Bakken Update: 30 Of The Best U.S. Oil Wells Show Why Operators Can Compete Internationally

| About: The United (USO)

Summary

The best unconventional wells in the US continue to get better, with some locations producing over 60,000 Bbls of oil in the first month.

Shale production has pushed the US closer to energy self-sufficiency, and has tipped the balance of world oil markets.

Operators continue to produce play best type wells through enhanced well designs or Mega-Fracs, and we expect these types of results to continue going forward.

Improving shale economics have made it competitive on an international level, as production from deep water is losing out on operator cap ex.

There was a time when most thought the oil business in the lower 48 was done. Natural declines and only small conventional reservoirs remained, leaving US production with the Gulf and Alaska. This was not enough to keep production from declining. This decline continued for decades until technologies were developed to tap shale for natural gas and then oil. No one could have guessed how quickly production would increase, nor the effect it would have on world oil markets. Not only did shale production aid in the US getting closer to energy self-sufficiency, it tipped the world supply/demand balance.

Click to enlarge

(Source: Investing.com)

This pushed the price of oil from over $100/Bbl. to less than $30/Bbl. It has been even more damaging to the US Oil ETF (NYSEARCA:USO).

Click to enlarge

(Source: Investing.com)

It has dropped from just below $40 in June of 2014 to $11.45 today. Contango continues to be an issue for the USO. One year out, oil is around $4/Bbl more than it trades for today. The USO buys forward contracts, and using today's prices it would lose around 8.5% per year. When the market returns to backwardation, the USO will perform better. Unconventional wells in the US are producing better than just a few years ago. Even the best areas in 2011 would need $100/Bbl just to break even. Breakeven prices today are below $30/Bbl in some counties.

There is a major difference in production from one well to the next. This includes plays like the Bakken, Permian, Eagle Ford, SCOOP/STACK, Permian, DJ Basin, and Powder River Basin. Differences include total production per well, but other factors also vary. The percentage of natural gas, crude, NGLs and condensate can differ. Well pressures from depth of shale and natural gas content also vary. The cost to drill and complete a well changes from operator and play. All intervals respond differently to stimulation. Some fracture easily, and require different types of proppant.

Click to enlarge

(Source: Welldatabase.com)

The United States has a large number of plays. Only a rare few do well with oil at $50/Bbl. The Permian, SCOOP/STACK, Bakken, Eagle Ford and Niobrara all have economic areas. As oil prices increase to $60 and higher we will start to see production increase. The Tuscaloosa and Eaglebine could become productive again, but prices would need to rise well above today's prices.

Unconventional well production can be a bit of a mystery. Production results from the same area can provide a wide range of results. Some think geology is the reason, but well design has influence. When looking at results it is very important to consider lateral length. A short lateral is one mile or around 5,000 feet. A long lateral is two miles. The long lateral has twice the producing feet. Depending on production it is possible a short lateral has better economics. Breaking production down to feet helps. It is also important to identify the interval.

Click to enlarge

(Source: Concho Resources)

Concho (NYSE:CXO) provided the diagram above. It shows all of the targets in the Delaware Basin. Total feet vary from 4,000 to 5,000. It has already tested eight, and more could see production in the future. The 2nd Bone Spring will produce differently than the upper Avalon. So a well could produce much more, but be a terrible well by that interval's current results. Make sure of the payzone before making a comparison. It can affect production and costs.

Oil and gas investors of the oil and gas generally follow unconventional well results. There are many reasons. A good result can change the value of acreage. If the interval was unproven, it could mean there is a new viable payzone. It not only affects that operator, but all near the location. It can also mean a new well design, or technology works. If an outperforming well increased production due to better stimulation, the expectation would be for this type of result to occur in the future. Huge wells get a lot of hype the same way a Sammy Sosa or Mark McGuire home run would. A huge well provides a new ceiling to performance. A well that produces 30,000 BO in the first month or 90,000 BO in the first 90 days gets the same response. These results show us that there are new possibilities. A huge result provides hope that results will continue to improve.

We have identified some excellent results from different plays in US basins. We aren't providing all, but giving a sample. There are a total of 30 in oil dominated plays.

Click to enlarge

(Source: Welldatabase.com)

There are a large number of data points for these locations. On average 138,632 BO have been produced per well. 4,158,973 BO has been recovered to date.

Click to enlarge

(Source: Welldatabase.com)

There were several wells that produced more than 70,000 BO in one month. One well produced more than 90,000 BO.

(Source: Welldatabase.com)

The majority of the wells pulled for this analysis are in New Mexico. Operators with acreage near these wells are Energen (NYSE:EGN), Laredo (NYSE:LPI), Encana (NYSE:ECA), BHP Billiton (NYSE:BHP), and Shell (NYSE:RDS.A).

Name

Well Count

CUM Gas [MCF]

CUM Oil [BBL]

New Mexico

14

3,735,227

1,871,881

North Dakota

5

743,539

727,852

Wyoming

5

1,018,499

780,324

Oklahoma

4

773,332

520,511

Texas

2

271,790

258,405

Click to enlarge

(Source: Welldatabase.com)

There have been several really large producers out of New Mexico. Intervals in the Delaware Basin seem to improve with enhanced completions to a much larger degree than other plays. These wells also produce significant volumes of natural gas which increases well pressures. North Dakota had five locations over three counties. Hess (NYSE:HES), Oasis (NYSE:OAS), Statoil (NYSE:STO), QEP Resources (NYSE:QEP), Marathon (NYSE:MRO), WPX Energy (NYSE:WPX), Halcon (NYSE:HK), Triangle (NYSEMKT:TPLM), Emerald (OTCPK:EOXLQ), Abraxas (NASDAQ:AXAS), and Samson (NYSEMKT:SSN) all have acreage near these locations. Where the wells are is interesting as there is a distance of over 50 miles between two locations. The Bakken core continues to widen and cover more territory. There are five wells in Wyoming. All of these are in the Powder River Basin. We are starting to see this play emerge with some terrific results. It has not been as good as the Bakken and Permian but results are improving rapidly. Chesapeake (NYSE:CHK), SM Energy (NYSE:SM), and Anadarko (NYSE:APC) have acreage in the same general vicinity. Since fewer operators have large chunks of land, we have seen fewer reports on well design progress. We believe the play still has a lot of upside but are unsure if breakevens will be that of other core plays.

(Source: Welldatabase.com)

Four wells were located in Oklahoma. These wells are in the STACK/SCOOP plays. Operators with acreage near these locations are Apache (NYSE:APA), Continental (NYSE:CLR), Jones (NYSE:JONE), Midstates Petroleum (OTCPK:MPOYQ), Exxon (NYSE:XOM), Linn Energy (NASDAQ:LINEQ), Chevron (NYSE:CVX), and Antero (NYSE:AR). This is another play that has seen a massive uptick of production through the use of enhanced completions. It is one of the top plays in the country with respect to breakeven prices. Since there has been less traffic, it has the possibility of more upside. Not only will well improvement be seen, but more de-risking of core areas could add market cap to operators. E&Ps are still defining the play borders, so we could see core plays continue to develop.

Name

Well Count

CUM Gas

CUM Oil

EOG RESOURCES INC (NYSE:EOG)

4

952,453

557,519

CIMAREX (NYSE:XEC)

2

620,427

225,912

CIMAREX OF COLORADO

2

705,471

222,831

Devon Energy Production (NYSE:DVN)

2

102,325

298,892

OXY USA INC (NYSE:OXY)

2

429,602

291,990

WHITING OIL AND GAS (NYSE:WLL)

2

428,026

336,357

Ballard Petroleum

1

527,878

233,667

CALLON PETROLEUM (NYSE:CPE)

1

196,268

157,469

CIMAREX ENERGY CO

1

243,052

119,017

COG PRODUCTION, LLC

1

267,014

122,646

CONOCOPHILLIPS (NYSE:COP)

1

255,907

114,018

CROWNQUEST OPERATING

1

75,522

100,936

DEVON ENERGY PRODUCTION

1

370,764

144,102

ENDURANCE RESOURCES LLC

1

176,355

197,568

ENERPLUS RESOURCES (NYSE:ERF)

1

107,714

132,412

EOG RESOURCES, INC.

1

54,178

120,758

LEGACY RESERVES OPERATING

1

98,116

123,460

NEWFIELD EXPLORATION (NYSE:NFX)

1

382,716

188,815

SANDRIDGE EXPLORATION (NYSE:SD)

1

78,962

103,992

SANDRIDGE EXPLORATION

1

68,602

108,687

Click to enlarge

(Source: Welldatabase.com)

Texas has just two wells. E&Ps near these locations are Pioneer (NYSE:PXD), Occidental, Approach (NASDAQ:AREX), Clayton Williams (NASDAQ:CWEI), Noble (NYSE:NBL), Matador (NYSE:MTDR), and EP Energy (NYSE:EPE). One well is located in the Midland Basin and one in the Delaware. These are two of the best basins in the country. The Delaware may have more upside. Purchases in the Delaware have been many and large from a dollar standpoint. RSP Permian (NYSE:RSPP), Parsley (NYSE:PE), Diamondback (NASDAQ:FANG) and Resolute (NYSE:REN) are just a few names to acquire Delaware leasehold.

We used wells with different operators, but EOG Resources seems to dominate in the Bakken, Eagle Ford, Permian, Powder River Basin, etc. It had the most with five. The above list does have wells in different states, so operators may have different names by state. Sandridge, Cimarex and Devon all had this occur. Cimarex has four locations and Devon three. The 30 locations have multiple months of production. I have included this below.

Key

BOE

Date

Oil

Gas

BLADE 202-2116H

39081.67

11/1/2015

32349

40396

BLADE 202-2116H

38629.83

12/1/2015

31588

42251

BLADE 202-2116H

22787.5

1/1/2016

18705

24495

BLADE 202-2116H

15759.33

2/1/2016

12963

16778

BLADE 202-2116H

13659.83

3/1/2016

12504

6935

BLADE 202-2116H

13670.5

4/1/2016

11194

14859

BLADE 202-2116H

17982.83

5/1/2016

14546

20621

BLADE 202-2116H

16713.5

6/1/2016

13456

19545

BLADE 202-2116H

0

7/1/2016

0

0

BLADE 202-2116H

0

8/1/2016

0

0

BLADE 202-2116H

0

9/1/2016

0

0

BLADE 202-2116H

0

10/1/2016

0

0

BLADE 202-2116H

0

11/1/2016

0

0

BLADE 202-2116H

0

12/1/2016

0

0

CARLSON TRUST 2407 3-15H

7919

1/1/2015

7919

0

CARLSON TRUST 2407 3-15H

91027

2/1/2015

91027

0

CARLSON TRUST 2407 3-15H

18206.33

3/1/2015

5046

78962

CEDAR CANYON 23 FEDERAL #004H

5020

1/1/2016

5020

0

CEDAR CANYON 23 FEDERAL #004H

57775.5

2/1/2016

49414

50169

CEDAR CANYON 23 FEDERAL #004H

44701.5

3/1/2016

35454

55485

CEDAR CANYON 23 FEDERAL #004H

25225.67

4/1/2016

20333

29356

CEDAR CANYON 23 FEDERAL #004H

26802.83

6/1/2016

19084

46313

CEDAR CANYON 28 FEDERAL #006H

32235

1/1/2016

32235

0

CEDAR CANYON 28 FEDERAL #006H

29880.17

2/1/2016

24298

33493

CEDAR CANYON 28 FEDERAL #006H

37964.17

3/1/2016

29613

50107

CEDAR CANYON 28 FEDERAL #006H

29674.83

4/1/2016

22767

41447

CEDAR CANYON 28 FEDERAL #006H

23436.67

5/1/2016

17895

33250

CEDAR CANYON 28 FEDERAL #006H

27832.5

6/1/2016

16559

67641

COSNER FED 22-154372-1XPH

0

1/1/2015

0

0

COSNER FED 22-154372-1XPH

0

2/1/2015

0

0

COSNER FED 22-154372-1XPH

0

3/1/2015

0

0

COSNER FED 22-154372-1XPH

0

4/1/2015

0

0

COSNER FED 22-154372-1XPH

0

5/1/2015

0

0

COSNER FED 22-154372-1XPH

0

6/1/2015

0

0

COSNER FED 22-154372-1XPH

1196

7/1/2015

1139

342

COSNER FED 22-154372-1XPH

37199.33

8/1/2015

35765

8606

COSNER FED 22-154372-1XPH

33686.17

9/1/2015

32145

9247

COSNER FED 22-154372-1XPH

14010.33

10/1/2015

13565

2672

COSNER FED 22-154372-1XPH

10021.83

11/1/2015

9736

1715

COSNER FED 22-154372-1XPH

7611

12/1/2015

7427

1104

COSNER FED 22-154372-1XPH

8463

1/1/2016

8250

1278

COSNER FED 22-154372-1XPH

7377.833

2/1/2016

7114

1583

COSNER FED 22-154372-1XPH

7183.5

3/1/2016

6904

1677

COSNER FED 22-154372-1XPH

6701

4/1/2016

6421

1680

COSNER FED 22-154372-1XPH

5898

5/1/2016

5654

1464

COSNER FED 22-154372-1XPH

5058.833

6/1/2016

4842

1301

COSNER FED 22-154372-1XPH

0

7/1/2016

0

0

COSNER FED 22-154372-1XPH

0

8/1/2016

0

0

COSNER FED 22-154372-1XPH

0

9/1/2016

0

0

COSNER FED 22-154372-1XPH

0

10/1/2016

0

0

COSNER FED 22-154372-1XPH

0

11/1/2016

0

0

COSNER FED 22-154372-1XPH

0

12/1/2016

0

0

COTTONBERRY 20 FEDERAL COM #003H

17916.83

2/1/2016

14315

21611

COTTONBERRY 20 FEDERAL COM #003H

43890.5

3/1/2016

33150

64443

COTTONBERRY 20 FEDERAL COM #003H

40928

4/1/2016

25160

94608

COTTONBERRY 20 FEDERAL COM #003H

29491.17

5/1/2016

15849

81853

COTTONBERRY 20 FEDERAL COM #003H

22405.5

6/1/2016

12034

62229

DILTS 44-15 TH

0

1/1/2015

0

0

DILTS 44-15 TH

0

2/1/2015

0

0

DILTS 44-15 TH

0

3/1/2015

0

0

DILTS 44-15 TH

0

4/1/2015

0

0

DILTS 44-15 TH

0

5/1/2015

0

0

DILTS 44-15 TH

0

6/1/2015

0

0

DILTS 44-15 TH

16788.33

7/1/2015

12898

23342

DILTS 44-15 TH

66049.83

8/1/2015

48800

103499

DILTS 44-15 TH

51860.67

9/1/2015

37833

84166

DILTS 44-15 TH

38510.17

10/1/2015

27547

65779

DILTS 44-15 TH

32354.83

11/1/2015

23139

55295

DILTS 44-15 TH

25356.33

12/1/2015

18275

42488

DILTS 44-15 TH

18207.67

1/1/2016

13064

30862

DILTS 44-15 TH

18424.67

2/1/2016

13515

29458

DILTS 44-15 TH

19036.67

3/1/2016

13863

31042

DILTS 44-15 TH

17443.67

4/1/2016

12622

28930

DILTS 44-15 TH

17613.83

5/1/2016

12111

33017

DILTS 44-15 TH

0

6/1/2016

0

0

DILTS 44-15 TH

0

7/1/2016

0

0

DILTS 44-15 TH

0

8/1/2016

0

0

DILTS 44-15 TH

0

9/1/2016

0

0

DILTS 44-15 TH

0

10/1/2016

0

0

DILTS 44-15 TH

0

11/1/2016

0

0

DILTS 44-15 TH

0

12/1/2016

0

0

EIDER FEDERAL #002H

31489.17

3/1/2016

22598

53347

EIDER FEDERAL #002H

36728.67

4/1/2016

28518

49264

EIDER FEDERAL #002H

55003.5

5/1/2016

40113

89343

EIDER FEDERAL #002H

43927

6/1/2016

31417

75060

FLATBOW 212-1621H

11159.67

2/1/2016

9266

11362

FLATBOW 212-1621H

39691.17

3/1/2016

31853

47029

FLATBOW 212-1621H

36445.5

4/1/2016

28476

47817

FLATBOW 212-1621H

25328.83

5/1/2016

17872

44741

FLATBOW 212-1621H

21570.83

6/1/2016

12993

51467

FLATBOW 212-1621H

0

7/1/2016

0

0

FLATBOW 212-1621H

0

8/1/2016

0

0

FLATBOW 212-1621H

0

9/1/2016

0

0

FLATBOW 212-1621H

0

10/1/2016

0

0

FLATBOW 212-1621H

0

11/1/2016

0

0

FLATBOW 212-1621H

0

12/1/2016

0

0

GUITAR GALUSHA 1H

22420.16

1/1/2016

19805.59

15687.44

GUITAR GALUSHA 1H

15682.23

2/1/2016

13483.74

13190.92

GUITAR GALUSHA 1H

22735.41

3/1/2016

20522.59

13276.92

GUITAR GALUSHA 1H

18461.68

4/1/2016

16540.54

11526.83

GUITAR GALUSHA 1H

18665.9

5/1/2016

16726.66

11635.46

GUITAR GALUSHA 1H

15557.67

6/1/2016

13856.94

10204.4

GUITAR GALUSHA 1H

13096.78

7/1/2016

11488.01

9652.6

LEA UNIT #054H

22288

1/1/2016

19544

16464

LEA UNIT #054H

30666.67

2/1/2016

26314

26116

LEA UNIT #054H

21981.5

3/1/2016

19804

13065

LEA UNIT #054H

26031.83

4/1/2016

22815

19301

LEA UNIT #054H

23050.83

5/1/2016

20515

15215

LEA UNIT #054H

15793.83

6/1/2016

14468

7955

LOIS 2407 3-16H

11001

12/1/2014

11001

0

LOIS 2407 3-16H

11143

1/1/2015

11143

0

LOIS 2407 3-16H

80655

2/1/2015

80655

0

LOIS 2407 3-16H

17321.67

3/1/2015

5888

68602

LOMAS ROJAS 26 STATE COM #703H

39936.83

3/1/2016

31612

49949

LOMAS ROJAS 26 STATE COM #703H

58674.5

4/1/2016

44864

82863

LOMAS ROJAS 26 STATE COM #703H

40837.67

5/1/2016

31276

57370

LOMAS ROJAS 26 STATE COM #703H

30416

6/1/2016

23387

42174

MANDAREE 24-13HZ

0

8/1/2014

0

0

MANDAREE 24-13HZ

0

9/1/2014

0

0

MANDAREE 24-13HZ

0

10/1/2014

0

0

MANDAREE 24-13HZ

0

11/1/2014

0

0

MANDAREE 24-13HZ

0

12/1/2014

0

0

MANDAREE 24-13HZ

0

1/1/2015

0

0

MANDAREE 24-13HZ

0

2/1/2015

0

0

MANDAREE 24-13HZ

0

3/1/2015

0

0

MANDAREE 24-13HZ

0

4/1/2015

0

0

MANDAREE 24-13HZ

0

5/1/2015

0

0

MANDAREE 24-13HZ

0

6/1/2015

0

0

MANDAREE 24-13HZ

0

7/1/2015

0

0

MANDAREE 24-13HZ

0

8/1/2015

0

0

MANDAREE 24-13HZ

36472.83

9/1/2015

32213

25559

MANDAREE 24-13HZ

36957.33

10/1/2015

30768

37136

MANDAREE 24-13HZ

32352.33

11/1/2015

26934

32510

MANDAREE 24-13HZ

32052

12/1/2015

26686

32196

MANDAREE 24-13HZ

26083

1/1/2016

21713

26220

MANDAREE 24-13HZ

20511.17

2/1/2016

17076

20611

MANDAREE 24-13HZ

18248.17

3/1/2016

14976

19633

MANDAREE 24-13HZ

13589

4/1/2016

11313

13656

MANDAREE 24-13HZ

14308.5

5/1/2016

11912

14379

MANDAREE 24-13HZ

9890.5

6/1/2016

8234

9939

MANDAREE 24-13HZ

4558.333

7/1/2016

3795

4580

MARQUARDT FEDERAL #016H

7879.167

2/1/2016

6403

8857

MARQUARDT FEDERAL #016H

45107

3/1/2016

35194

59478

MARQUARDT FEDERAL #016H

51199.5

4/1/2016

33554

105873

MARQUARDT FEDERAL #016H

45431.33

5/1/2016

24406

126152

MARQUARDT FEDERAL #016H

32493.83

6/1/2016

16182

97871

MARQUARDT FEDERAL #017H

16666.67

2/1/2016

14094

15436

MARQUARDT FEDERAL #017H

41153.33

3/1/2016

33288

47192

MARQUARDT FEDERAL #017H

41439.33

4/1/2016

27904

81212

MARQUARDT FEDERAL #017H

34104.5

5/1/2016

19055

90297

MARQUARDT FEDERAL #017H

24934.83

6/1/2016

12751

73103

MC 5 COM #113H

0

9/1/2015

0

0

MC 5 COM #113H

1301

10/1/2015

1301

0

MC 5 COM #113H

22193.17

11/1/2015

17602

27547

MC 5 COM #113H

24380.67

12/1/2015

19587

28762

MC 5 COM #113H

27127.33

1/1/2016

19525

45614

MC 5 COM #113H

25397.83

2/1/2016

20355

30257

MC 5 COM #113H

18799.5

3/1/2016

13289

33063

MC 5 COM #113H

15005

4/1/2016

10190

28890

MC 5 COM #113H

13687

5/1/2016

9393

25764

MC 5 COM #113H

12944.17

6/1/2016

8358

27517

P JOHNSON 153-98-1-6-7-16HA

35362

8/1/2015

24806

63336

P JOHNSON 153-98-1-6-7-16HA

50702.5

9/1/2015

41087

57693

P JOHNSON 153-98-1-6-7-16HA

50789.67

10/1/2015

41834

53734

P JOHNSON 153-98-1-6-7-16HA

47800.67

11/1/2015

36401

68398

P JOHNSON 153-98-1-6-7-16HA

36970.5

12/1/2015

27868

54615

P JOHNSON 153-98-1-6-7-16HA

30645

1/1/2016

22685

47760

P JOHNSON 153-98-1-6-7-16HA

24794

2/1/2016

17813

41886

P JOHNSON 153-98-1-6-7-16HA

23044

3/1/2016

16165

41274

P JOHNSON 153-98-1-6-7-16HA

19925.33

4/1/2016

13773

36914

P JOHNSON 153-98-1-6-7-16HA

18715.67

5/1/2016

12896

34918

P JOHNSON 153-98-1-6-7-16HA

18390.83

6/1/2016

11755

39815

P JOHNSON 153-98-1-6-7-16HA

16550.33

7/1/2016

10735

34892

PECAN ACRES 23 PSA 1 1H

48965.83

3/1/2016

42332

39803

PECAN ACRES 23 PSA 1 1H

53215

4/1/2016

43928

55722

PECAN ACRES 23 PSA 1 1H

47441.67

5/1/2016

38370

54430

PECAN ACRES 23 PSA 1 1H

40557.83

6/1/2016

32839

46313

PECAN ACRES 23 PSA 1 1H

40419.5

7/1/2016

32310

48657

RATTLESNAKE 21 FEDERAL COM #702H

54995.83

4/1/2016

40795

85205

RATTLESNAKE 21 FEDERAL COM #702H

98912.83

5/1/2016

76474

134633

RATTLESNAKE 21 FEDERAL COM #702H

80006.5

6/1/2016

61346

111963

RED HILLS WEST 16 STATE W1 #011H

0

2/1/2016

0

0

RED HILLS WEST 16 STATE W1 #011H

29266.67

3/1/2016

19582

58108

RED HILLS WEST 16 STATE W1 #011H

48485.67

4/1/2016

36658

70966

RED HILLS WEST 16 STATE W1 #011H

42425.67

5/1/2016

31320

66634

RED HILLS WEST 16 STATE W1 #011H

36491.17

6/1/2016

26458

60199

SCHEFFLER 1H-9X

47603.17

12/1/2014

36320

67699

SCHEFFLER 1H-9X

50341.83

1/1/2015

38708

69803

SCHEFFLER 1H-9X

40651.33

2/1/2015

31521

54782

SCHEFFLER 1H-9X

42222.5

3/1/2015

32200

60135

SCHEFFLER 1H-9X

37273.33

4/1/2015

26950

61940

SCHEFFLER 1H-9X

34508.83

5/1/2015

23116

68357

SHELL 12-3225H

3334

9/1/2015

3173

966

SHELL 12-3225H

38347.33

10/1/2015

35269

18470

SHELL 12-3225H

34681.67

11/1/2015

32360

13930

SHELL 12-3225H

30815.5

12/1/2015

28736

12477

SHELL 12-3225H

22569.17

1/1/2016

21180

8335

SHELL 12-3225H

13744.33

2/1/2016

12491

7520

SHELL 12-3225H

9896

3/1/2016

9062

5004

SHELL 12-3225H

12992.67

4/1/2016

11727

7594

SHELL 12-3225H

12729.67

5/1/2016

11250

8878

SHELL 12-3225H

10320.5

6/1/2016

9036

7707

SHELL 12-3225H

8043.5

7/1/2016

6999

6267

T COSNER FED 204372-2PH

12018.83

11/1/2015

11464

3329

T COSNER FED 204372-2PH

37346

12/1/2015

35568

10668

T COSNER FED 204372-2PH

36685.17

1/1/2016

34468

13303

T COSNER FED 204372-2PH

22493.17

2/1/2016

20922

9427

T COSNER FED 204372-2PH

19615.67

3/1/2016

17981

9808

T COSNER FED 204372-2PH

14847

4/1/2016

13750

6582

T COSNER FED 204372-2PH

15838.33

5/1/2016

14324

9086

T COSNER FED 204372-2PH

12695.17

6/1/2016

11453

7453

T COSNER FED 204372-2PH

0

7/1/2016

0

0

T COSNER FED 204372-2PH

0

8/1/2016

0

0

T COSNER FED 204372-2PH

0

9/1/2016

0

0

T COSNER FED 204372-2PH

0

10/1/2016

0

0

T COSNER FED 204372-2PH

0

11/1/2016

0

0

T COSNER FED 204372-2PH

0

12/1/2016

0

0

THISTLE UNIT #030H

0

2/1/2016

0

0

THISTLE UNIT #030H

26860.83

3/1/2016

21921

29639

THISTLE UNIT #030H

65405

4/1/2016

56122

55698

THISTLE UNIT #030H

65743.5

5/1/2016

40812

149589

THISTLE UNIT #030H

47886.67

6/1/2016

25247

135838

TIISTO 43-7-2XH

7567.833

8/1/2015

6800

4607

TIISTO 43-7-2XH

37018.83

9/1/2015

33633

20315

TIISTO 43-7-2XH

19714.67

10/1/2015

18159

9334

TIISTO 43-7-2XH

28202.5

11/1/2015

25921

13689

TIISTO 43-7-2XH

30170.33

12/1/2015

27510

15962

TIISTO 43-7-2XH

32750.17

1/1/2016

29653

18583

TIISTO 43-7-2XH

26537.17

2/1/2016

23868

16015

TIISTO 43-7-2XH

21992.67

3/1/2016

19084

17452

TIISTO 43-7-2XH

19006.83

4/1/2016

16140

17201

TIISTO 43-7-2XH

17786.5

5/1/2016

14935

17109

TIISTO 43-7-2XH

14757.17

6/1/2016

12209

15289

TIISTO 43-7-2XH

15216

7/1/2016

12524

16152

TIPI 148-93-22A-21H

43690

8/1/2015

38550

30840

TIPI 148-93-22A-21H

26852

9/1/2015

23693

18954

TIPI 148-93-22A-21H

29524

10/1/2015

25967

21342

TIPI 148-93-22A-21H

19611.5

11/1/2015

17126

14913

TIPI 148-93-22A-21H

16189.67

12/1/2015

14285

11428

TIPI 148-93-22A-21H

14497.17

1/1/2016

12791

10237

TIPI 148-93-22A-21H

11783.33

2/1/2016

10287

8978

TIPI 148-93-22A-21H

12399.67

3/1/2016

10725

10048

TIPI 148-93-22A-21H

10926.33

4/1/2016

9411

9092

TIPI 148-93-22A-21H

7457.833

5/1/2016

6486

5831

TIPI 148-93-22A-21H

6162.167

6/1/2016

5342

4921

TIPI 148-93-22A-21H

7703.333

7/1/2016

6690

6080

TRISTE DRAW 25 FEDERAL #007H

136.1667

1/1/2016

84

313

TRISTE DRAW 25 FEDERAL #007H

19604.33

2/1/2016

15627

23864

TRISTE DRAW 25 FEDERAL #007H

35624

3/1/2016

28184

44640

TRISTE DRAW 25 FEDERAL #007H

41118.17

4/1/2016

32122

53977

TRISTE DRAW 25 FEDERAL #007H

43124.83

5/1/2016

28776

86093

TRISTE DRAW 25 FEDERAL #007H

35077

6/1/2016

20611

86796

WHITE FALCON 16 STATE #001H

46247.5

1/1/2016

43030

19305

WHITE FALCON 16 STATE #001H

47510.5

2/1/2016

42042

32811

WHITE FALCON 16 STATE #001H

32335.67

3/1/2016

28313

24136

WHITE FALCON 16 STATE #001H

33459.33

4/1/2016

28300

30956

WHITE FALCON 16 STATE #001H

36423.83

5/1/2016

31549

29249

WHITE FALCON 16 STATE #001H

30983.67

6/1/2016

24334

39898

WORT 1-21H

16967

12/1/2014

16967

0

WORT 1-21H

31372

1/1/2015

31372

0

WORT 1-21H

27260

2/1/2015

27260

0

WORT 1-21H

24568

3/1/2015

24568

0

WORT 1-21H

39697.17

4/1/2015

18850

125083

WORT 1-21H

19661.5

5/1/2015

0

117969

Click to enlarge

(Source: Welldatabase.com)

Some of these wells have been shut in for an extended period of time. These interruptions to production are commonplace. It is done anytime an adjacent well is completed or if it needs servicing. There are several months of production worth noting. DILTS 44-15 TH produced 66,050 BOE over the month of August, 2015. It produced 51,861 BOE the month after. In May, 2016 EIDER FEDERAL #002H produced 55,004 BOE. It produced 68,000 BOE in the two months prior. LOMAS ROJAS 26 STATE COM #703H produced 168,000 BOE in just four months. RATTLESNAKE 21 FEDERAL COM #702H produced 234,000 BOE in just three months. There are more production months that could be mentioned, but all of these wells are top notch.

There is no doubt that much better production from newer wells has affected world oil prices. US production has not declined as quickly, and this looks to be continually slowing. These wells were huge producers and because of that decline is probably a little more robust than other wells. Decline has been the key as enhanced completions have decreased this variable significantly. When looking at decline, its decrease affects production through the life of the well. So if decline is decreased by 20% over the first year, that additional production increase will be 20% better in future years. Each following year that has decline improvements will see the same. We will continue to see large decreases in production from areas like Venezuela and Brazil, but US unconventional wells need a lower oil price. Brazil has higher costs since much of its production is deep water. Venezuela is loaded down with social programs and produces heavy crude. A lower realized price continues to make things difficult, and production has declined as it does not have the money to maintain what it currently has. Brazil and Venezuela look to be in a more difficult position than the US.

Arguably the best well of this grouping is RATTLESNAKE 21 FEDERAL COM #702H. It is located in Lea County, New Mexico. This Delaware Basin well is operated by EOG Resources. It has produced 178,620 BO over the first 90 days.

Click to enlarge

(Source: Welldatabase.com)

This type of curve covers 15 total months and provides an exponential decline. It uses the first 3 months of production to develop a production estimate over the next 12. It is oil only and does not account for natural gas production.

Oil Exponential

Volumetrics

EUR: 609,834.65

Months: 15

Recovered: 178,615.00

Months: 3

Remaining: 431,219.65

Months: 12

Economics

Working Interest (%):

80%

Selling Price:

$50/Bbl

Initial Capital Expense:

$6,000,000

Lease Operating Cost (monthly):

$6,098,355

Tax Rate (%):

8.25%

Gross:

Total

Working Interest

Total:

$30,491,732.51

$24,393,386.01

Recovered:

$8,930,750.00

$7,144,600.00

Remaining:

$21,560,982.51

$17,248,786.01

Total

Working Interest

Total:

($14,613,922.93)

($11,691,138.35)

Recovered:

($7,219,671.00)

($5,775,736.80)

Remaining:

($4,878,684.00)

($3,902,947.20)

Taxes:

($2,515,567.93)

($2,012,454.35)

Total

Working Interest

Total:

$15,877,809.58

$12,702,247.66

Recovered:

$974,292.13

$779,433.70

Remaining:

$14,903,517.45

$11,922,813.96

Click to enlarge

(Source: Welldatabase.com)

This is one of the single best oil producing wells that I have seen. This is why it nets almost $13 million in 15 months. This is after taking out a $6 million well cost. An additional $10/BO was stripped out and an 8.25% tax rate applied. An 80% NRI was used, with a $50/Bbl realized oil price. Results like these have motivated operators to focus on transaction in the Delaware Basin. Acreage prices are high, but look very good at $50/bbl.

In summary, we continue to see better economics from unconventional oil production. This not only was a big contributor to the current oil glut, it may keep oil prices low well into the future. The wells in this article are not typical, but should be seen as the high end of today's producers. The fact that operators can get these types of results, shows the upside to core areas. We are starting to see a large number of new locations produce 20,000 to 30,000 BO in the first month, in the best core areas. Well designs continue to improve through shorter stages and tighter frac cluster placement. It is impossible to know how much better wells will get, but the industry has shown these production improvements can occur quickly. We probably have plenty of upside from here. Although current wells cannot compete with conventional wells in Russia and Saudi Arabia, it will continue to push deep water barrels out of the market.

Disclosure: I am/we are long APA, APC, EOG, FANG, CXO, XEC, MTDR, PE, RSPP.

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 article is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Well data is provided by Welldatabase. Accordingly, the publication of articles should not be construed by any consumer and/or prospective client as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. This information is provided for guidance and information purposes only. This information is not intended to provide investment, tax, or legal advice. The information contained herein has been compiled from sources deemed reliable and it is accurate to the best of our knowledge and belief. However, I cannot guarantee its accuracy, completeness, and validity and cannot be held liable for any errors or omissions. All information contained herein should be independently verified and confirmed. Hartstreet LLC does not accept any liability for any loss or damage whatsoever caused in reliance upon such information. Readers are advised that the material contained herein should be used solely for informational purposes. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.

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