Oasis Conference Call -- 2Q12

Updates

August 15, 2012: the company's August presentation (a PDF file):

• pad drilling; 35% of 2012 wells scheduled for pad drilling; moving to 100% in 2013
• days to frack wells: down 50% to ~ 5 days
• upgrading rig fleet; running 9 - 10 operated rigs
• pressure pumping: 2 - 3 dedicated external frack crews; own in-house fracking 24-hr ops
• cost to complete wells: moving from $10.5 to $8.8/well (remember, these are long laterals)
• well design: significant lower well costs in Hebron (eastern Montana) and Red Bank (north of Williston)
• north Cottonwood: all-sand fracs; saves money
• TFS; Spratley produced over 1,300 boed in first 60 days; TFS wells look similar (if not better) than nearby Bakken wells
• interference tests suggest Bakken and TFS produce independently of each other; confirms CLR's findings
• in-fill test program: 4 Bakken well test; 3 Bakken, 3 TFS test in Indian Hills
• slide 26: average EUR for middle Bakken now at 600K; was 350 - 450 when company went public 

Original Post

Data points from the Oasis 2Q12 conference call below. I didn't see a whole lot new. Like others, Oasis will focus on cutting costs (pad drilling, better use of ceramics; optimize fracking; in-house frack team). Bringing in more work-over rigs, something Whiting also said. 

2011: a transition year; consolidated acreage position; coring up large blocks

2012: focused in four areas - a) holding of all our drill blocks by production (successful); b) continue extensional testing in both the middle Bakken and the Three Forks; c) optimizing services, including start-up of Oasis well services (in-house fracking); and, d) infrastructure development.

Looking to knock off ~ 10% of drilling costs by end of year (every operator is saying this)

Moving to pad drilling -- again, the trend

Added leases around the company's core areas; now 320,000 net acres

Has brought in additional work-over rigs (also mentioned by Whiting; Whiting's ratio is 1.5 work-over rigs for every drilling rig)

Like CLR, Oasis increased full-year guidance to 22,500 to 22,50 boepd; 3Q12 will range between 22,000 and 24,000 boepd

Like CLR, Oasis increased its 2012 CAPEX as of July from $900 million to $1.1 billion; partly due to increased pace of drilling -- when the going gets tough, the tough get going

Current well cost: $9.8 million; hoping to reduce that to $8.8 million by end of year

Oasis Well Services: commenced 24-hour ops, two-week-on/one-week off rotation in June; 30% of Oasis frack work on a 10-rig schedule; will increase about 50% when OWS goes to full 24-hour operations

Guar not an issue;  nor is sand

In the north Cottonwood, where the Bakken is thick, but higher water concentrations, 36-stage completions, but reduced size of individual stages

EURs have increased significantly; now up to about 500,000 bbls on these (Cottonwood?) wells

Hebron prospect in Montana: similar approach; less proppant per stage; the Bakken is thinner; EURs there also about 500,000, but at lower cost in stimulations previously used in that area

In the Indian Hills (sic) and south Cottonwood, Three Forks are as good or better than the middle Bakken

Optimize proppant mix: Indian Hills (sic) and South Cottonwood, 60 to 65 percent ceramic; north Cottonwood is all sand to this point; Red Bank, beginning to use less ceramic;

Takeaway: 50/50 rail/pipeline

Looking at going from six wells to eight wells per 1280-acre spacing unit

OASIS: stimulation is "our biggest ticket item with respect to our total well cost" 

Important data points:

In a recent interference test, the JO Anderson Three Forks well was drilled about 800 feet from a Bakken well, which had already produced about 140,000 barrels. So far, the JO Anderson well has produced at a higher rate and other nearby Three Forks wells. We think that this is indicative of unique Three Forks reserves, even at close-Bakken/Three Forks well spacing.

Farm Subsidies and Welfare -- Red Herrings in the Budget Debate

Farm subsidies and welfare are red herrings in the budget/debt/deficit debate. There are only two areas that cuts will make a difference: military and health care. Period. Dot. Eliminate farm subsidies and welfare and one might feel "good," but the budget/debt/deficit will remain relatively unaffected.

Farm subsidies.

Texas:

• $25.9 billion in subsidies 1995-2011. ($1.5 billion/year)
• Texas ranking: 1 of 50 States
• 81 percent of farms in Texas did not collect subsidy payments - according to USDA.
• Ten percent collected 78 percent of all subsidies.
• Amounting to $16.7 billion over 17 years.
• Top 10%: $41,496 average per year between 1995 and 2011.
• Bottom 80%: $657 average per year between 1995 and 2011.

Iowa:

• $23.6 billion in subsidies 1995-2011. ($1.4 billion/year)
• Iowa ranking: 2 of 50 States
• 19 percent of farms in Iowa did not collect subsidy payments - according to USDA.
• Ten percent collected 58 percent of all subsidies.
• Amounting to $11.8 billion over 17 years.
• Top 10%: $33,626 average per year between 1995 and 2011.
• Bottom 80%: $1,553 average per year between 1995 and 2011.

Illinois:

• $19.7 billion in subsidies 1995-2011. ($1.15 billion/year)
• Illinois ranking: 3 of 50 States
• 26 percent of farms in Illinois did not collect subsidy payments - according to USDA.
• Ten percent collected 68 percent of all subsidies.
• Amounting to $11.2 billion over 17 years.
• Top 10%: $28,747 average per year between 1995 and 2011.
• Bottom 80%: $831 average per year between 1995 and 2011. 

Minnesota:

• $16.2 billion in subsidies 1995-2011. ($0.95 billion/year)
• Minnesota ranking: 4 of 50 States
• 30 percent of farms in Minnesota did not collect subsidy payments - according to USDA.
• Ten percent collected 62 percent of all subsidies.
• Amounting to $7.95 billion over 17 years.
• Top 10%: $35,237 average per year between 1995 and 2011.
• Bottom 80%: $1,319 average per year between 1995 and 2011.

Nebraska:

• $15.6 billion in subsidies 1995-2011. ($0.92 billion/year)
• Nebraska ranking: 5 of 50 States
• 27 percent of farms in Nebraska did not collect subsidy payments - according to USDA.
• Ten percent collected 62 percent of all subsidies.
• Amounting to $7.97 billion over 17 years.
• Top 10%: $36,494 average per year between 1995 and 2011.
• Bottom 80%: $1,340 average per year between 1995 and 2011.

Kansas:

• $15.4 billion in subsidies 1995-2011. ($0.91 billion/year)
• Kansas ranking: 6 of 50 States
• 32 percent of farms in Kansas did not collect subsidy payments - according to USDA.
• Ten percent collected 70 percent of all subsidies.
• Amounting to $8.67 billion over 17 years.
• Top 10%: $27,615 average per year between 1995 and 2011.
• Bottom 80%: $721 average per year between 1995 and 2011.

 North Dakota:

• $14.0 billion in subsidies 1995-2011. ($0.82 billion/year)
• North Dakota ranking: 7 of 50 States
• 16 percent of farms in North Dakota did not collect subsidy payments - according to USDA.
• Ten percent collected 61 percent of all subsidies.
• Amounting to $6.17 billion over 17 years.
• Top 10%: $45,980 average per year between 1995 and 2011.
• Bottom 80%: $1,712 average per year between 1995 and 2011.

California:

• $9.99 billion in subsidies 1995-2011. ($0.58 billion/year)
• California ranking: 10 of 50 States
• 91 percent of farms in California did not collect subsidy payments - according to USDA.
• Ten percent collected 73 percent of all subsidies.
• Amounting to $5.93 billion over 17 years.
• Top 10%: $66,781 average per year between 1995 and 2011.
• Bottom 80%: $1,436 average per year between 1995 and 2011.

Indiana:

• $9.78 billion in subsidies 1995-2011. ($0.57 billion/year)
• Indiana ranking: 11 of 50 States
• 41 percent of farms in Indiana did not collect subsidy payments - according to USDA.
• Ten percent collected 74 percent of all subsidies.
• Amounting to $6.01 billion over 17 years.
• Top 10%: $27,525 average per year between 1995 and 2011.
• Bottom 80%: $556 average per year between 1995 and 2011.

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Welfare payments, 2007

As the recession grinds on and people run out of unemployment benefits, the last safety net is the government's Temporary Assistance for Needy Families (TANF) program. Though benefits vary by state, TANF provides a maximum of 60 months of coverage throughout a recipient's lifetime.

The list appears to be ranked on basis of percent of population on assistance, not total dollar amount.

1. California, $3.3 billion
2. Maine, $62 million
3. Tennessee, $91 million
4. Massachusetts, $295 million
5. Vermont, $31 million
6. DC, $19 million
7. New York, $1.5 billion
8. Minnesota, $106 million
9. Washington state: $266 million
10. New Mexico: $59 million
11. Indiana: $102 million

The Great Plains, Joe Kotkin, The Wall Street Journal, 2006

A huge "thank you" to a reader who stumbled across this 2006 WSJ article and sent me the link. 

Look at how incredibly prescient Joel Kotkin was. This was at least a year before things really got going in North Dakota.

It begins:

At a time when the much-celebrated coasts creak from rising interest rates, faltering income levels and soaring energy prices, this windswept, energy-rich city of 57,000 on the western edge of the Dakota plains is experiencing the best of times. Cities like this one out in the far-off hinterland -- Iowa City, Sioux Falls, Fargo, Grand Forks, Rapid City -- now are enjoying job growth rates that, if they don’t rival Las Vegas, certainly put to shame those of most major metropolitan areas.

Unemployment is negligible and wages are rising across virtually all job categories.

Over the past five years, the fastest growth in per capita income has taken place in energy-rich Wyoming, Montana, North Dakota, New Mexico and West Virginia, while highly urbanized places like California, New York, Michigan and Illinois gather dust at the bottom of the pack. Tax revenues in these once hard-pressed states are also soaring; North Dakota’s surplus is now estimated at $527 million, representing more than a quarter of the state’s $2 billion annual budget.

Behind the good times are numerous factors, such as an Internet-enabled shift of technology and business service firms into the region, and a growing migration of downshifting boomers and young families. But perhaps the most dramatic change has come from an upsurge of energy prices that is turning places like North Dakota into a Nordic Abu Dhabi.

"We’re on the verge of a gold rush driven by energy," crows Bob Valeu, state coordinator for North Dakota Sen. Byron Dorgan. Mr. Valeu and other leaders here in both political parties see their state as a growing bastion of energy production for the U.S. Already North Dakota is among the major exporters of energy to the rest of the country, exporting roughly three-fourths of its 4,000 megawatts of electricity.

The article is a must for those interested in history of the boom as it was taking off. 

Remember the Poppers? The name pops up again:

Two decades ago the academics Frank and Deborah Popper described the development of the Great Plains as a mistake -- an expansion of too many people and farms into an environment unable to support them. They pointed, with some justification, to the depopulation of much of the area and suggested that it be "de-privatized," brought back to its "original pre-white state" and turned into "the ultimate national park." This notion was widely described as the "buffalo commons," and it gained some traction among environmentalists -- many of whom seem to regard people as a kind of blot on the landscape. Indeed the Plains -- parts of which are now suffering from a severe drought -- as a kind of human disaster area remains a popular theme among Eastern journalists: irresistible decline, dying towns, aging populations, a place to visit now before it all blows away.

Incredible stuff.

And, if you enjoyed this, you will really enjoy his article in the WSJ earlier this spring, "The Great California Exodus":

"California is God's best moment," says Joel Kotkin. "It's the best place in the world to live." Or at least it used to be.

Mr. Kotkin, one of the nation's premier demographers, left his native New York City in 1971 to enroll at the University of California, Berkeley. The state was a far-out paradise for hipsters who had grown up listening to the Mamas & the Papas' iconic "California Dreamin'" and the Beach Boys' "California Girls." But it also attracted young, ambitious people "who had a lot of dreams, wanted to build big companies." Think Intel, Apple and Hewlett-Packard.

Now, however, the Golden State's fastest-growing entity is government and its biggest product is red tape. The first thing that comes to many American minds when you mention California isn't Hollywood or tanned girls on a beach, but Greece. Many progressives in California take that as a compliment since Greeks are ostensibly happier. But as Mr. Kotkin notes, Californians are increasingly pursuing happiness elsewhere.

So many story lines. CBS News reports the same.

Random Update of A Midnight Run Well; Random Updates of Some Other Monster Wells

This well is still on "DRL" status. It was spud 3/10/11. It has produced almost 100,000 bbls of light, sweet crude to date (97,830 as of 6/12).

• 20323, drl, BR, Midnight run 11-1MBH, Union Center, s3/11; cum 97,830 bbls 6/12; (at 98K bbls produced, no IP had been reported)

Other random updates:

• 19690, 2,884, BR, Mazama 44-21H, Westberg, Bakken, t7/12; cum 125K 6/12; not even a full year of production, and > 125,00 bbls
• 19764, 3,249, BEXP, Vachal 3-34 1H, Alger, Bakken, t5/11; cum 142K 6/12; just over a year old;
• 20079, 2,760, Whiting, Obrigewitch 21-16TFH, Bell, t2/12; cum 117K 6/12; 

PBS Discovers the Bakken -- Human Interest Story

Link here to PBS. A reader sent me the link; thank you.

In case the link breaks, the first few paragraphs:

In western North Dakota, near the Montana border, there's so much oil around, it almost feels risky to say it: boom -- a 1 percent unemployment rate, heavy traffic in what was once a sleepy town of 12,000 [Williston, North Dakota], nowhere to live, restaurants that close early because they can't find enough people to work at $15 an hour and others offering signing bonuses to dishwashers and fast food workers.

Geologists say there is a small ocean of oil, hundreds of billions of barrels trapped underground here in North Dakota. So, thousands of workers flocked to Williston to pull it out. Instant towns rose, instead of corn and wheat, as Williston joined a new American energy boom driving growth in parts of the West.

Just two years ago, the United States was importing two-thirds of its oil. Today, imports are down to less than half U.S. oil needs. Oil companies have known about these supplies for decades, but new technology makes the deposit, known as the Bakken, profitable to drill.

Nowhere to live? Also, no groceries.

The entire transcript looks promising.