Bakken Update: Denbury Is Using Significant Volumes Of Water In Completions

| About: Denbury Resources (DNR)

Denbury (DNR) has been working the Bakken/Three Forks quite hard over the past couple of years. Even though its main business is EOR, it is increasing production quickly through unconventional methods in North Dakota. Early last year, Denbury was using 15 stage laterals, and in my opinion were behind other operators with respect to completion design. Recently Denbury has seen a big improvement in initial production which should translate to higher EURs.

Much of Denbury's Bakken acreage was acquired, and was operated by Encore in 2011. This includes Siverston Field in McKenzie County. This area is one of the better locations in the Williston Basin, and has produced very good wells for Newfield (NFX), Kodiak (KOG) and XTO Energy (XOM). These three links provide access to each companies' well design. In the table below, I have covered Encore's results in Siverston Field. Later in the article I will also cover Denbury's results for 2012.

2011 Encore Results In Siverston Field
Name Date Choke Stages Water Proppant 60Day IP 120Day IP
Satter 44-34SWH 4/11 24/64 23 37289 2941200 496 450
Hoffmann 149-98-1-12-1H 4/11 28/64 24 37218 2991800 491 399
Satter 44-34NWH 5/11 18/64 20 45993 2945305 499 432
Johnson 31-6SWH 5/11 18/64 24 49705 2391309 400 354
Koeser 41-15SWH 6/11 24/64 24 54792 2887940 321 325
Lundin 11-15SEH 7/11 25/64 20 58460 3068687 516 424
Lee 34-31NWH 7/11 20/64 24 49788 2887940 577 441
Sorenson 34-32NWH 8/11 20/64 19 56822 2959860 430 377
Johnson 11-5SEH 8/11 12/64 24 59426 3170200 236 296
Click to enlarge

Encore's results were good considering its completion design. It used average amounts of water and a significant amount of proppant, but still used less than 30 stages in all the wells above. This led me to believe there is significant improvement to be had with some changes to these variables. In 2012, Denbury has seen a marked improvement to IP rates in Siverston Field. Here is its well design in that area.

Denbury's 2012 Results In Siverston Field
Name Date Choke Stages Water Proppant IP Rates
Serrahan 41-6SWH 1/12

24/64

26 130357 3136003 60Day=453
Satter 24-35NEH 1/12 18/64 26 102495 3044784 60Day=531
Satter 24-35SEH 1/12 22/64 24 126621 2870626 60Day=617
Johnson 24-31NEH 3/12 30/64 26 64356 3091198 60Day=482
Lundin 11-13SEH 4/12 20/64 26 128590 3033622 53Day=585
Click to enlarge

Only five Denbury operated Siverston wells completed in 2012 are off confidential status. Of those five, Denbury has slightly increased proppant and made a very large increase to volumes of water used. As far as I know these water volumes are higher than any other operator in the Bakken. What I find most interesting, is Denbury uses over 130000 Bbls. of water on a 26 stage frac while Whiting (WLL) will use just over 20000 on a 25 stage. These highly variable water volumes does raise questions as to how much water can be used as a bare minimum? Also, there are questions as to how much water should be used per stage on a two mile lateral.

In summary, Denbury is making progress with respect to its completion design in Siverston Field. This progress includes a very large increase in water volumes. It also uses a better than average amount of proppant per well with a moderate number of stages and tight choke. Denbury is moving slower in adding stages as it determines the proper amount of water to use per stage first. This is important as other companies like Kodiak and Exxon are doing the same while companies like Whiting are increasing stages ahead of water increases.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: IP rates are measured in barrels of oilWater volumes are measured in barrelsProppant is measured in poundsThis is not a buy recommendation.