Bakken - Single Well Economics

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Includes: BNO, DBO, DNO, DTO, DWTI, OIL, OLEM, OLO, SCO, SZO, UCO, USL, USO, UWTI
by: Ron Patterson

By Ciaran Nolan

Disclaimer: The opinions and views expressed in this presentation are solely those of the author and not necessarily those of any organisation.

Introduction

This presentation builds upon earlier work carried out by the author in May 2015 on the North Dakota (ND) Bakken/Three Forks Light Tight Oil (LTO) Play - 'Bakken - the bubble has burst'*.

North Dakota Industrial Commission (NDIC) production data (up to November 2015) kindly supplied by Enno Peters. Data analysed in Excel and IHS Kingdom.

Production decline curves generated for P10 - P90 type wells, based on 8,843 wells with 1-year full production (January 2007-October 2014).

Discounted cash flow (DCF) models were generated by the author for single wells in the ND Bakken/Three Forks Play.

Break even oil prices for Net Present Values with a 10% discount rate (NPV10) determined for P10-P90 type wells. NPV10 breakeven oil price map generated. Historical NPV10 generated for average wells for 2008-2015. NPV10 breakeven oil price determined for top ten Bakken Producers in 2014, for 2014 wells.

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ND - Bakken/Three Forks

Single Well Economic Model

ND - Bakken/Three Forks

Historic Economics

ND Bakken/Three Forks Average

2014 production by company and breakeven oil price

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Conclusions

Discounted cash flow models were generated by the author on a single well basis, for the North Dakota (ND) Bakken/Three Forks Light Tight Oil Play.

Breakeven oil prices for Net Present Values with a 10% discount rate (NPV10) determined for P10-P90 type wells. NPV10 break even oil price map generated based on established relationship between NPV10 and 1-year oil production. Historical NPV10 generated for average wells for 2008-2015. NPV10 breakeven oil prices determined for the top ten producers in 2014, for 2014 wells only.

Point forward economics (net, post tax, based on average cost assumptions) indicate that at $55 (WTI) none of the ND Bakken/Three Forks is NPV10 positive. At $89 (WTI) 50% is NPV10 positive, at $121 (WTI) 90% is NPV10 positive. Historical NPV10s are negative for all years.

For an average 2014 type well, the majority of the top ten Bakken/Three Forks producers have forward breakeven oil prices of $70-75 (WTI).

Most investment banks are predicting oil prices below $60 (WTI) in 2016.