Bakken Update: EOG Wells Model EURs Over 2 Million Barrels Of Oil

| About: EOG Resources, (EOG)

Unconventional oil production in the United States is growing. Liquid rich shale plays are relatively new, making it difficult to estimate future production. Each play is different, requiring a unique well design. Additional difficulties are seen within each basin as geology can change from one mile to the next. It is important to consider each area individually before modeling production. EOG Resources (NYSE:EOG) is a Bakken top producer. It has developed most of Parshall Field, with only a handful of results from Statoil (NYSE:STO), Whiting (NYSE:WLL), and Hess (NYSE:HES). By using EOG, I was able to isolate results from wells completed in 2007. This provided enough information to use historical data to model EURs for Parshall Field.

Horizontal wells share like characteristics. High initial production or IP rates are followed by high depletion rates. IP rates are used to calculate estimated ultimate recoveries or EURs. The method of calculation is important as this can cause a wide range of results. More importantly, models can be used to produce incorrect results by changing data. This can be from ignorance, but some will manipulate data to produce findings to back their assertions. This causes contradictions difficult to disprove. Different areas see different types of production further complicating well results. Producers also have better or worse results depending on well design.

Well depletion changes from year to year. Models calculate for this, but these are just estimates. It does not account for water, proppant, choke usage. Water and proppant can reduce depletion holding open fractures in the source rock. Ceramic proppant does this better and for a longer period of time. A tight choke will produce a lower IP rate for as long as 30 days. This may or may not affect EURs, but it does change early depletion. Initially, wells experience a hyperbolic initial decline. This decline occurs after a large amount of resource is produced from the stimulated source rock. Depletion continues to decrease until terminal decline begins. This is a change as the shale's matrix replaces production from the stimulated rock. In the Bakken, terminal decline is 8% and continues for decades.

Models are currently used because liquids rich unconventional shale plays have not produced long enough to provide proper historical data. This is further complicated by the number of stages, choke, amount and type of proppant. Some variables are difficult to document. An operator's skill in drilling and completion can only be estimated by current results. Some areas have seen enough development to derive a sample, and use historical production to model EURs. Two important factors to isolate are the area (geology) and operator. Geology can affect production mix, depletion, and total production. Operator skill in drilling and completion methods are also important. I chose EOG Resources based on its consistent outperformance in the Bakken and other U.S. plays. Parshall Field has been its focus, so I used this area to provide well data. Parshall Field has a significant number of well results going back to 2007. This provides five years of production. This time frame sees the largest variation in production. After this time, terminal decline can be used to measure future production.

EOG Well Depletion In Parshall Field In Bo/d

Table 1

Well IP Rate 360- Day IP 720-Day IP 1080-Day IP 1440-Day IP 1800-Day IP
16637 970 449 313 251 215 234
16461 1487 469 410 321 264 231
16543 1015 440 321 261 226 197
16532 1285 489 365 291 253 223
16467 783 333 240 198 171 150
16497 1675 502 364 292 246
16635 581 286 203 162 135 116
16484 1670 535 379 302 254 219
16457 922 481 339 275 232 202
16550 1329 421 307 253 217
16671 1198 466 340 282 242 212
16483 870 494 396 321 272 239
16370 1553 421 332 269 226 195
16469 1267 533 396 322 276 249
16578 817 489 358 291 253
16371 918 552 421 342 288 250
16713 781 740 494 389 322
16768 1441 793 535 424 350
16795 1519 814 561 438 360
Avg. 1162 511 372 299 253 209

Rate

56%

27.3%

19.6% 15.4% 17.4%
Click to enlarge

Table 1 provides how EOG's early wells deplete. Some of its wells had some production problems. These were minor, so I was able to use all 19 Parshall Field wells completed in 2007. My estimates for this time frame has EOG using roughly twice the water and proppant of other operators at that time. Every well is short lateral, so doubling the EURs is required for a proper comparison to current results. The first year of production produced a lower depletion than I would have expected. EOG's use of tight chokes are probably the reason, as well pressures are maintained for a longer period of time.

2007 EOG Parshall Field Well Design Table 2

Well Lateral (Ft.) Choke Water (Bbls) Proppant (Lbs.)
16637 5293 20/64 20894 2183146
16461 4957 16/64
16543 5082 20/64 17796 2134876
16532 4840 20/64 19081 2039800
16467 4292 20/64 17254

1789276

16497 4472 20/64 17588 1738700
16635 4569 22/64 18197 1752960
16484 4105 20/64 17149 1981000
16457 4250 28/64 17281 1091000
16550 4433 20/64 16645 1919090
16671 4638 26/64 17250 1803224
16483 4394 16/64 17727 1691400
16370 3764 18/64
16469 4705 20/64 24129 2198291
16578 4753 20/64 19940 2052859
16371 4392 14/64 16791 1590000
16713 4664 24/64 18980 1948307
16768 4471 22/64 20059 1910795
16795 4308 20/64 25056 2624300
Avg. 4546 18930 1908766
Click to enlarge

Specific well production wasn't affected much by a choke difference in from 14/64 to 28/64. Water and proppant usage was important. Well number 16795 had the highest 1440-day IP rate of all the wells in this article. This well used the most water and proppant.

EOG Well Depletion: Wells With 24-Hour IP Over 1000 Bo/d

Table 3

Well IP Rate 360- Day IP 720-Day IP 1080-Day IP 1440-Day IP 1800-Day IP
16461 1487 469 410 321 264 231
16543 1015 440 321 261 226 197
16532 1285 489 365 291 253 223
16497 1675 502 364 292 246
16484 1670 535 379 302 254 219
16550 1329 421 307 253 217
16671 1198 466 340 282 242 212
16370 1553 421 332 269 226 195
16469 1267 533 396 322 276 249
16768 1441 793 535 424 350
16795 1519 814 561 438 360
Avg. 1404 535 392 314 265 232

Rate

61.9%

26.7%

19.9% 15.6% 12.4%
Click to enlarge

EOG Well Depletion: Wells With 24-Hour IP Under 1000 Bo/d

Table 4

Well IP Rate 360- Day IP 720-Day IP 1080-Day IP 1440-Day IP 1800-Day IP
16637 970 449 313 251 215 234
16467 783 333 240 198 171 150
16635 581 286 203 162 135 116
16457 922 481 339 275 232 202
16483 870 494 396 321 272 239
16578 817 489 358 291 253
16371 918 552 421 342 288 250
16713 781 740 494 389 322
Avg. 830 478 346 279 236 199

Rate

42.4%

27.6%

19.4% 15.4% 15.7%
Click to enlarge

In tables 3 and 4, I separated wells by 24-hour IP rates. Depletion from the first day of production to 360 days, was much higher in outperforming wells. This backs the assertion that source rock stimulation is affected more by well design, than flow from the shale's matrix. I am not saying matrix production is not affected at all, but to a much smaller extent.

EOG EURs In Parshall Field

Table 5

Well 1800-Day IP Oil Produced EUR
16637 234 421200 842400
16461 231 415800 831600
16543 197 354600 709200
16532 223 401400 802800
16467 150 270000 540000
16497 203 365400 730800
16635 116 208800 417600
16484 219 394200 788400
16457 202 363300 726600
16550 179 322200 644400
16671 212 381600 763200
16483 239 430200 860400
16370 195 351000 702000
16469 249 448200 896400
16578 209 376200 752400
16371 250 450000 900000
16713 266 478800 957600
16768 289 520200 1040400
16795 297 534600 1069200
Avg. 209 376200 752400

Rate

17.4%
Click to enlarge

I generated the 1800-day IP rates for the wells with insufficient production (In Bold) using the average depletion. I multiplied this number by 1800 days to get the total oil produced by each well to date. The model I use estimates half of all well production is attained at 5.5 years. Being conservative, I will use five years for EURs. These numbers are very good, and derived from short laterals. If these wells were completed as 10000 foot laterals and NGLs and natural gas are figured, several would model to EURs over 2 million barrels of oil.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Additional articles of mine can be found at shaleinsight.net. A special thanks to Craig Cooper, consultant to the oil and energy industries for his help with this article. Some of the stats and data in this article are estimates. These are only estimates and may or may not be correct depending on how these wells deplete. This is not a buy recommendation.