The Million Dollar Way (The Bakken Oil Blog)

Tuesday, December 26, 2017

How's That Renewable Energy Working Out In New England? -- December 26, 2017

A reader alerted me to this. I had seen it earlier but I was not going to post it until I saw this story: the day after Christmas, 75% of US sees freezing temperatures, and it's particularly severe in New England, which naturally led to the next question, "how's that renewable energy working out to keep the heat on?"

Spot prices for electricity surging above $200/MWh. And so it goes. Surrounded by a glut of natural gas and electricity surging above $200/MWh. CAVE dwellers don't want natural gas pipelines.

WTI Hit "$60" Today -- December 26, 2017; Hillary Aghast!

Active rigs:

$59.80	12/26/2017	12/26/2016	12/26/2015	12/26/2014	12/26/2013
Active Rigs	53	41	62	173	186

No new permits.

Three permits renewed:

EOG: three Parshall permits, all in Mountrail County

No permits cancelled.

DUCs reported at completed: none.

Hillary aghast? See this site. In case this link breaks, the issue -- US government looks to subsidize coal industry.

Random Update Of MRO's Kukla Well, #16422 -- December 26, 2017

Updates

March 20, 2018: see long note below. Production has been updated for #16422:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2018	31	13515	13443	19066	13232	11279	158
BAKKEN	12-2017	31	15498	15756	23576	14411	12418	0
BAKKEN	11-2017	28	17826	17771	30827	13396	7552	3770
BAKKEN	10-2017	26	9433	9390	22877	6674	4064	1461
BAKKEN	9-2017	19	10797	10182	8229	12806	3107	8468
BAKKEN	8-2017	0	0	0	0	0	0	0
BAKKEN	7-2017	0	0	0	0	0	0	0
BAKKEN	6-2017	0	0	0	0	0	0	0

Original Post

Disclaimer: in a long note like this there will be typographical and factual errors. It is difficult to separate opinion from facts. I may be seeing things that do not exist, and I certainly see things differently that a lot of analysts.

Case study: as you go through this case study, think about this. Some folks are suggesting that operators are running out of new drilling locations in the "sweet spots" in the Bakken. I don't buy that. To some extent, "sweet spots" are defined by the price of WTI. Whatever.

The bigger story is continued management of existing wells. Somewhere else one can find the exact number of Bakken wells that have been drilled and are still being "managed." I come up with about 10,500 Bakken wells. The vast majority of those wells have not been re-fracked, either with a mini-re-frack, a modest re-frack, or a full-fledged re-frack.

If one considers an existing Bakken well as a well that could be re-fracked, one could argue it's a "new" drilling location. That may not make sense, but think about it as you go through this case study. This makes unconventional (tight oil) very different from conventional oil.

The well:

16422, 293, MRO, Kukla 34-34H, Murphy Creek, F; t12/07; cum 141K 10/17;

Recent production profile:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	10-2017	26	9433	9390	22877	6674	4064	1461
BAKKEN	9-2017	19	10797	10182	8229	12806	3107	8468
BAKKEN	8-2017	0	0	0	0	0	0	0
BAKKEN	7-2017	0	0	0	0	0	0	0
BAKKEN	6-2017	0	0	0	0	0	0	0
BAKKEN	5-2017	0	0	0	0	0	0	0
BAKKEN	4-2017	0	0	0	0	0	0	0
BAKKEN	3-2017	13	443	747	326	435	0	336
BAKKEN	2-2017	28	1502	1873	462	1461	0	1132
BAKKEN	1-2017	31	2221	2101	705	2098	0	1674
BAKKEN	12-2016	12	478	0	660	240	0	120
BAKKEN	11-2016	0	0	0	0	0	0	0
BAKKEN	10-2016	0	0	0	0	0	0	0

It has been off-line since 1/15:

BAKKEN	12-2014	31	954	926	315	809	360	161
BAKKEN	11-2014	30	976	939	361	759	360	115
BAKKEN	10-2014	31	1001	1140	343	670	283	94
BAKKEN	9-2014	30	994	906	347	630	244	100
BAKKEN	8-2014	31	1073	1129	372	884	432	151
BAKKEN	7-2014	31	1139	1118	422	742	348	86
BAKKEN	6-2014	30	1162	1122	443	685	233	148
BAKKEN	5-2014	31	1338	1611	570	747	232	186

Initial production after original frac:

BAKKEN	9-2008	30	2450	2433	707	1546	1546
BAKKEN	8-2008	31	2918	3008	838	1958	1958
BAKKEN	7-2008	31	3184	3124	1043	2004	2004
BAKKEN	6-2008	30	4113	4279	1197	2749	2749
BAKKEN	5-2008	31	4627	4371	1523	2543	2543
BAKKEN	4-2008	18	1774	1821	862	931	931
BAKKEN	3-2008	31	3197	3218	808	1590	1590
BAKKEN	2-2008	29	3755	3766	914	1770	1770
BAKKEN	1-2008	29	5030	5176	1307	2309	2309
BAKKEN	12-2007	31	5800	5219	2915	2280	2280

FracFocus:

Re-fracked 7/24/2017 - 8/10/2017; 6,706,365 gallons of water; water, 91% by mass;
a gallon of water weighs: 8.345404 pounds
6,706,365 gallons x 8.345404 pounds = 56 million pounds
91% of what = 56 pounds
61.5 million pounds - 56 million pounds = 5.5 million pounds proppant max
let's see if there's sundry form over at NDIC
wow, there is
the new IP: 1,742 (crude oil)
45 stages
and, the amount of proppant? 5.3 million lbs (whoo-hoo, the math above was right on target)

The other two wells in the drilling unit unremarkable at this point: #25761 and #25760, although the latter was off-line 10/17; it's not a great well, and wonders if this one might be a candidate for a re-frack?

The graphic:

Comments:

this well was, in the big scheme of things, a pretty lousy well from the beginning; the IP and total production the first couple of years was not all that great
it was shut in for almost two years
it was then re-fracked, and by "modern" standards, it was re-fracked with a small amount of proppant, 5.3 million pounds
the modest re-frack resulted in an IP and a first two-month production well above what the well produced when it was first drilled/fracked back in 2007
the operator had almost no risk re-fracking this well
the well was already drilled; no new infrastructure costs were incurred; no new lease money; no new nothing as far as costs, except the costs associated with a modest re-frack
my hunch is that the geologist/company could almost "guess" what new production would be based on their knowledge of the Bakken
finally, note that this well is almost ten years old, and is still flowing, without a pump, at least according to the scout ticket; sometimes the scout tickets are wrong
could one consider this a "new" drilling location? Just saying
one more thing: note that is an MRO well; it's my feeling that MRO is taking the lead on re-fracks

October, 2017, US Crude Oil Production Data To Be Released Later This Week -- Richard Zeits -- December 26, 2017

EIA to report US crude oil production for October, 2017, at the end of the week. Richard Zeits forecast and my comments:

9.45 million bopd; above the 9.28million bbls/day implied by the EIA's weekly estimates
Zeits reminds us that October, 2017, production was strongly impacted by Hurricane Nate
Zeits again wades into the controversy regarding EIA forecasts
oil peak folks think the EIA is overly bullish
Zeits thinks EIA may be under-estimating the oil industry
the best "news": unless I missed it, Zeits did not mention rig count; CNBC was still emphasizing rig count as the best way to measure/forecast US crude oil productivity

How Bad Was The Saudi Trillion-Dollar Mistake? -- December 26, 2017

It will take them more than a decade to balance their budget.

From Bloomberg:

Saudi assumes: oil revenue will surge by 80% by 2023 -- that's five years from now; and almost ten years from when Saudi first announced plans to flood the world with oil, to crush US shale (their trillion-dollar mistake)
six-year program to balance the budget
their plant assumes rising oil prices and increasing output: will push oil sales to 801.4 billion riyals ($214 billion) from 440 billion riyals this year
assumes the price of oil will reach $75 (when that happens is not provided)
one expert says these assumptions look very "challenging"
"the strong oil revenue growth in 2017 will be difficult to repeat"
forecast: oil production to 11.03 million bopd vs an average 10 million bopd
for 2020: 10.45 million bopd

From another story earlier this month, this is how the Saudi's plan to execute their budget: