Monday, August 3, 2015

Re-Fracking; Update On BHI-HAL Merger -- August 3, 2015

Note: a huge "thank you" to all readers for not pointing out the number of typographical (spelling) errors in the original post. I post as fast as I can, and will come back when I proofread later. The spelling errors have been corrected in this post. 

Rigzone has an article on re-fracking. The jury is still out. For all the writing, not much was said in the article. Re-fracking might work, it might not work.

Reuters/Rigzone reports update of the BHI-HAL merger. Tea leaves suggest the deal is dead.

Bloomberg/Rigzone reports that the situation in the oil patch, due to slumping oil prices, excess supply, poor demand, could get really, really ugly.  It appears crude oil supply will outpace demand by 1 million bopd through 2016.
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This Is Not An Investment Site, But Some Companies Of Interest That Will Be Reporting Tomorrow -- August 3, 2015

Reporting tomorrow:
This list may not be entirely accurate; things change.
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Apple Buys Massive 43-Acre Development Site In North San Jose -- August 3, 2015

Link here.
Shortly after leasing a 300,000 square foot campus in North San Jose, Apple has expanded on its real estate holdings in the area, buying a 43-acre development site at 2347 North First Street for more than $138 million.
According to the Silicon Valley Business Journal, the site, which consists of undeveloped land, is approved for up to 2.8 million square feet of office space, much like Apple's Campus 2 location in Cupertino. Apple has not submitted building plans for the site, and it is unclear what the company plans to do with the land.
Apple is expanding rapidly in the Bay Area. In addition to the second Cupertino campus and the 300,000 square feet of space leased in San Jose in July, the company made its first real estate lease in San Francisco last week, signing a deal for 76,000 square feet of office space.
Along with office space, Apple is also said to be seeking additional space for both industrial purposes and research and development, possibly for undisclosed projects like its Apple Car.
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Update On Halcon's Work In Marmon Oil Field, The Bakken -- August 3, 2015

Updates

August 4, 2015: see comment below suggesting another reason why Halcon is reporting great wells in Marmon oil field:
Another variable at play here is production method.
I've noticed Halcon routinely putting their new wells on ESP (electrical submersible pump) very early (similar to what EOG is doing).
This allows them to move LARGE fluid volumes and "unload" all that water they pumped down during the frac very quickly.
In addition to accelerating production these ESP's are likely the next phase of the Bakken "laboratory" as they provide accurate real time bottom hole flowing pressure, a key variable for any productivity indexing or rate transient analysis. This pressure data point was previously rarely available with any quality to the engineers. Having this on numerous wells should accelerate the learning curve since it will allow for much earlier time diagnostics/benchmarking of fracture stimulation. 
Original Post
 
Quite awhile ago I noted that some nice wells were being reported in the Marmon oil field. It surprised me; Marmon oil field is not exactly an area I had expected to see the good wells that were being reported. I gave it some passing thought but not much more, until tonight.

A reader wrote to ask if I had any idea why ... here's the question the reader asked:
Do you know what Halcon is doing different on the Nelson Wells in the Marmon Prospect North of Williston?
The wells, 157-100-Sections 25/36 with well numbers 27000. 27001, 27002 are producing 15,000-30,000 barrels a month which isn’t common in the area. 
These three wells are still on confidential status, but production numbers have been published:

27000, conf, HRC, Nelson 157-100-25A-36-2H:

DateOil RunsMCF Sold
6-20151761114749
5-20152847226596

27001, conf, HRC, Nelson 157-100-25A-36-3H:

DateOil RunsMCF Sold
6-20151865614968
5-20151949814324
4-201536940

27002, conf, HRC, Nelson 157-100-25A-36-4H:

DateOil RunsMCF Sold
6-20152137317624
5-2015139059349
4-201560701789

 ***************************

Back on June 23, 2015, after a reader inquired about the HRC wells in Marmon oil field, I was reminded how good these wells really were.

I updated the completion techniques: it appears that HRC is routinely using 35 stages, 4.1 million lbs in the Marmon. There is much more to their completion technique but further description is beyond my comfort zone. Maybe other readers have more understanding / knowledge of HRC's completion techniques.

Interestingly enough, someone has already done that. I posted the link back on June 24, 2013. Wow, that feels like ancient history. 2013. Two years ago. How things have changed.

Anyway, that "someone" was no less than Mike Filloon. The good news is that his article on the Halcon wells in Marmon oil field was not archived. I linked it then but you can go to it directly here: http://seekingalpha.com/article/1518342-bakken-update-halcon-well-results-improve-while-kodiak-buys-the-best-in-west-williams-county.

This is what Mike wrote about Halcon's well completion design:
Well design varies from one operator and area to the next. What works in Mountrail County may be ineffective in Divide. These variations take time to hammer out, and most operators have a good idea of how they want to work the formation by the time pad development begins. There are several variables manipulated by operators to maximize production at the lowest cost.
The lateral length is how long the horizontal leg of the well is. Basically, this is the total feet coming in contact with the source rock. The longer the lateral, the better the production (or at least that is how it is suppose to work). The lateral is made of stages.
These stages allow completions work to be done one section at a time. The tighter the stage, the better the pump trucks can stimulate the source rock. Water and proppant are pushed into the fractures, keeping it open so the crude and natural gas can continue to travel into the well. Well design must have balance. Too little water and proppant, and the fractures close off, decreasing well economics. Too much and there is added cost with no benefit of additional revenues. This is why operators use a wide range of design, as it is the only way to optimize well economics.
Halcon has drilled and completed a large number of wells in western Williams County. This is the same general area I recently covered. EOG Resources recently completed a well in this area that had a 6 month pay back. These results are not typical, but could be a sign of things to come.
The table below provides Halcon's well design and production data in several fields of western Williams County. Keep in mind, it is relatively new to the Bakken and still getting comfortable with the play. (Go to the link to see the table/results).
More:
Halcon's goal is to improve on Petro-Hunt's and GeoResources' well design. The above wells use average stage and lateral length. It could feasibly increase water usage by 50% and proppant by 25%. This would depend on how well it is stimulating the source rock, but this design tells me Halcon is still figuring that out. Its IP rates are below average, with EURs of 300,000 bbls ofoil. Comparing to Petro-Hunt, Halcon's well are better.
Petro-Hunt's well design had very poor production. It used more water, but the average stage was longer. It used less proppant. Petro-Hunt's EURs were approximately 200,000 bbls of oil, which is not economic even with better Bakken differentials.
Bottom line:
  • The Marmon oil field is north of Williston; it is generally not considered one of the sweet spots in the Bakken
  • HRC's wells suggest that the right completion technique might take an "average" field and make it a great field
  • at a minimum, HRC's completion technique in the Marmon: 35 stages, and 4.1 million lbs sand
But, my hunch is there is a lot more to the story. I can hardly wait to see the frack reports for the three Nelson wells above.

In the graphic below, note the location of the Marmon oil field, well north and far west of the generally recognized sweet spots in the Bakken (and well south of the one small sweet spot in Divide County being worked by SM Energy). In the graphic below, the Stockyard Creek oil field, east of Williston, is circled; it is in the sweet spot of the Bakken as it trails under the river and into the Watford City area. You can see the relative lack of activity around the Marmon oil field far to the north of the very active Stockyard Creek area.

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Six (6) New Permits -- North Dakota, August 3, 2015

Frack data for some HRC wells has been updated: link here. 

Active rigs:


8/3/201508/03/201408/03/201308/03/201208/03/2011
Active Rigs74194179206182

Wells coming off the confidential list Tuesday:
  • 28525, 1,227, EOG, Parshall 58-1608H, Parshall, ESP July 3, 2015; 43 stages, 9.1 million lbs sand, 7 million gallons xl gel, HCl, fresh water; t2/15; cum 83K 6/15;
  • 28639, 848, EOG, Parshall 92-28H, Parshall, ESP February 21, 2015, 34 stages, 6.7 million lbs sand, 5 million gallons xl gel, HCl, fresh water, t2/15; cum 55K 6/15;
29494, drl, XTO, Rita 44X-34H, Tobacco Garden, no production data,
Six (6) new permits --
  • Operator: XTO
  • Field: Lindahl (Williams)
  • Comments:
Two (2) producing wells completed:
  • 29048, 2,112, BR, Teton 2-1-3MTFH, Camel Butte, 4 sections, t7/15; cum --
  • 29463, 2,645, BR, Teton 7-8-10MBH, Camel Butte, 4 sections, t7/15; cum --
Whiting abandoned three producing wells, including:
  • 23936, AB, Whiting, Faiman 32-14, Golden Valley, a Red River well, s12/12; a grand total of 10 bbls;
**************************************

28525, see above, EOG, Parshall 58-1608H, Parshall:

DateOil RunsMCF Sold
6-20151291510838
5-20151587211017
4-20151609610577
3-20152190510395
2-2015160505114

28639, see above, EOG, Parshall 92-28H, Parshall:

DateOil RunsMCF Sold
6-201565560
5-201587372780
4-2015111936094
3-2015165666848
2-2015114044142
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