Another Active Rig Added In North Dakota -- December 20, 2018

Active rigs:

$45.88	12/20/2018	12/20/2017	12/20/2016	12/20/2015	12/20/2014
Active Rigs	69	51	41	64	182

Seven new permits:

• Operators: Liberty Resources (5); Whiting (2)
• Fields: East Tioga (Mountrail), Sanish (Mountrail)
• Comments: Whiting has permits for a two-well Meiers pad on section 17-154-92; Liberty Resources has permits for a 5-well pad on section 29-158-93;

And that was all.

News Article Reads Like A Press Release From Saudi Arabia -- December 20, 2018

Updates

Later, 4:55 p.m. CT: talk about mixed messages. In the original post, we were told how conventional oil makes up 93% of the world's oil mix and much/most of that comes from the Mideast. And now we get this banner headline from oilprice:

How is cognitive dissonance spelled?

Original Post 

 
It's easy to forget this when focused on the Permian and the Bakken, but look at this, from Rigzone:

Conventional oil makes up around two-thirds of the world’s recoverable oil resources and accounts for 93 percent of today’s oil mix. More than half of this oil comes from oil fields that are past their peak and declining, revealed by a loss of about 3 million barrels of output last year.

To accommodate this yearly natural decline from old wells and to satisfy rising demand, the world needs a fresh supply of 5.7 million barrels each year according to the International Energy Agency (IEA).

With so much attention focused on the exceptional growth in U.S. tight oil supply to 11.5 million barrels per day (MMbpd) this year and forecasts of 12 MMbpd in 2019, it is easy to forget the pivotal role of the Middle East in global oil supply.

Rystad Energy analysts expect Middle Eastern oil production to grow by 2.7 MMbpd by 2025, driven largely by supply additions of 1.5 MMbpd from Iraq and another 1.2 MMbpd from the re-opened Neutral Zone—the area between Saudi Arabia and Kuwait—as well as the UAE and Iran.

OPEC countries hold nearly 82 percent of the world’s crude oil reserves of which the bulk 65 percent are in the Middle East, led by Saudi Arabia, Iran, Iraq, Kuwait and the UAE. The world’s cheapest oil producers, with costs between $9 and $10 a barrel in 2016, were respectively Saudi Arabia, Iran and Iraq because their oil lies close to the surface and is pooled in mega fields.

Moreover, the Middle East's producing countries have some of the lowest oil decline rates in the world, which matters greatly since, as one estimate suggests, the difference between a 5.7 percent (2017) and a 7.5 percent (2016) decline rate yields another 900,000 barrels online.

Rystad Energy notes that output from conventional fields beyond the Middle East peaked in 2010 and they expect it to continue falling to 45.6 million barrels a day, a 2.3 million barrel decline from current levels.

This is largely due to the oil price collapse in 2014, which triggered fierce cuts to exploration budgets in 2015 and 2016, flat investment during 2017, and only a slight uptick this year. 

In essence, capital investment fell from $750 billion to $460 billion in 2016 and has yet to recover, says the IEA. 

The impact is seen in discoveries of new oil, which fell to a record low in 2017 with less than 4 billion barrels of crude, condensate and NGLs.

Discoveries in 2018 are led by offshore Guyana with an estimated 4 billion barrels of oil equivalent, the Barents Sea, the north slope of Alaska, the Dorado field offshore Australia and new finds in Oman and by Norway.

However, unlike oil fields in the Middle East and U.S. tight oil for that matter, conventional offshore oil fields are huge, complex and expensive projects that take years to come to fruition. This has encouraged big energy companies in recent times to invest in acreage, drilling wells and hydraulic fracturing in U.S. shale, especially in the premier Permian Basin stretching from Texas to New Mexico. Drilling a tight oil well costs between $5 and $10 million, is fast—measured in days rather than years—and brings a return on investment within months.

More at the link.

This data point from the article is irrelevant and results in questionable credibility of the entire article:

The world’s cheapest oil producers, with costs between $9 and $10 a barrel in 2016, were respectively Saudi Arabia, Iran and Iraq because their oil lies close to the surface and is pooled in mega fields.

Bakken Oil Production Expected To Drop Next Month -- Platts -- December 20, 2018

It appears this is about production for the month of January, 2019. Note that official (final) production figures lag two months. The most recent Director's Cut was for data for October, 2018. The article below, I believe, pertains to January, 2019, data, estimates.

Also, we get an explanation for the incredibly low prices for North Dakota light sweet oil (Bakken) this past autumn. And we were correct in our guesses why prices were so low. 

From Platts: after months of record Bakken oil production, a dip is expected next month.

A combination of winter weather and sluggish upstream investment in the Williston Basin because of declining oil prices will likely cause output growth to plateau or slow in early 2019, potentially until May, Lynn Helms, North Dakota's top oil and gas regulator, said.

Helms added that investments in drilling, fracking and well completions all are slowing down because of the decline in Bakken oil prices.

Bakken crude oil price differentials saw pressure in October and November as growing production in the Williston Basin began to outpace available pipeline takeaway capacity.

Other factors that put pressure on prices was prolonged seasonal maintenance at Midwest refineries this fall and record-low prices for competing Canadian crude as oil there faced issues with takeaway constraints as well. Bakken crude in the Williston basin was assessed at a multi-year low November 1 at a $20.50/bbl discount to the NYMEX WTI calendar-month average.

The differential averaged WTI CMA minus $12.75/bbl in October and November. At their strongest level this year in June, Bakken Williston was trading at WTI CMA plus $1.75/bbl.

Prices quickly rebounded in December, however, after refinery maintenance was complete and there was an announcement that the Alberta government ordered a 325,000 b/d curtailment of Canadian crude production, starting January 1. Differentials spiked in December and Williston basin crude reached WTI CMA minus $3.50/bbl before leveling off at the end of the trade cycle for February. A few trades for January Bakken continue to get done and it was heard bid Thursday at WTI CMA minus $3.25/bbl.

By the way, Bakken companies might have actually made money when prices dropped this past autumn. Counterintuitive but very possible. 

CLR Looks To Put Seventeen Wells On A 2560-Acre Drilling Unit In Jim Creek Field -- December 20, 2018

From the January, 2019, NDIC hearing dockets, case number (not permit):

• 27279, CLR, Jim Creek-Bakken, 17 wells on an existing 2560-acre unit, sections 6/7/18/19-146-95; Dunn County

This is a four-section stand-up drilling unit. In a four-unit stand-up, drillers often site the wells in the middle and drill standard long laterals, some going north for two sections; and, some going south for two sections.

As that section looks today:

The Pletan / Dvirnak wells are tracked here.

BR Looks To Put Nine Wells On A 640-Acre Drilling Unit In Charlson Field -- December 20, 2018

From the January, 2019, NDIC hearing dockets, case number (not permit):

• 27250, BR, Charlson-Bakken, 9 wells on a 640-acre unit, section 34-153-95, McKenzie;

This section is a 640-acre drilling unit; part of a 1280-acre drilling unit; and part of a 2560-acre drilling unit. 

As that section looks today:

The wells in the graphic:

• 33931, n/d, BR, Three Sons 1A TFH-ULW, Charlson, t7/18; cum 44K 10/18: 

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	10-2018	31	5442	5430	7290	48543	48182	0
BAKKEN	9-2018	24	14997	15318	8282	25391	25111	0
BAKKEN	8-2018	24	23088	22640	13335	741	33	428
BAKKEN	7-2018	2	30	30	3177	255	253	0

• 33932, 208, BR, Three Rivers 1B MBH, Charlson, t7/18; cum 72K 10/18: 

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	10-2018	31	28781	28254	17395	17798	13505	2136
BAKKEN	9-2018	23	24802	24934	13472	22897	19134	1830
BAKKEN	8-2018	22	17630	17288	14201	37668	36095	245
BAKKEN	7-2018	3	377	377	5564	386	384	0

• 33933, 192, BR, Three Rivers 1C TFH, Charlson, t7/18; cum 56K 10/18: 

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	10-2018	31	19769	19437	13546	10323	6835	2396
BAKKEN	9-2018	29	20509	20645	9906	21541	10950	9485
BAKKEN	8-2018	6	15963	15653	11699	27597	26549	71
BAKKEN	7-2018	1	157	157	2862	596	592	0

33934, conf, BR, Three Washers 3D TFH-ULW, Charlson, no production data,
33935, conf, BR, Three Rivers 2C MBH, Charlson, no production data,
33936, conf, BR, Three Rivers 2A TFH, Charlson, no production data,