ND Department of Mineral Resources
7/21/2011 Lynn Helms
Apr Oil 10,538,165 barrels = 351,272 barrels/day
May Oil 11,203,612 barrels = 361,407 barrels/day (preliminary) (all time
high)
Apr Gas 10,779,061 MCF = 359,302 MCF/day
May Gas 11,084,312 MCF = 361,407 MCF/day (preliminary) (all time high)
Apr Producing Wells = 5,536
May Producing Wells = 5,570 (all time high)
Apr Permitting: 125 drilling and 1 seismic
May Permitting: 154 drilling and 2 seismic (all time high 245 and 2 Nov
2010)
Apr Sweet Crude Price = $103.91.51/barrel
May Sweet Crude Price = $94.69/barrel
Today Sweet Crude Price = $91.50/barrel ND (all time record high $136.29
July 3, 2008)
April rig count 173
May rig count 175
June rig count 175
Today’s rig count is 183 (all time record high 184 Jul 20, 2011)
Comments:
The summer time surge has begun. Although the effects of severe winter
weather and a rainy spring continued to depress May daily production, warm
dry weather has brought a surge in the rig count and hydraulic fracturing
activity.
The Bakken and Three Forks
formations continue to be the target of over 95% of drilling activity.
Bowman County Red River production has stabilized at about 27,000
barrels per day with no wells drilling.
The idle well count surged to over 800 again
in May, 2011.
Crude take away capacity with pipeline, rail, and truck transportation
is more than adequate for the next few years.
Additional pipeline and rail projects in the various planning stages should
provide adequate capacity until 2015. North Dakota Sweet posted price versus
NYMEX-WTI is down to -7%.
Rig counts in the Williston basin dropped in April, May, and June, but
are now setting new records every few days. Utilization of rigs capable
of +20,000 feet is over 90%, but for shallow well rigs that can drill to
7,000 feet or less utilization remains below 50%. The efforts to force federal
regulation of hydraulic fracturing remain high.
Drilling permit activity is high, but well below record levels due to road
restrictions, weather, and long waiting lists for fracturing services. The
number of wells drilling on federal surface in Dakota Prairie Grasslands
is 5.
Seismic activity has stopped except for the Sanish buried array
due to wet weather conditions, but will be busy this fall during dry weather.
Leasing activity remains focused on renewals and top leases in the Bakken
- Three Forks thermal maturity area, but there is significant activity south
of Dickinson to the South Dakota border. The Commission heard the first
drilling unit proposal for Hettinger County this week.
Daily natural gas production is up in spite of weather and road restrictions.
Flaring is up
to a new record of 29% (excluding inert gases from tertiary recovery
operations).
Significant new plant and gathering pipeline expansions have been announced.
We are anticipating very high plant and gathering system construction activity
whenever there is warm dry weather.
US natural gas storage is stable at 2% below the five-year average.
North Dakota Shallow gas exploration is not economic at the current price.
Natural gas Watford City Delivery to Northern Border price is down to $4.11/MCF.
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North Dakota one
billion dollar state tax surplus
North Dakota, the fourth biggest state with respect to oil production,
with a one billion dollar state tax surplus (and that is after the oil drilling
tax break).
Oil production is increasing fast, only held up by overworked frack crews
and little capacity to get the oil out of the state. Right now they are
using trains and trucks. The good thing is that costs will decrease for
these companies when we have suitable pipelines.
The ND Bakken Companies
Leaders in this region are companies like Continental Resources,
with almost 900,000 acres and 21 rigs, and Hess with a little over 600,000
acres and 15 rigs. Scanning the list produces plenty of names and a lot
of potential. Those who follow the Bakken Formation know the names.
Northern Oil and Gas.
Currently it has a market cap of 1.41 billion and a P/E ratio of 135, with
a forward P/E of 28. NOG has 122,000 net Bakken acres, but no operating
rigs and has eight employees. This compares to Oasis 55 employees and Brigham's
71. NOG performs under a non-operator model. By being a non-operator, it
takes a minority position. The operator has control of the well but must
absorb more of the costs. NOG only has to pay for its percentage of drilling
costs, development and operating cost of the wells. The operator is responsible
for its percentage of those costs, plus research and development, seismic,
legal, and engineering departments, and will need a larger staff to complete
all of those tasks.
Much of the acres NOG owns are in good locations such as Mountrail County.
It has also picked good companies to partner with, including HES, CLR and
EOG Resources. It is participating in over 300 wells in the Bakken/Three
Forks areas, with 91 gross wells currently drilling or completing. The success
rate is 100%.
NOG is now in the process of expanding its exposure to a total of 760 net
wells. It acquired an additional 38,800 acres in 2010 at an average price
of $1,086 per acre. Currently the company has zero debt. Rig counts in the
Bakken are expanding rapidly, with 164 rigs. Drilling is starting to go
better as super-fracks are widely used. 80% of current NOG acreage is producing.
In 2010, production increased 45%. This production is 96% oil.
Williston
Basin Unconventional Oil & Gas
Sliding-sleeve fracs unlock more ND Bakken oil
Production results for the Bakken formation in the Williston basin continue
to improve with technological advances, prompting Continental Resources
Inc. to estimate potentially recoverable reserves of 24 billion boe.
Continental’s estimate dwarfs the US Geological Survey’s 2008 most likely
estimate of 4.3 billion bbl of undiscovered technically recoverable oil
in the Bakken play. The difference between the estimates is that recoveries
on a per-well basis have increased substantially since June 2007, which
was the cutoff for wells in the USGS analysis, Continental said.
The North Dakota Industrial Commission in January announced recoverable
reserves from the Bakken-Three Forks reservoirs could reach 11 billion bbl
in North Dakota alone—fivefold the NDIC’s 2008 estimate.
Jack Stark, Continental senior vice-president, exploration, told the NAPE
expo in Houston that the Bakken play could become the world’s largest discovery
in the last 30-40 years. He attributes this potential to “ingenuity of the
oil and gas industry.” Ron Ness, president of the North Dakota Petroleum
Council, told OGJ that oil companies expanded “what were considered the
sweet spots.”
Having spudded vertical oil wells in the upper Bakken during the 1950s,
industry now focuses on middle dolomite between the upper and lower Bakken
shale. The formation reaches from Canada through North Dakota and Montana
with most activity being in North Dakota.
Fine tuning Bakken technology
Companies drill 2 miles underground and rely on hydraulic fracs with as
many as 40 stages using a ball-and-sliding-sleeve system. Swell packers are
used to push frac liners into 2-mile laterals.
Drillers and operators acknowledge a learning curve in the Bakken and other
shale plays.
Jack Ekstrom, Whiting Petroleum Corp. vice-president, corporate and government
relations, said, “There are always science projects early in a play. It
takes experimentation to get the optimum recovery as rock properties vary
across resource plays.”
A Continental Resources ECO-Pad site in the North Dakota Bakken
where Continental drilled four wells from a single pad, increasing production
efficiency while cutting costs and environmental impact.
More frac stages unlock more oil but also increase costs, prompting companies
to try and cut overall expenses by slashing the time it takes to drill and
complete a well.
“While debate continues about estimated ultimate recoveries per well, there’s
no argument about what the Bakken is producing as a region now,” Ryder Scott
Co. LP reported in its March-May Reservoir Solutions newsletter. “In 2010,
North Dakota pumped 113 million bbl of oil from the wellhead, almost three
times the state’s total in 2006, with most coming from the Bakken.”
Drilling permit activity and rig utilization are at record highs in the
North Dakota Williston basin. North Dakota’s rig count averaged 110 in 2010
compared with 49 in 2009. Montana’s climbed to 7 from 3, according to Baker
Hughes.
Oil tax revenue for North Dakota reached a record of more than $100 million
in March. State tax officials told OGJ that they do not categorize revenue
by basin so they cannot say how much of the $100 million can be attributed
to Bakken production.
Estimates vary
Many operators are drilling 18,000-21,000-ft wellbores that include 9,500-ft
laterals and generally apply 18-30 frac stages/well, Stark said, adding
that it’s been Continental’s experience that operators seem to reach a point
of diminishing returns between 18 and 24 frac stages (OGJ Online, Feb. 16,
2011).
Continental based its 24 billion boe estimate on the following
assumptions about two areas of continuous oil reservoir:
• A recoverable factor of 500,000 boe/well based on Continental’s average
results as of Feb. 4, 2011.
• Middle Bakken and Three Forks act as separate reservoirs (500,000 boe/reservoir).
• Dual-zone development (both Middle Bakken and Three Forks reservoirs).
• 320-acre spacing/well (4 wells per zone with 8 wells per 1,280-acre spacing
unit).
• Estimated Area 1 having 10,314 sq miles (6.6 million acres) thermally
mature.
• Estimated Area 2 having 4,357 sq miles (2.8 million acres) marginally
mature/migrated.
Harold Hamm, Continental chairman and chief executive officer, said industry
has completed 3,600 horizontal wells in the Bakken and is adding 2,100 wells/year
using 170 drilling rigs actively running.
Continental restricts initial production rates on many of its North Dakota
wells to minimize natural gas flaring and to maximize the volume of rich
gas that can be marketed. “Some wells have initial flowing tubing pressures
of more than 3,000 psi for several days, so they could easily have tested
at double or more their announced rates, if we have opened them up,” Hamm
said. As of Mar. 31, Continental had 878,900 net acres leased in the Bakken.
As of early May, Continental operated 22 drilling rigs in North Dakota and
two in Montana. Six of Continental’s eight best wells during first quarter
2011 were in the Williston prospect where Continental has leased 110,000
net acres.
In McKenzie County, Continental reports the Akron 1-27H well on initial
production test flowed at 1,407 boe/d at 3,600 psi on a 16⁄64-in. choke. The
well targeted the Middle Bakken zone and involved 24 stages.
Multiwell pad design
Continental expects to complete several multiwell projects during the second
quarter. Continental’s proprietary ECO-Pad allows four wells (two Middle
Bakken, two Three Forks) to be drilled on two adjoining 1,280-acre spacing
units from a single pad, increasing recoveries per well and reducing drilling
costs, completion costs, and the environmental footprint.
Marathon Oil Corp.
Marathon holds 391,000 net acres in the Bakken oil play in rural North
Dakota and eastern Montana, with a working interest of about 80% in its
company-operated assets.
In Montana, Continental is testing several variations on its
standard 24-stage, perf-and-plug frac design for well completions. The Big
Sky 3-35H was completed in 18 stages using a sliding-sleeve frac system. Hamm
said sliding-sleeve fracs are superior to open-hole fracs, which were once
standard in Elm Coulee field.
Whiting Petroleum Corp. completed a 40-stage frac in 26 hr on the Smith
14-29XH well in Sanish field in North Dakota. Baker Hughes Inc., which provided
the downhole assembly, said it was the world’s first 40-stage frac using all
sliding sleeves.
The Smith well was tested Apr. 2 flowing 1,805 bbl of oil and 1,338 Mcfd
of gas. The flow rate was gauged on a 48⁄64-in. choke with a flowing casing
pressure of 700 psi. Whiting holds a 43% working interest in the Smith well,
which it operates.
Slawson Exploration Co. Inc.,
A private Wichita operator ran 36 stages using packers and sleeves on its
Stallion 1-1-12H well in Mountrail County in 2009. Last year, Slawson ran
47 stages in its Cannonball 1-27-34H well. On May 10, Slawson successfully
tested Baker’s 40-stage ball drop system in the Williston basin. The fracturing
was completed in 2 days vs. the normal 6-7 days. Slawson was the second
to test this system behind Whiting Petroleum.
EOG Resources Inc.
The biggest oil producer in North Dakota having 600,000 net acres leased
in Bakken-Three Forks where it reported 49.4 million boe/d gross production
at yearend 2010. EOG plans a 10-rig development program in 2011.
Denbury Resources Inc.
Numerous oil companies have invested in the Bakken, including
Denbury Resources Inc., known for its carbon dioxide enhanced oil recovery
business. Denbury has 266,000 net acres in the Bakken, where it operates
five drilling rigs and expects to operate seven rigs by yearend.
Marathon Oil Corp.
Marathon entered the Bakken in 2006, drawing
upon its experience in reservoir characterization, horizontal drilling,
and well stimulation from its other operating areas. Marathon’s acreage
in North Dakota is in Dunn, McKenzie, McLean, Mountrail, and Williams counties.
Its Montana acreage is in Richland, Roosevelt, and Sheridan counties.
The Bakken serves as a proving ground for multistage hydraulic fracturing,
and its emerging role in unconventional oil production reminds some of the
role the Barnett shale has played in boosting US natural gas production.
Natural
Gas Processing Facility and Pipeline Construction
Oneok already announced $1.3-1.6 billion in other projects in
2010, including:
Construction of two 100 MMcfd natural gas processing facilities in the
Bakken shale and related infrastructure.
Construction of a 525- to 615-mile NGL pipeline to transport unfractionated
NGL produced in the Bakken to the Overland Pass Pipeline, a 760-mile NGL
pipeline extending from southwestern Wyoming to Conway, Kan.
Related capacity expansions for Oneok Partners' 50% interest in the Overland
Pass Pipeline to transport the additional unfractionated NGL volumes from
the new Bakken pipeline.
Expansion of the partnership's fractionation capacity at Bushton, Kan.,
by 60,000 b/d to accommodate the additional NGL volumes from Overland Pass
Pipeline.
Installation of seven additional pump stations along the existing Sterling
I NGL distribution pipeline, increasing its capacity by 15,000 b/d.
Williams to buy Bakken-Three Forks stake
Williams Cos. Inc., Tulsa, will pay undisclosed private owners $925 million
to acquire 85,800 net acres in North Dakota that it estimates represent
185 million boe net potential recovery from the Middle Bakken and Upper
Three Forks formations.
The purchase will diversify the company's exploration and production interests
into light, sweet crude oil production. By 2013, 25% of the company's E&P
revenue streams are expected to be generated by oil production, up from
7% in 2010.
The properties produce 3,300 b/d net from 24 wells. Three rigs are running
on the acreage, which is entirely on the Fort Berthold Indian Reservation
and in the "best geologic portion of the strongest onshore oil play in the
US," Williams said. The purchase is to close by the end of 2010.
Williams expects to invest $60 million in 2010 and $200-300 million in
2011 to develop the properties, double the rig count by 2012, and hike production
to more than 20,000 b/d by the end of 2012.
Williams has also accumulated 100,000 net acres in Pennsylvania's Marcellus
shale play in the last 18 months.
The company said it will "build new relationships in North Dakota and with
the Three Affiliated Tribes—the Mandan, Hidatsa, and Arikara—who call the
area around these properties home."Before the closing of this transaction,
EPPP owns, among other assets, 51% in SLNG, which owns the Elba Island LNG
storage and regasification terminal near Savannah, Ga.; 51% in Elba Express;
and 45% in SNG. Both Elba Express and SNG are interstate pipeline systems
serving the US Southeast.
Plains All American to acquire Bakken assets
Plains All American Pipeline LP has entered into a definitive agreement
with Nexen Holdings USA Inc. to purchase entities that hold crude oil gathering
and transportation assets that primarily service Bakken area producers.
Total consideration is estimated at $210 million, including $170 million
for the business and physical assets and $40 million for about 400,000 bbl
of inventory and other working capital adjustments. Subject to regulatory
approval, the transaction is scheduled to close by yearend.
The assets are located mainly in northwestern North Dakota and northeastern
Montana and include a lease gathering business that currently handles 55,000
b/d of oil, the Robinson Lake pipeline, a regulated 20-mile, 8-in. pipeline
that currently handles 18,000 b/d of oil, eight truck terminals, and various
other contractual rights
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