Bakken Update: NE McKenzie County Wells Produce $33 Million In Under 18 Months

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 |  Includes: COP, EOG, HES, KOG, NFX, WLL, XOM
by: Michael Filloon

I began this series with a focus on west Williams County. Of the fields I covered, there were two operators that were significantly outperforming. EOG Resources (NYSE:EOG) and Liberty had similar results with a different well design. West Williams is in a shallow portion of this play, and because of this, it has not produced as well as northeast McKenzie and southwest Mountrail counties. Recently, operators have been able to unlock the resource and have very good producing wells. EOG Resources uses significantly more proppant, while Liberty uses large volumes of water. Kodiak (NYSE:KOG) saw something special here, as it recently acquired Liberty. It will be interesting to see whether Kodiak can use Liberty's well design to improve results to the east.

Northeast McKenzie County is currently one of the best areas in the Bakken. Some of the best operators have bought their way into these associated fields as initial production and/or EURs have been much better than expected. There are several reasons to like this area. The middle Bakken is very good, and it is between 80 and a 100 feet thick. It is more gassy than Parshall and Sanish fields. Although natural gas is not as economic as crude, it aids in bringing crude up and out of the well. This improves IP rates and overall resource garnered.

The middle Bakken is good, but the Three Forks is better. The Three Forks has greater thickness and depth than the middle Bakken. Northeast McKenzie County thickness ranges from 200 to 225 feet. It has up to four benches, two of which are consistent throughout the Bakken play. The third bench seems economic here, but there hasn't been enough de-risking to know for sure. The fourth bench is spottier than the third, and EOG commented a while back it thought the third and fourth could be fracced as one horizontal.

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There are several fields in northeast McKenzie County that have had very good well results. Keep in mind, most of the best Bakken wells to date are in Parshall Field operated by EOG. There are still some big wells elsewhere, and we will analyze those results. The biggest recent wells have been in Twin Valley Field, by Whiting (NYSE:WLL).

Whiting's Twin Valley Field Results

Well Lateral Ft. Stages Water Bbls. Proppant Lbs. 30-Day IP Bo/d 90-Day IP Bo/d 180-Day IP Bo/d
20589 9413 30 30816 1993832 1367 1260 1132
22360 10417 10 15165 895720 453 299
22361 11518 30 40919 2729068 1795 1289
Avg. 10449 23 28967 1872873 1205 949 1132
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Well 20589 is one of the best wells of all time based on resource produced over the first year and a half. Depending how it depletes, this well could produce well over a million barrels of crude. These results are surprising given the small amounts of water and proppant. This has been a standard design for Whiting, and it has kept well costs low. Looking further out, this well had a 360-Day IP of 740 Bo/d. Over the first 530 days, this well has produced 333166 barrels of oil and 745140 Mcf of gas. About half of this gas is NGLs, which sell for about $40/Bbl. Whiting seems to have had some production problems with well 22360. This well was only fracced with 10 stages. I have not heard what the issue was with this well, but I would guess Whiting will recomplete. Whiting is currently using 25% to 30% ceramic proppant in this area. Well 22361 had a much higher 30-Day IP rate, but is depleting at a much faster rate. This well has a tighter choke and lower GOR, which should make it deplete slower. The flowing casing pressure was approximately 30% greater. The only variable that could have affected depletion is the longer lateral with the same number of stages. The stages were already over the averages in feet.

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Westberg Field was the center of a large number of very good wells in 2010. Newfield (NYSE:NFX) was ahead of the competition on well design, and had excellent geology to work with. Newfield has decreased its cap ex associated with the Bakken, as it shifted dollars to the Uinta. This had to do with cost acceleration. 2010 saw cost increases for all companies, but we have since seen this pullback in 2011 and 2012.

Newfield's 2011-2013 Westberg Field Well Results

Well Lateral Ft. Stages Water Bbls. Proppant Lbs. 30-Day IP Bo/d 90-Day IP Bo/d 180-Day IP Bo/d
18691 5293 26 38560 2228638 1348 1000 737
22181 4641 24 36681 1947416 758 546 397
23022 4207 20 36110 1671704 528 362 261
22778 9353 32 53225 3689360 462 422 339
22779 9562 32 55907 3455160 551 401 309
Avg. 6611 27 44097 2598456 729 546 409
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Well 18691 was a huge well and a short lateral. Its proppant and water per foot was quite a bit higher than the average well in 2011. Newfield also used short stages. This was a great design, as this well's 360-Day IP averaged 524 Bo/d. Over the first 625 days of production, it produced 235654 barrels of oil and 556257 Mcf of gas. The first well was drilled in 2011. The four after were 2012. What you are seeing is Newfield changed its well design to lower costs. It has moved to longer laterals, longer stages and less water/proppant per foot. This data shows the opposite of what we normally see. Usually operators get better with each well, but Newfield placed costs above production.

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East of Westberg and Twin Valley fields is Union Center. This is a small field. IP rates here have been very good. ConocoPhillips (NYSE:COP) has completed the majority of the horizontals in this field. Northeast McKenzie County has been its focus.

Conoco 2012 Union Center And Charlson Field Well Results

Well Lateral Ft. Stages Water Bbls. Proppant Lbs. 30-Day IP Bo/d 90-Day IP Bo/d 180-Day IP Bo/d
22675 10125 20 34633 2220600 691 496
22754 9996 20 34680 2226700 169 500
22755 9897 20 33954 2232800 227 606
20636 3616 10 25877 1498900 325 464 374
20637 3880 8 22434 1198400 422 609 469
20635 4083 10 29444 1502338 428 436 426
Avg. 6933 15 30170 1813290 377 519 423
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The first three wells in the table above were completed in Union Center. All three were completed between October and November. Conoco's IP rates are skewed because it shut in these wells sporadically through the winter. This is why there is such as disparity between the 30-Day and 90-Day IP. The last three wells are all in Charlson Field. Conoco continues to report low 3-Day IP rates, as it does not seem to be real interested in headlines. All three of these wells were excellent, especially when you consider production per foot. We continue to see shorter laterals outperform in the short term. Short laterals are difficult to get away from, an operator has to be ready to drill twice as many verticals if it chooses to do so.

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Hawkeye Field is located to the southeast of Charlson and east of Union Center fields. Hess (NYSE:HES) has completed a large number of wells in this field.

2012 Hess Hawkeye Field Well Results

Well Lateral Ft. Stages Water Bbls. Proppant Lbs. 30-Day IP Bo/d 90-Day IP Bo/d 180-Day IP Bo/d
20738TF 9590 38 100176 3666720 1414 1275 1054
20739TF 9373 25 43083 1168487 677 460 340
21122TF 8597 34 41560 1530044 352 261 208
22982TF 8915 34 57867 1510525 983 675 503
22801TF 8464 30 48759 1191843 959 649 486
23010TF 9394 30 43720 1221066 723 485
23072TF 10346 30 33718 1611652 1220 904
Avg. 9240 32 52698 1700048 904 673 518
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Hess has manipulated its well design since 2011. These wells are in order by date, with the earliest at the top. Initially, Hess had the right idea in this field. It used a long lateral with good stage length. Hess also used very good volumes of water and good amounts of proppant. Hess uses mostly ceramic proppant in this area. It has also been developing the upper Three Forks. The top well design was excellent, but expensive. Production from 20738 was excellent and compares to the wells Helis drilled in Grail Field. This is a problem operators run into a lot. When developing cap ex, there are a number of wells to be drilled over the course of a year. If well costs run high, an operator generally will not decrease the number of wells, but decrease the costs associated per well. By doing this, it can claim well costs are heading lower and still confirm the number of wells for the year. Looking at its wells, there has been a marked improvement using less water, proppant and stages. The last well listed was very good considering the well cost. Operators are always looking for a balance between quality and quantity.

Exxon (NYSE:XOM) has been active in Grinnell Field. This is just northeast of Twin Valley Field where Whiting had the very big wells listed earlier in this article. It is located right on the Lake, just west of the Nesson Anticline. This is the northernmost field in this article. This field is located in both Williams and McKenzie counties.

Exxon Well Results In Grinnell Field

Well Lateral Ft. Stages Water Bbls. Proppant Lbs. 30-Day IP Bo/d 90-Day IP Bo/d

180-Day IP Bo/d

19257TF 9569 24 56766 2361130 515 379 342
20098 10015 24 60460 2913007 441 436 367
20906 8784 24 60051 2691415 179 318 306
21289TF 8035 26 77370 2330789 699 513 387
20582 9519 30 71423 3067674 733 524
Avg. 9184 26 65214 2672803 513 434 351
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Exxon's well results are interesting. The first and fourth well on the list are upper Three Forks wells, while the other three are middle Bakken. The well results point to the middle Bakken and upper Three Forks being comparable in this field. Exxon's well design is quite good, even in 2011. Over the course of 2012, it increased water and proppant. The most important change it made over this time frame was the number of stages. Geology is an issue in Grinnell Field as well. These results were affected by well design, but historical results have not been as good this far north. The Nesson Anticline area has not been as productive in east Williams when compared to northeast McKenzie County.

Lateral lengths differ significantly from one operator to the next. This creates some confusion as to what operators are outperforming. If the choke size is manipulated, this can skew results further. By taking longer-term production data and breaking it down into feet, we get a better idea as to a well's performance.

Northeast McKenzie County Well Results By Operator Per Foot

Co. Feet/ Stage Water/ Foot

Proppant/ Foot

180-Day Production/ Foot
WLL 349 3.4 226 19.5
NFX 245 6.7 393 11.1
COP 462 4.4 262 11.0
HES 289 5.7 184 10.1
XOM 353 7.1 291 6.9
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Of the three Whiting wells in Twin Valley Field, one well was only partially completed. Because of this, I removed the well from the table above. Since Whiting is on the best geology, it is not surprising production is off the charts. It also managed to do this using the longest laterals, second to the least proppant and lowest volumes of water. As I noted above, Newfield changed its well design to longer laterals, longer stages, less water and proppant per foot. To show the significance, I calculated its 180-Day production per foot. The short laterals produced 17.8 barrels of oil per foot. This is only 1.7 less than Whiting's Twin Valley wells. Conoco's production results are difficult to figure as it calculates its IP rate immediately, and not when the well is up to optimal production. It uses very long stages with low amounts of proppant and water. When Conoco uses shorter laterals and tighter stages, its production per foot increases significantly. This is why its Charlson Field wells were much better than in Union Center. The shorter laterals outproduce long laterals by almost double per foot. Hess' production results were good, but the average was pulled up considerably by one well. Well 20738 produced 189720 barrels of oil in the first six months. Not only does this well have more stages, it also has more water and proppant. All of Hess' wells targeted the Three Forks. Obviously, the Three Forks will produce differently than the middle Bakken. I hope to have enough data in this area to develop estimates on the type and total production. Exxon's numbers don't fit real well with the other fields in this area. Not only is this field in both McKenzie and Williams counties, but it is getting closer to the part of the Nesson Anticline where production hasn't been as good. Exxon's well design is quite good. It uses large volumes of water, with good amounts of proppant. As it has improved its design, production has increased. Geology is probably more to blame for its underperformance than its drilling and completion style.

To outline well performance on a per well basis, I have provided the economics in the table below, using $90/Bbl crude and $4/Mcf of natural gas. This area produces roughly 78% crude, 11% NGLs and 11% natural gas. I did not include NGLs in the calculation, which would increase the Mcf price to around $8.

Well Economics For Operators In NE McKenzie County

Well Co. Total Oil Bbls. Oil Revenues Total Gas Mcf Gas Revenues Days Total Revenues
20589 WLL 333166 $29984940 745140 $2980560 530 $32965500
18691 NFX 235654 $21208860 556257 $2225028 625 $23433888
20637 COP 109558 $9860220 203685 $814740 287 $10674960
20738 HES 349159 $31424310 611317 $2445268 510 $33869578
21289 XOM 75446 $6790140 93568 $374272 207 $7164412
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These numbers are huge. This does represent this area in a sweet spot. There are two wells producing revenues of over $30 million, one just over $20 million and another above $10 million. The latter hasn't even produced for a year, and will no doubt eclipse the $20 million mark. Take note that these are some of the best wells in the area and are not average results. Keep in mind the average result would be better than Exxon's best result. I am not stating Exxon has a poor well design, but it is at a disadvantage based on geology. Its well has only produced for 7 months, and will no doubt pay back in one year. In other articles, I haven't broken down individual wells into revenues by foot. I will also break down these wells by other metrics below. This is the perfect article to do so as we have a couple of huge short laterals.

Big Well Breakdown

Well Co. Feet/ Stage Water/ Foot Proppant/ Foot Days Total Revenues/ Foot
20589 WLL 314 3.3 212 530 $3502
18691 NFX 204 7.3 421 625 $4427
20637 COP 485 5.8 309 287 $2751
20738 HES 252 10.4 382 510 $3532
21289 XOM 309 9.6 290 207 $892
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Breaking down these wells into feet shows the importance of tighter stages, more water and proppant per foot. Newfield and Hess both have the best well designs, but higher well costs. Keep in mind, Newfield's number is inflated as it has approximately a hundred day head start on both Hess and Whiting. It has more than twice the number of total days as the Conoco well.

These numbers tell how profitable northeast McKenzie County can be. EOG Resources has made a big investment in both this and western Williams County. EOG Resources may be the best at grabbing acreage, as it has assembled the best U.S. unconventional acreage. When it makes a move, others should take notice. Although not as good as Parshall Field, northeast McKenzie could be the next best thing. Not only are these big results, but we are seeing it from both the middle Bakken and upper Three Forks. We still don't know how good the second and third benches are, but early indications make me optimistic. Keep in mind, this is not just about geology. Well design could significantly affect these results. My worry is that operators using too little proppant, or not enough ceramics could see fractures close up and shut down production much earlier than expected. More importantly, we continue to see short laterals and tight stages outperform. Some of the best wells of all time had 5000 foot horizontals and 200 foot stages. Stimulation of the source rock is by far the most important aspect of a completion. Long laterals make it much more difficult to frac the toe. Many operators moved to longer laterals as they have to drill half as many verticals. It is difficult to know if using short laterals is profitable enough to warrant the extra investment. From the data I have seen, I believe it is.

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: This is not a buy recommendation. The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, are not guaranteed for accuracy or completeness, do not reflect actual investment results, do not take in consideration commissions, margin interest and other costs, and are not guarantees of future results. All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. For more articles like this check out my website at shaleexperts.com. Fracwater Solutions L.L.C. engages in industrial water solutions for oil and gas companies in North Dakota. This includes constructing water depots, pipelines and disposal wells. It also provides contracting services for all types of construction at well sites. Other services include soil remediation. Please contact me via email if you are interested in working with us. More of my articles and other pertinent information on the oil and gas sector, go to shaleexperts.com.