Bakken Update: Oasis Is Increasing Production

May.30.12 | About: Oasis Petroleum (OAS)

Bakken producers continue to improve initial production which will equate to higher EURs. Companies have been slow to raise EURs, but I would think this will happen soon and those increases could be quite large. Producers are increasing the number of wells drilled by decreasing the amount of time it takes to drill and complete. Some companies are reducing the number of rigs, as efficiencies allow for more wells/rig. This means more oil/well, using less rigs and saving time. All of this is being done at decreased cost.

There are big changes occurring in the Bakken. Many of the producers have a good portion of acreage held by production. This allows for a ramp up of drilling in the best areas. To decrease time drilling and completing wells, pad drilling is be used. Oil companies are also getting comfortable in the play, which is translating to better IP rates. Some of the best IP rates have come from Kodiak (NYSE:KOG). Brigham (NYSE:STO) is using a large number of stages, and allows initial production to run freely. Brigham's results are not as good as Kodiak, but still better than the majority of Bakken operators. Whiting (NYSE:WLL) has had some fantastic results in the Pronghorn, but these have been sporadic. I would suspect results will be more consistent going forward.

Oasis (NYSE:OAS) has slowly made improvements to its Bakken drilling program. Few have noticed these changes as most of the attention had been on Brigham and is now on Kodiak. These improvements can be seen in its recent completions.

Oasis 4Q 2011 Well Completions
Well IP Rate (BO/d) 90-day IP Rate Choke Stages Volume Proppant
BRIER 5200 42-22H 1358   22/64 44 96954 5383113
STEWART 5200 12-29H 2081 704 112/64 36 75368 4536130
ANDERSMADSON 5201 41-13H 981 422 48/64 36 91457 4561361
HANOVER FEDERAL 5300 13-14H 1445 596 30/64   72768 4500102
CHALMERS 5300 31-19H 1395 527 24/64 36 74826 4539124
FOLEY FEDERAL 5301 43-12H 1167 528 28/64 36 74475 4519292
HELLING TRUST 11-15H 1731 481 112/64   79619 4436915
LYNN 5502 11-10H 653 195 34/64 16 47335 2839049
HERON 5693 43-12H 1327 368 48/64 36 79415 4541467
MELVILLE 5601 12-18H 1339 310 112/64 36 74066 4508968
THOMPSON 5601 43-24H 756 408 32/64   80241 4593128
DARRELL 5602 42-10H 621 231 48/64   81701 4526328
COOPER 5603 43-8H 119 ? 30/64   35785 1947372
CHARLIE 5603 43-19H 54 ? 40/64   43789 2387775
HILLSTEAD 5603 13-29H 382 242 26/64 36 87652 6557807
YEISER 5603 42-33H 683 232 68/64   74689 4385939
ATLAS 6092 13-20H 183   30/64 10 25716 1266327
Averages 957 403     70344 3879275
Click to enlarge

Oasis has had some very interesting results as it has increased the number of stages to 36, with increased water volumes and proppant. These results may seem to be all over the board, but there are good reasons for this. It has had its best results in Camp Field of McKenzie County during the fourth quarter of 2011. These results were even better than its wells in Alger Field, which also points to north McKenzie as possibly better than west Mountrail County. Its Brier well was its most aggressive well to date with 44 stages and over 5 million pounds of proppant. I would guess we will see Oasis continue to do wells of this size, depending on results. It also has completions in west Williams County where pressures are lower. This area produces smaller IP rates, but has lower well costs. Burke County completions also provide lower IP rates, but Oasis is just starting to figure this area out. These numbers should continue improve. Oasis did have two wells with big problems in the fourth quarter. Cooper and Charlie both look to be quite bad, but we will continue to watch these wells for any positive news.

In summary, Oasis is using a 36 stage long lateral with 4.5 million pounds of proppant. This is its standard design, but I would guess these numbers will continue to change as results dictate. It is having some very good success in north McKenzie and south Williams counties, and I anticipate these results will continue to get better.

Disclosure: I am long KOG.

Additional disclosure: This is not a buy recommendation.