More on the Lodgepole

(Corrected November 30, 2010)

I apologize for folks who are tired of this subject, but the Lodgepole formation has really caught my interest. If you want to know why I'm interested in the Lodgepole, click here first to get an overview. 

According to the NDIC website, since 1993 forty-eight (48) wells have been drilled into the Lodgepole. Those 48 wells have produced a total of 55,848,939 barrels of oil. By my calculations (55,848,939 bbls / 48 wells), that equals an average of 1,163,520 barrels of oil per well. I assume these are mostly vertical (conventional) wells but I don't know for sure.

On September 10, 2009, Continental Resources (CLR) announced another significant Lodgepole well, the Laurine Engel 1 in a press release.

Continental Resources, Inc. today announced a significant Lodgepole discovery in Stark County, ND. The Laurine Engel #1 (33% WI) flowed 463 bopd at 650 psi flowing tubing pressure from 10 feet of perforations in the Lodgepole formation. The well was a conventional vertical test drilled to 9,754 feet of total depth.

"This is the first significant Lodgepole discovery in the Dickinson area since the late 1990s," said Harold Hamm, Chairman and Chief Executive Officer of Continental Resources. "Initial wells targeting the Lodgepole formation were drilled in 1993, and since that time 41 producing wells have yielded 55 million barrels of oil and 28 Bcf of natural gas."

Same well, different story.

The operator for the well was Armstrong Operating, Inc., of Dickinson, North Dakota.

Except for the years between 1994 and 2000, when Armstrong reported anywhere from five to ten wells per year (except for only one well in 1998), the company generally drills one to two wells per year. In 2005, 1 well; 2006, 2 wells; 2007, none; 2008, 1 well; 2009, 1 well; and, in 2010, so far, 2 wells.

The two 2010 wells are file number 18496, Gruman 18-3 with a status date of March 10, 2010; and, 19975, Zastoupil 1-17, permit granted this past month, no status date yet but on the confidential list.  Armstrong's Gruman well and Zastoupil well are in adjoining sections.

• The location of the Gruman well: NENE 18-139-96
• The location of the Zastoupil well: SESW 17-139-96

Where are the Oil for America wells? They are all in adjoining sections.

• 19785, Froelich 27-2; 27-138-97, rig-on-site;12 miles southwest of center of Dickinson
• 19601, Wieglenda 23-1; 23-139-94; 15 miles east-southeast of center of Dickinson
• 19272, Wolf 29-1; 29-139-95; six miles southeast of center of Dickinson
• 19258, Zastoupil 22-1; 22-139-97; six miles SW of ctr of Dickinson, just outside Eland field
• 20061, Dohrmann 13-1; 13-140-94; 15 miles east-northeast of Dickinson

For the past several weeks, Whiting has been granted at least one permit almost every day it seems in the same county, Stark County:

• 19891, Cymbaluk 21-15TFH, 15-140N-99W
• 19923, Richard 21-15TFH, 15-139N-99W
• 19926, Roller 21-16TFH, 26-139N-99W
• 19937, Paluck 21-17TFH, 27-139N-99W
• 19967, Talkington 21-40TFH, 30-140N-99W
• 20002, Praus 21-28TFH, 28-139N-97W
• 20028, Duletski 21-16TFH, 16-139N-99W
• 20064, Froehlich 21-28TFH, 28-140N-99W
• 20079, Obrigewitch 21-16TFH, 16-140N-99W

By their designation / name, they are all targeting the Three Forks Sanish, not the Lodgepole.

Whiting as a case before the NDIC in December, 2010, to establish eight (8) 1280-acre spacing units, not in Stark County, but in Golden Valley County, to target the Lodgepole. This is part of their Lewis and Clark prospect. 

Delay in Completing Wells Due to Lack of Fracking Crews -- Rodney 1-14H and Earl 1-13H -- Bakken, North Dakota, USA

Anyone who has followed the Bakken knows that there is a shortage of fracking crews. Some of the larger operators have contracted dedicated fracking crews to deal with the problem. The smaller operators, of course, have more difficulty in contracting dedicated fracking crews and / or scheduling fracking crews. I have talked about the latter on numerous occasions. Here is an example:

Samson has been notified that the frac jobs for the Rodney #1-14H and Earl #1-13H wells have been delayed due to the scarcity of available frac crews.

I have opined that the difficulty in completing wells due to lack of fracking crews and the increasing cost of acreage will likely result in significant consolidation in the Bakken. The moat is getting wider. One can almost predict what is going to happen.

For Investors: Motley Fool Notices Bakken Activity -- Bakken, North Dakota, USA

Motley Fool mentions three geographic areas that have captured the attention of oil and gas investors.  One of the three areas is the Bakken, and the Motley Fool information is old news for all who have been following the Bakken activity closely, but it's still neat to see it capture the fools.

Heavy Sands Oil Discount to West Texas Intermediate -- Enbridge

First of all, a little rockabilly for all the Swedes in the Bakken (this has nothing to with the post itself; I just like to listen to music while reading and posting):


Swedish Film

Enbridge Energy Partners will be re-opening line 6B, the line that was closed following the pipeline spill earlier this year.

This story (the one linked above) gets into details I generally don't follow closely and would never think to post, except it provides a nice overview of several topics including a) various pipeline routes; b) discounts on Canadian oil sands heavy oil; and, c) restrictions placed on some pipelines limiting amount of oil that can be shipped.

It's a complicated story, and I don't know if I have it completely correct, but putting high quality Bakken oil into the Enbridge 6B pipeline will result in a discount for the Bakken oil also, despite it being much higher quality. This is why: at the end of the pipeline, the refiner pays for the quality of the oil that comes out of the pipeline. The refiner does not know what quality of oil went into the pipeline along the way; all he/she knows is the quality of the oil that comes out of the end of the pipeline into his/her refinery. The lower the quality, the lower he/she will pay for the oil. Obviously the more Bakken oil, the higher the quality and the higher the price.

Unfortunately, mixing all that lower-quality Canadian sands oil into the pipeline lowers the quality of the oil that comes out the other end. So, I assume there's a complicated formula to determine how much Enbridge discounts high-quality Bakken oil when it enters the pipe.

On the other hand, there is no discount taken on high-quality Bakken oil when it is shipped by rail, since it ends up at the refinery as high-quality oil. However, it costs more to ship by oil.

As more and more railroad oil loading facilities come on line and more and more oil is shipped by rail, the unit (or "per barrel") cost probably comes down. It is my understanding that the difference in  price paid for oil carried by pipeline and that carried by rail is becoming narrower and narrower (but rail is still more costly).

On another note, opening of line 6B is very, very important to the Bakken companies. I believe I read some months ago that Whiting said they would miss their third-quarter production targets due to the two oil spills that closed the pipelines. EEP paid a markedly lower distribution in the third quarter as a result of that. I assume, if there are no further problems, Whiting should meet their fourth quarter production targets and the distribution should come back nicely. We'll see.

Another Stroh Well; Three Great Whiting Wells -- Bakken, North Dakota, USA

A very, very nice well:

• Anschutz Exploration, Raphael Stroh, 13-143N-97W, Dunn County, 2,405.

Other nice wells completed and reported today:

• Whiting, Bartleson 12-18H, 18-153N-92W, Mountrail County, 1,667.
• Whiting, Ness 43-21H, 21-154N-91W, Mountrail County, 2,686.
• Whiting, Jones 12-8H, 8-154N-91W, Mountrail County, 2,746.

And then a Three Forks Sanish Well:

• Whiting, Mallard State 44-16TFH, Mountrail, 474.