Seeking Alpha
Oil & gas, small-cap, growth at reasonable price, hedge fund analyst
Profile| Send Message|
( followers)  

Northeast McKenzie County may be the hottest area in the Bakken. It is a top notch stacked play with very good geology. Mountrail County is the home of almost all the top producing wells. The Parshall Field middle Bakken pay zone is thicker, and has higher concentrations of crude. It produces 92% crude versus northeast McKenzie's 78%.

(click to enlarge)

The picture above shows the different thicknesses of the Bakken and Three Forks. The Sanish Field (located next to Parshall) has a very thick middle Bakken. Its upper Three Forks is much thinner. This is why little has been said about the Three Forks in initial development. In the Sanish Field middle Bakken EURs are around 950 MBoe, while the upper Three Forks is closer to 500 MBoe. In northeast McKenzie County these pay zones produce EURs that are much more comparable. To show where each area described in the first picture is located, I have provided the map below.

(click to enlarge)

Whiting's (NYSE:WLL) Tarpon Prospect is to the north and west of Grail Field. This is considered by many to have the best Three Forks producing field. The upper and second bench of the Three Forks is much thicker in this part of the basin. The Hidden Bench is west of Grail. The reason I identify these two prospects is Three Forks development would be much like both prospects. Looking at Whiting's development in the Tarpon, we see much fewer locations. Currently it plans three middle Bakken, two upper Three Forks and three in the second bench of the Three Forks. This is by no means exciting, as the Sanish Field could potentially produce 7 wells and another 3 in the upper Three Forks. The reason Tarpon has such a low number of prospective wells is activity. Whiting's Tarpon Prospect is small (6258 net acres) and less wells will be drilled in this area. Also, there is a significant natural fracturing in the area. Looking at Hidden Bench, there are 8 prospective middle Bakken locations and 7 upper Three Forks. The additional middle Bakken wells are targeting a new zone, the middle Bakken silt. Whiting will target this zone with half of the 8 total wells. The upper Three Forks, not including any other benches, could hold up to 7 wells. There is no reason to believe northeast McKenzie County couldn't produce the same number of locations.

(click to enlarge)

Continental is currently in the process of three 320-acre density tests, and one 160-acre. One of the 320-acre tests are located in northeast McKenzie County. Keep in mind, this includes three wells in the third bench.

(click to enlarge)

The combination of middle Bakken and Three Forks benches provides significant upside to northeast McKenzie County. In previous articles I have covered different fields and found the area to be highly productive with emphasis on the upper Three Forks. The focus of my last article was Grail and Antelope fields. East of Grail is Squaw Creek, which is south of Antelope Field. This is a very active field on Fort Berthold. WPX Energy (NYSE:WPX) is active in this field.

WPX Well Results In Squaw Creek Field

WellLateral Ft.StagesWater Bbls.Proppant Lbs.30-Day IP Bo/d90-Day IP Bo/d180-Day IP Bo/d
19973884729529953383697556354279
20238900330515243262879557378287
20320933430503923510781724558460
20603904130512903000074445401326
20711389817294281894368331246175
20995376517391762207139356326271
21063409017303091965508231120101
21445365717314322105107471481399
Avg.645423420682666194459358287

WPX's long lateral results are a little disappointing. Its long laterals had average stage spacing with average amounts of water and good amounts of proppant. There is a significant increase in crude production per foot from its short laterals. There is good reason for this, as stages get much shorter, or a little over 200 feet on average. This compares to its long lateral stages closer to 300 feet. Water and proppant per foot also increases dramatically. If it weren't for the short laterals, WPX's data would have come up short. This well design, coupled with a short lateral, is a big improvement. Keep in mind short laterals provide better source rock stimulation. Not only does the operator have better control of the lateral, it also allows for more effective usage of pump trucks to better stimulate the toe.

(click to enlarge)

To the east of Squaw Creek is Mandaree Field. Enerplus (NYSE:ERF) is active here.

Enerplus Well Results in Mandaree Field

WellLateral Ft.StagesWater Bbls.Proppant Lbs.30-Day IP Bo/d90-Day IP Bo/d180-Day IP Bo/d
20102365414129201666172355612454
2010332791286951111060716563400
20977412914107591751540623568436
2049936261181151381800505392320
20978354014126401752880490353255
20101TF405910110601119200551420342
21784TF1014825281822698440551408322
21785999024182012577360608435407
22726TF1001729312612609720944669507
Avg.582717157591852019594491383

ERF's production is quite good. Its short laterals outperformed, but long laterals were still good. The big difference in long lateral performance may be how well the operator can change each stage to the surrounding geology. The geology can change significantly over two miles, and it is not uncommon for several stages to produce little or nothing. If each stage is designed properly, more resource will be garnered. Enerplus uses very low volumes of water, and it is interesting the results were this good. On a side note, Mandaree Field is located in Dunn County. This article is focusing on northeast McKenzie, but given the similarities in production numbers, it was included in this piece.

Just south of Grail is Lost Bridge. This field is also located in Dunn County. Exxon (NYSE:XOM) has been active here.

Exxon's Well Results In Lost Bridge Field

WellLateral Ft.StagesWater Bbls.Proppant Lbs.30-Day IP Bo/d90-Day IP Bo/d180-Day IP Bo/d
19185TF978418379022219330453361334
19187TF1043118497912571120185162144
19566957824680523046865348399397
19960994130750413494590873714510
20520TF996124589812607639286224218
20521854024521242269536417376340
22248917824560212675398457471393
Avg.963023568452697783431387334

Exxon has used long laterals exclusively in this field, with long stages. As you could guess, this was not a good combination. This in concert with inadequate amounts of water and proppant produced poorly. Exxon had better results in the middle Bakken than the upper Three Forks, which is a little strange. I would guess this has more to do with Exxon drilling more middle Bakken wells. Since it has more experience with this source rock, results were better. As a comparison, Grail Field is just a few miles to the north of Lost Bridge. Its average 180-Day IP rate was 701 Bo/d. This is more than double Exxon's results.

(click to enlarge)

Kodiak (NYSE:KOG) has acreage in both Mandaree and South Fork Fields. I decided to use both in this article to provide enough data to formulate proper results.

Kodiak's Well Results in South Fork Field

WellLateral Ft.StagesWater Bbls.Proppant Lbs30-Day IP Bo/d90-Day IP Bo/d180-Day IP Bo/d
19587TF951530924724290428971658496
20926TF919824705872893800736499365
19817285614391281659324660460374
21224TF896828803473829100812747616
21064891630800594550000674472340
Avg.789125725193444530771567438

Kodiak has decent results in South Fork. It continues to produce good results from long laterals. Kodiak has been able to accomplish this using 300 foot stages and lots of water and ceramic proppant. I had one excellent well in this field. More importantly is its consistency, as all of its wells had good results. Kodiak is also active in Heart Butte Field. It is just east of Mandaree Field.

Kodiak's Well Results In Heart Butte Field

WellLateral Ft.StagesWater Bbls.Proppant Lbs.30-Day IP Bo/d90-Day IP Bo/d180-Day IP Bo/d
21700TF479018562422734336530389317
21701914329635644524531701495378
20511TF8999288936342533491034842662
19263762527836534070716839753576
22468843527837513998102526347244
22467812027846534059685677466365
Avg.785226768713940120718549424

Kodiak had two excellent wells in this area, one of which targeted the middle Bakken.

(click to enlarge)

Conoco (NYSE:COP) has been very active in Haystack Butte. This field is to the southwest of Grail. Conoco's production here is a good example of how IP rates can be altered due to operator completion changes. Conoco would frac part of the horizontal and bring to production. It does this three to four times, bringing parts of the lateral to production over time.

Conoco's Well Results In Haystack Butte Field

WellLateral Ft.StagesWater Bbls.Proppant Lbs.30-Day IP Bo/d90-Day IP Bo/d180-Day IP Bo/d
20077922230299892182421406301226
19865914719464172489500528439361
20447916033135847827402407302252
209309093301051653364500368382260
2140988853159452471067599462304
210589111206471729841005511882
20817901530752293362300185300283
21742900930465683330389618474373
Avg.908028704232376460396347268

The above results are all over the board and first indications are this completion method is not successful. Conoco had the worst production average of all operators in this article. Also, there is no consistency to design. Some of these long laterals used very low amounts of proppant, while others used very large volumes of water. Conoco's well results may have been skewed due to how it reports its IP rates. In some of the above wells, it would report production over a larger number of days in the first month than were actually producing. It also shut down production in some of these wells over the winter months. I would guess there isn't pipe in the ground to transport crude, so instead of trying to truck it out, Conoco shuts the well for a few months. Either way, many of these wells did have production problems.

Well Results By Operator Per Foot

Co.Feet/ StageWater/ FootProppant/ Foot180-Day Production/ Foot
WPX2816.54138.0
ERF3432.731811.8
XOM4195.92806.2
KOG/SF3169.243710.0
KOG/HB3029.85029.7
COP3247.82625.3

These results show an outperformance of Enerplus and Kodiak. Neither had fantastic production, which is surprising this close to Grail Field. It is possible these fields are not as productive as in the other articles I have written on northeast McKenzie County. As an example, Conoco only produced 5.3 Bo/d in Haystack Butte over the first 180 days. In Charlson Field, the number improves to 11 Bo/d.

Well Economics For Operators In Northeast McKenzie County

WellCo.Total Oil Bbls.Oil RevenuesTotal Gas McfGas RevenuesDaysTotal Revenues
20320WPX1312631181367010069040276039612216430
22726TFERF1073589662220644162576642349919884
19960XOM2162151945935022228488913657120348486
21224TFKOG2046841842156015551662206449019043624
20511TFKOG1369511232559010560742242823812748018
21742COP724126517080867673470682166864148

Above are the revenues produced from each operator's best well in its prospective field. The majority of these wells pay out in the first year, or will do this going forward. Total revenues show exactly how easy it is for wells to reach a one year pay out. Conoco's well was anything but huge and it has already produced almost $7 million in revenues after just 7 months of production. Well 20511 was a great well, and Kodiak has generated almost $13 million in revenues in almost 8 months.

In summary, we continue to see a large number of economic wells in northeast McKenzie County. Not only are these wells economic, but we are seeing a larger number with one year pay outs. Although production per foot is much better with short laterals, tight stages and more water and proppant, we continue to see more operators using long laterals. This has been very good for operators like Kodiak, which has proven its laterals are sound at a two mile length. We are starting to see a decrease in production to the south of Grail Field in northeast McKenzie County. The sweet spot is 30 miles north to south from Charlson to Grail Field. From east to west, it covers 20 miles from Twin Valley to Sanish Field. I excluded Sanish, Parshall and Alger fields, as it is a different type of production. The northeast McKenzie sweet spot has increased natural fracturing and natural gas production. Parshall Field and the surrounding areas have a much larger percentage of crude. Northeast McKenzie County will not only produce higher EURs, but it will do this in both the middle Bakken and upper Three Forks. This does not necessarily mean these wells will produce larger revenues, as southwest Mountrail County will produce a much larger percentage of crude.

Source: Bakken Update: Kodiak, Enerplus Outperform South Of Nesson Anticline; Exxon, Conoco Struggle

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.