, t10/12; cum 78K 5/13;
• 21556, 2,376, QEP, MHA 3-31-30H-150-91, 4 sec, t10/12; cum 70K 5/13;
• 21557, 2,140, QEP, MHA 1-31-36H-15-92, 4 sec, t5/13; cum 14K 5/13;
• 21558, 2,359, QEP, MHA 3-31-36H-150-92, 4 sec, t5/13; cum 18K 5/13;
• 21559, 2,032, QEP, MHA 5-31-25H-150-92, 4 sec, t5/13; cum 12K 5/13;
• 21560, 673 QEP, MHA 7-31-25H-150-92, 4 sec, t5/13; cum 19K 5/13;
• 21561, 1,731, QEP, MHA 1-31-25H-150-92, 4 sec, t5/13; cum 9K 5/13;

32-150-91, Heart Butte; one 4-well pad and one 2-well pad

• 20487, 606, QEP, t11/11; cum 160K 5/13;
• 20488, 1,571, QEP, t11/11; cum 182K 5/13;
• 20489, 933, QEP, t11/11; cum 141K 5/13;
• 20490, 2,609, QEP, t11/11; cum 243K 5/13;


• 22028, 2,737, QEP,  MHA 2-32-29H-150-91, t11/12; cum 91K 5/13;
• 22029, 1,961, QEP, MHA 4-32-29H-150-91, t11/12; cum 84K 5/13;

A 3-well pad, and two 4-well pads in 31-148-92, Heart Butte:

• 22649, 709, WPX, Charles Blackhawk 31-30HA, t11/12; cum 63K 5/13;
• 22650, 247, WPX, Charles Blackhawk 31-30HX, t11/12; cum 50K 5/13;
• 22651, 219, WPX, Charles Blackhawk 31-30HB, t11/12; cum 62K 5/13;

• 22652, conf, WPX, Charles Balckhawk 31-30HY, 
• 22653, conf, WPX, Charles Blackhawk 31-30HC, 
• 22654, conf, WPX, Charles Blackhawk 31-30HZ,
• 22655, conf, WPX, Charles Blackhawk 31-30HD,

• 21904, 1,542, QEP, MHA 4-06-07H-147-92, Heart Butte, t8/20/12; cum 101K 5/13;
• 21905, 2,223, QEP, MHA 2-06-07H-147-92, Heart Butte, t8/17/12; cum 81K 5/13;
• 21906, 2,142, QEP, MHA 4-32-33H-148-92, Heart Butte, t8/15/12; cum 75K 5/13;
• 21908, 2,180, QEP, MHA 2-32-33H-148-92, Heart Butte, t8/22/12; cum 83K 5/13;

5-149-90, Deep Water Creek Bay

• 21091, 499, QEP, t7/12; cum 54K 5/13; 
• 21092, 436, QEP, t7/12; cum 51K 5/13; 
• 21093, 878, QEP, t7/12; cum 72K 5/13; 
• 21116, 952, QEP, t4/12; ccum 70K 5/13; 
• 21824, 814, QEP, t4/12; cum 53K 5/13; 

18-150-90, Deep Water Creek Bay

• 17434, 880, QEP, t1/09; cum 145K 5/13;
• 17940, 1,217, QEP, t1/10; cum 211K 5/13;
• 18930, PNC, QEP
• 18991, 1,053, QEP, t9/10; cum 148K 5/13;
• 19683, 766, QEP,  t12/11; cum 115K 5/13;
• 20271, 592, QEP, t12/11; cum 102K 5/13; 

Some time ago I mentioned that I was no longer tagging/labeling "multi-well pads" because this was becoming too commonplace. I am now tagging/labeling "mega-pads"which have more than 5 wells on the pad. This is different than the tag "mega-units" which generally refers to 2560-acre spacing units, but at least 1,920 acres.

Note: there may be some errors on the data above; it was done quickly and not double-checked.

Mike Filloon on Marathon -- SeekingAlpha -- The Bakken, North Dakota, USA

Mike Filloon had another excellent article in SeekingAlpha.com last week looking at Marathon Oil.

Marathon's activity in both the Eagle Ford (south of San Antonio, Texas) and the Bakken provide an opportunity to compare the two fields.

For newbies, it also provided a look at where the Bakken was headed in terms of spacing: four wells per spacing unit in general, and six wells in some areas of the Bakken. Filloon talks of Marathon's 420-acre spacing in the Bakken.

Filloon noted that Marathon feels that takeaway capacity will be less of an issue by late 2013 or early 2014, "even if by that time the Williston Basin production grown to over a million barrels of oil per day."

According to the article, Marathon's oil:

• 55% to Tesoro refinery in Mandan
• 28% pipeline
• 14% rail

In passing, Filloon reminds us of the potential of downspacing in the Three Forks, and that EOG is testing secondary recovery (water flooding).

Bakken Oil Being Shipped To California -- A Great Story To Start Off The Week

Link here to Bakersfield.com.This story is huge, and immensely enjoyable to read. The data points do not do the story justice.

Data points:

• Kern County (Bakersfield, heart of California oil country) refinery buying "large amounts" of Bakken oil
• 26,000 bbl/day refinery
• Kern Oil & Refining Co
• turns a bigger profit refining Bakken oil than using same grade of oil produced in Kern County
• the site says the shift appears to have begun in 2010
• California's 2-million bbl/day refining industry needs more oil than California able to produce
• due to pipeline issues, there is a relative "glut" of Bakken oil
• $20 differential between Bakken and Kern oil
• experts estimate rail costs no more than $18; maybe less than $15/bbl

The article has much more information and some nice links embedded.

What a great way to start the week.

A huge thank you to a reader for alerting me to the story. 

Other refiners across the country are considering the same thing. The "genius" of all that unit trains and crude-by-rail terminals in North Dakota -- as someone else said, "necessity if the mother of innovation."

One small point might need clarification for the experts: early in the article the writer suggests that Bakken oil and Kern County oil are similar grades, but later in the story the writer refers to Kern County oil as "heavy" oil. If accurate, it is less expensive to refine Bakken oil than heavy oil, all things being equal.