North Dakota - update until 2015-12

Total oil production in ND in December fell to 1152 kbo/d, a monthly drop of 30 kbo/d. This output was in line with my expectation based on the normal production decline, and the number of new wells producing in Nov (77) and Dec (78).

Drilling activity has dropped significantly since December. There were 88 wells spudded in December, whereas based on preliminary data it looks like just 60 wells were spudded in January. The last time it was that low was at the end of 2009.

Completions during the winter are lower than in the summer months. I therefore expect oil production in ND to decline by another 60 kbo/d to about 1090 kbo/d (+-30kbo/d) in March.

In about a week I will post another update on the Niobrara. I'm also trying to get data on the Permian and Eagle Ford. At this moment I can't say yet whether that effort will succeed. I will give another update on that next month.

Discussion

  • Enno says:

    I just had a closer look at the data, and made an observation regarding Mountrail county. You can see on the map that historically this county has delivered quite some of the Bakken oil. However, if you look at the quality of wells in Mountrail, you can see that the wells in 2007 & 2008 have not been beaten by any later wells, on average. In other prolific counties (McKenzy, Williams, Dunn) 2014 & 2015 wells are still better than earlier wells, although there doesn’t appear to have been much improvement recently (2015 over 2014).

    Most of the oil production has come from the Middle Bakken (MB) formation, with the Three Forks (TF) formation as the follow-up. I noticed that the improvement of 2015 MB wells over 2014 was minimal, whereas TF wells have shown a small improvement in initial production, on average.

    Another thing I found striking is that recent EOG wells, although still good on average, are not replicating the monster wells of 2007, 2008 & 2013, and appear to decline faster later in life.

    1. Carl Dean says:

      Are you planning on adding gas production to your data base? Would it include only gas sales or sales and production?

      Thank You,

      Carl

      1. Enno says:

        Carl,

        Thanks for your question.

        If I see that there is continued interest in the information that is made available here, I plan a major update in about 2 months. It depends per basin what data is available, but for example for North Dakota there is much more information available, including gas produced & sold, water production, the status of wells over time (incl estimates of uncompleted wells), rig efficiency, production projections, the effect of refracking on the performance of wells, and many others.

        I am considering to introduce a layered subscription service by that time, so that I can make some basic insights into the shale oil production for free (like the ones available now), and some for a very low cost (probably gas & water production), while making other more detailed presentations available for those who can use these insights for their work or investing. That would allow me to serve a large audience, while also recouping some of the expenses of the tools and work.

        Any comments on this are appreciated.

        Enno

  • John says:

    Enno

    I think shale gas is important and merits further analysis which I certainly hope you will do rather than the army of internet financial oil and gas experts out there. Very few seem to be capable of what you and Art Berman routinely do and it is very much needed for the following

    The gas shale plays are generally more mature than the LTO plays and since the over production of gas bifurcated the “traditional” financial relationship between methane and oil I think it will greatly influence the LTO plays.

    At the greatest level of distortion, the value ratio of gas/oil was about 50:1. It looks to me that gas/oil might be going back to a more traditional 10:1 ratio. Which in my mind justifies a $20/bbl price for oil. Thus from my perspective unless the price of natural gas recovers to $6-8/ mcf then oil is going to remain below its cost to produce much less drill and develop.

    1. Enno says:

      Thanks for your vote of confidence John.

      If I get the Texas data to work (EF & Permian), and the subscription goes well, I will have a look at the major US shale gas plays as well. I heard there should be good data available, which would be a good start.

  • Carl Dean says:

    Enno,

    The gas sales data will have value to investors in the shale company’s. The data does not lie, but the company’s certainly do misrepresent the reserves.

    Let me know when you get your data base completed.

    1. Enno says:

      Carl,

      I agree with you that also on the gas production & reserves it’s hard to get objective data. I’m pretty confident that at least by the April update I’m able to include gas production & sales data for ND (and also water production).

      I found that just going through the type curves & total production of some companies a pretty interesting exercise. For example, EOG was one of the few companies that responded very quickly to the slide in prices, and was willing to let full production erode. Also, just have a look at the production curves of Emerald Oil. It’s hard to see how investors would have gotten in to that if they had this data available to them.

  • Nony says:

    http://seekingalpha.com/article/3930906-whiting-petroleum-wll-james-j-volker-q4-2015-results-earnings-call-transcript?part=single

    Some interesting comments from Whiting on drilling program reduction in current price environment. Also on refracks.

  • Nony says:

    What is your opinion on QEP?

    They seem to have the nicest wells. Not sure if that is operations or rock (more likely rock). Wonder how they ended up with the best rock though. Wonder what the history was.

    I listened to their call and looked at a presentation but didn’t bother going through the 10K. They do have some significant assets out of the Bakken.

    Just wondered if you had any other impressions on them.

    1. Enno says:

      Nony,

      I don’t know the company well. But they do seem to have nice acreage and well results in the Bakken.
      Surprising to see that their Three Forks wells are actually doing better than their Middle Bakken wells.

      Their wells do about 300 kbo in 5 years on average (see the 3rd tab, only selecting QEP). That’s pretty good, and above the average well in the Bakken. If we take an optimistic $40 in wellhead pricing, that’s about (300k * $40) $12m in oil revenue for the average well. If we subtract 30% for production taxes & royalties that leaves $8.4m. According to their latest investor presentations their wells in that area cost about $7.5m. If those numbers are accurate, I don’t see much profit left though after adding gas revenue and subtracing lifting costs, G&A, land costs, interest, etc, but with that they’re in a better shape than others. Haven’t looked at hedges.

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