FRACTIONAL FLOW

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Posts Tagged ‘Williams

Is the Red Queen outrunning Bakken LTO extraction?

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

This post also presents a closer look at developments in LTO extracted from the three of the four counties that presently dominates LTO extraction; McKenzie, Mountrail and Williams.

With an oil price below $50/Bbl (WTI) the companies involved in extraction of LTO in Bakken faces two financial challenges;

  1. The decline in the cash flow from operations reduces funding capacities for manufacturing new wells. A lower oil price also lowers the value of the companies’ assets and borrowing capacities.
  2. The “average” well with around 90 kb [90,000 Bbls] 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 $65/Bbl (WTI). The break even price increases with increases in the return requirement.


In short, LTO extraction at present prices
($45/Bbl, WTI) makes little commercial sense!

Figure 01: The chart above shows development in Light Tight Oil (LTO) extraction from January 2009 and as of January 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.

Figure 01: The chart above shows development in Light Tight Oil (LTO) extraction from January 2009 and as of January 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.

From December 2014 to January 2015 LTO extraction from Bakken(ND) declined from 1.16 Mb/d to 1.13 Mb/d.

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THE REVIVAL OF MOUNTRAIL’s ”OLD” SWEET SPOTS

This post is an update and slight expansion of my previous post In Bakken (ND) it is now mostly about McKenzie County about developments in light tight oil (LTO) extraction in the Bakken/Three Forks formations in North Dakota.

It also includes a little about developments in LTO extraction from Bakken/Three Forks in Elm Coulee, Montana.

Harsh winter weather affected additions of producing wells and also caused a total estimated 300 additional producing wells (relative to entering winter) to be shut in with different durations. The total effects from well additions that was below what was estimated to sustain a level production, and the high number of wells shut in caused total LTO extraction to move sideways last winter, with a small dip during December and January.

Figure 01: The chart above shows development for annual tight oil extraction from the Bakken/Three Forks formations in North Dakota [green area and rh scale]. The black line shows development in the interest for the US 10 - Year Treasury [lh scale].

Figure 01: The chart above shows development for annual tight oil extraction from the Bakken/Three Forks formations in North Dakota [green area and rh scale]. The black line shows development in the interest for the US 10 – Year Treasury [lh scale].

Interest rates had for some time been on a downward trajectory and the extraction of tight oil from Bakken/Three Forks started to grow while interest rates continued to be lowered and the Fed and other central banks started their rapid expansion of their balance sheets. Assisted with a tighter global supply/demand balance the oil price moved higher.

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IN BAKKEN (ND) IT IS NOW MOSTLY ABOUT MCKENZIE COUNTY

In this post I present an update to my previous posts over at The Oil Drum (The Red Queen series) on developments in tight oil production from the Bakken formation in North Dakota with some additional estimates, mainly presented in charts. The expansion is much about the differences between wells capable of producing, actual producing wells and idle wells (here defined as the difference between the number of wells capable of producing and the number of actual producing wells).

Figure 01: The chart above shows monthly net additions of producing wells (green columns plotted against the rh scale) and development in oil production from Bakken (ND) (thick dark blue line, lh scale) as of January 2000 and as of October 2013. The 12 Month Moving Average (12 MMA) is also plotted (thick dotted dark red line, lh scale).

Figure 01: The chart above shows monthly net additions of producing wells (green columns plotted against the rh scale) and development in oil production from Bakken (ND) (thick dark blue line, lh scale) as of January 2000 and as of October 2013. The 12 Month Moving Average (12 MMA) is also plotted (thick dotted dark red line, lh scale).

There is still noticeable growth in tight oil production from an accelerated additions of producing wells.

  • For October 2013 North Dakota Industrial Commission (NDIC) reported a production of 877 kb/d from Bakken/Three Forks.
  • In October 2013YTD production from Bakken/Three Forks (ND) was 775 kb/d.
    (It is now expected that average daily production for all 2013 from Bakken (ND) will become around 800 kb/d.
  • The cash flow analysis now suggests less use of debt for manufacturing wells for 2013.
    Major funding for new wells now appears to come mainly from from net cash flows.

kb; kilo barrels = 1,000 barrels

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