In the first three parts of this series, I have attempted to show the article, "Is Shale Oil Production From Bakken Headed for a Run With the Red Queen?" is off base with some of its key points. Specific points I disagreed with were:
- Presently the estimated breakeven price for the "average" well in the Bakken formation in North Dakota is $80 - $90/Bbl In plain language this means that presently the commercial profitability for new wells is barely positive.
- The "average" well now yields around 85 000 Bbls during the first 12 months of production.
- There is a huge spread in well productivity, cumulative and decline rates amongst individual wells. I believe Mr. Likvern is mistaken that there are very few "big producers", and believe his study used companies that consistently underperform.
In Part 3 of this series, I focused on well results in 2011 around the Sanish Field in Mountrail County. I used this data to refute the assertion an average Bakken/Three Forks well yields around 85000 barrels of oil in its first 12 months of production. This number was found using Statoil (NYSE:STO), Whiting (NYSE:WLL) and Marathon (NYSE:MRO). Of these three operators both Whiting and Marathon have underperformed its competition. I believe this, coupled with 2010 well results produced a skewed representation of the Bakken/Three Forks. Since 2010, IP rates have improved significantly as companies have started to focus on vertical communication instead of well spacing.
Results from this article are focused in northeast McKenzie County. As with the last article, I will focus on 2011 well production, but only use wells that have at least 360 days of production. So no well will have an IP test date before January of 2011.
|Well||OP||Days||120 Days||360 Days||Lateral||Stages||Choke||Water||Proppant||Ceramic||SR|
The statistics from northeast McKenzie County were better than I expected. These results were better than wells in southwest Mountrail County. These results are independent of lateral length, and I would guess that if this was taken into consideration we would see Mountrail County's results improve significantly. The table above spans a very large area. From north to south there are 30 miles separating wells, and 19 miles east to west. All of these wells are on or west of the Nesson Anticline. All of these wells began producing in 2011. Below I listed other notable wells in northeast McKenzie County that did not fall within the guidelines used for the wells above.
|Well||OP||Days||120 Days||Total Production||Lateral||Stages||Choke||Water||Proppant||Ceramic||SR|
Northeast McKenzie County has areas every bit as good as Mountrail County. 20589 is one of the best wells here, if not the best well in the Basin. It is notable that Whiting produced this result while using lower amounts of water and proppant. The Helis results are some of the best Three Forks results, and more importantly better than the majority of middle Bakken results as well. Newfield continues to be one of the best operators in the Basin and has found ways to get the most from its wells. It has had problems keeping costs in check, but given the results this was warranted.
In summary, northeast McKenzie County has 2011 production close to that of Mountrail County. The data provided in this article used in concert with part 3 of this series shows a very large area with average first year production of over 120000 barrels of oil. This area runs from 12 miles north of Sanish Field southwest to Banks Field. These two fields are roughly 40 miles apart. This area stretches from Banks Field to the southeast ending another 40 miles to Bear Den Field. To the northeast of Bear Den Field there are 20 miles, and from Van Hook back to Alger Field another 20 miles. This is an area of significant size. Moreover, the almost the entire area has at the most one well per 640 acres. This is not the only very good area in the Bakken, but it does give an idea of the work yet to be done. For every 640 acres a conservative estimate (without including the Red River, and bottom 3 benches of the Three Forks) would be 4 middle Bakken and 4 upper Three Forks wells. If we presume one well has been completed in each and every 640 acres, 7 wells are yet to be drilled. Since the majority of wells drilled in this area have been from the middle Bakken, we will assume this is the case throughout. The average middle Bakken well in this area produced roughly 120000 barrels of oil in the first year. The average upper Three Forks well is 90000 barrels. The middle Bakken, per mile, would produce another 360000 barrels of oil and the upper Three Forks would produce 360000 as well. These 720000 barrels of oil at $80/barrel would produce revenues of $57600000. It is significant as middle Bakken wells are paying back in around one year using these parameters.
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. 120 Days- Total barrels of oil produced in the first 120 days.360 Days- Total barrels of oil produced in the first 360 days.Lateral- Measured in feet.Water- Measured in gallons.Proppant- Measured in pounds.SR- Source Rock (Either Middle Bakken or Upper Three Forks)