FRACTIONAL FLOW

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Archive for June 2015

Status on the Bakken ”Red Queen” with Data as per April 2015

This post presents a study of developments of Light Tight Oil (LTO, shale oil) extraction for 8 companies in Bakken(ND) that as of April 2015 had added around 600 (or more) producing wells in the Bakken/Three Forks formations since January 2008.

The 8 companies are; Continental Resources, EOG Resources, Hess Bakken Investments, Marathon Oil Company, Oasis Petroleum, Statoil Oil & Gas, Whiting Oil and Gas Corporation and XTO Energy.

These 8 companies had around 63% of total LTO extraction from Bakken as of April 2015.

The decline in the oil price has so far reduced the number of rigs drilling in Bakken and a decline in total LTO extraction in Bakken. This study shows there are differences in responses amongst the studied companies to the oil price decline.

As with most other things, size matters, also in Bakken.

Figure 1: The chart above (stacked areas) shows developments in total  LTO extraction, split on the 8 presented companies and others. 4 of the studied companies had growth in LTO extraction for the period from December 2014 through April 2015 which are stacked on top. NOTE: The chart does not include contributions from wells starting to flow prior to 2008 for the presented companies and the contributions from these wells are included in others and normally diminishes as the wells ages.

Figure 1: The chart above (stacked areas) shows developments in total LTO extraction, split on the 8 presented companies and others.
4 of the studied companies had growth in LTO extraction for the period from December 2014 through April 2015 which are stacked on top.
NOTE: The chart does not include contributions from wells starting to flow prior to 2008 for the presented companies and the contributions from these wells are included in others and normally diminishes as the wells ages.

Data from the North Dakota Industrial Commission (NDIC) shows that in  April 2015 Bakken LTO extraction was at 1.11 Mb/d, down from a high of 1.16 Mb/d as of December 2014.

  • For the period December 2014 – April 2015 those in decline lost about 76 kb/d (close to 10%), while those with growth added around 21 kb/d, curtailing total decline at 55 kb/d (close to 5%).
  • The 4 companies with growth added about 300 producing wells (46%) of a total of 645 for the months January – April 15 and contributed about 37% of the total Bakken LTO extraction per April 2015.

kb; kilo barrels = 1,000 barrels

The decline in the oil price and LTO flow (for some companies) is likely to move focus to CAPital EXpenditures discipline, profitability and balance sheets healing.

The low oil price has already affected the scale of the drilling and will in the near future lead to a decline in the monthly producing wells additions.

At present oil prices ($60/Bbl, WTI) the net cash flow from operations could unabridged pay for the addition of around 100 wells/month (from spud to flow).

As of the recent months an average of 160 producing wells was started monthly and LTO extraction declined.

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Written by Rune Likvern

Thursday, 18 June, 2015 at 21:48

The Bakken ”Red Queen” is restrained with more credit

 

NOTE changes to: ABOUT FRACTIONAL FLOW, CONTACT, LINKING, COPYRIGHTS


 

This post is an update on Light Tight Oil (LTO) extraction in Bakken based upon published data from the North Dakota Industrial Commission (NDIC) as per March 2015.

Extraction developments of LTO from Bakken may be followed by county, formation, vintage of wells, and one important source to understand the developments are coming from studying the developments by companies. Holding this up with companies’ financial statements (10-K and 10-Q) is an invaluable source about the companies, their financial capabilities and their strategies. This information is paramount to understand the developments in LTO extraction from Bakken and provides valuable insights into what to expect of future developments.

To get some understanding of what will drive future developments, it is helpful to look at individual companies.

Amongst all the companies operating in Bakken I selected for this post to present a closer look at 3 of the biggest companies in Bakken; Continental Resources, EOG Resources and Whiting Petroleum.

These 3 companies were found to be representative for several of the companies with regard to a range of variation in quality of wells, development strategies, use of debt, asset sales and not least what their responses to oil price changes may reveal.

  1. For Q1 – 15 the companies involved in LTO extraction in Bakken used an estimated $4 Billion (CAPEX) for well manufacturing and an estimated $2.3 Billion was from external sources, primarily from equity and asset sales and assuming more debt.
    The “average” well with around 90 kb [90,000 barrels] of flow in its first year is estimated to have an undiscounted point forward break even (that is a nominal break even with 0% return for the well) at around $60/Bbl (WTI).
  2. The break even price increases with increases in the return requirement.
  3. This analysis shows that the companies have deployed different strategies as responses to the decline in the oil price, which will affect future developments in LTO extraction.

Figure 1: The chart above shows development in Light Tight Oil (LTO) extraction from January 2009 and as of March 2015 in Bakken North Dakota [green area, right hand scale]. The top black line is the price of Western Texas Intermediate (WTI), red middle line the Bakken LTO price (sweet) as published by the Director for NDIC and bottom orange line the spread between WTI and Bakken LTO wellhead all left hand scale. Note that the spread between WTI and Bakken LTO wellhead has remained relatively high and fairly stable during the recent year.

Figure 1: The chart above shows development in Light Tight Oil (LTO) extraction from January 2009 and as of March 2015 in Bakken North Dakota [green area, right hand scale]. The top black line is the price of Western Texas Intermediate (WTI), red middle line the Bakken LTO price (sweet) as published by the Director for NDIC and bottom orange line the spread between WTI and Bakken LTO wellhead all left hand scale. Note that the spread between WTI and Bakken LTO wellhead has remained relatively high and fairly stable during the recent year.

Since September 2014 and as of March 2015 LTO extraction from Bakken(ND) has flatlined at  1.12 – 1.16 Mb/d.

With an oil price below $50/Bbl (WTI) the companies involved in extraction of LTO in Bakken will face several financial challenges.

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Written by Rune Likvern

Sunday, 7 June, 2015 at 20:33

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