December 9, 2016 • Vol. 6, No. 10docFinder alert
docFinder alert

Bakken Activity Slowly Resuming on Lower Costs; Major Growth Awaits Dakota Access Pipeline

Slide

Conoco to boost rigs from one to four in 4Q16

Conoco

November 10, 2016

Full Presentation

Slide

Bakken takeaway capacity to exceed production

Energy Transfer

November 21, 2016

Full Presentation


According to the USGS, the Williston Basin (Bakken and Three Fork formations) has more than 7 Bbbl of recoverable oil. The EIA’s November Drilling Report indicates that the Bakken rig count peaked at more than 200 in 2012 and was running at nearly 200 rigs as late as YE14 before plunging to fewer than 25 rigs in early 2016. Oil production peaked at 1.2 MMbbl/d as recently as 2015 but has plunged to less than 1 MMbbl/d. However, the Bakken rig count has bounced back recently, increasing modestly from 22 in late May to 35 today. We were curious about the reasons for this increase and the likelihood that activity would accelerate futher in the near future. For answers, we turned to docFinder, the most comprehensive and accessible source of global oil and gas financial and operational information. We found that costs in the region have fallen dramatically and EURs have increased, both of which have stimulated additional activity based on higher oil prices in late 2016. We also found that breakevens were higher than in some other regions, largely because of high transportation costs. A more significant recovery could depend on completion of the Dakota Access pipeline, which would slash shipping costs by as much as $10/bbl.

Email PLS for a quick demo on how docFinder can save you valuable time in researching market activity!
Click here for the latest issue of our Bakken Scout full report!

The most dramatic increase in activity is by ConocoPhillips. The company cut capital investment by 74% from 2014 to 2016, and the majority of the remainder was allocated to completing large capital projects in Asia/Pacific and the North Sea. However, Conoco said in its November 2016 Investor Day presentation that as these projects wrap up it would shift focus to ramping up its US unconventional activity. The largest boost will be in the Bakken, where it is increasing its rig count from one to four in 4Q16. The reason is a dramatic reduction in well costs that the company touts as the lowest of any competitor. At the same time, cumulative oil production from Middle Bakken wells has soared 40% as a result of enhanced completion techniques.The company now says it has 700 MMbbl of potential resources that are economic at $35/bbl or under.

The explosive growth of production in the Bakken far exceeded the pipeline takeaway capacity, leading to an equally explosive growth of shipping crude by rail. Building rail terminals and adding cars was relatively quick and did allow output to reach markets, but the downside was a transportation cost of $15/bbl or more, far above the shipping costs from plays like the Permian Basin. The midstream industry responded by building pipelines, but total capacity is 730,000 bbl/d, far below production. The solution to the problem will be the Dakota Access pipeline, which will carry up to 570,000 bbl/d 1,172 miles to connect with an Energy Transfer Partners pipeline converted to carry crude instead of natural gas to refineries and other end users on the Gulf Coast. The result will be a $7-$10/bbl reduction in transportation costs for Bakken producers, which is expected to trigger a resumption of production growth in the play. Dakota Access is nearly complete and was expected to be in service in late 2016. However, fierce protests by Native Americans and environmentalists have delayed completion of the final portion of the pipeline until 2017.

Hot slides and more industry examples!
Down below you'll see four (4) relevant stories and another reminder how docFinder and its library of over 1.5 million slides can deliver critical information in seconds.

You can do what?
You can now search docFinder by numerical data like lateral length, sand, IP, EUR, IRR, well costs, API, B-Factors and more! Email Ernesto Sandoval to learn more.

Click here to access the docFinder database!
Click here to sign up for a web demo!

featured.slides from docFinder

Slide Slide Slide Slide

Oasis

Not adding rigs despite cost improvements

November 8, 2016

Whiting

Reduces drilling time by nearly two-thirds

November 1, 2016

Hess

Production declining as it cuts rigs

November 17, 2016

Continental

Bakken F&D costs slashed by 70%

November 2, 2016

Oasis Petroleum, a pure Bakken player, indicated that its slickwater well cost has declined by more than half from $10.6 million in 2014 to $5.2 million in 3Q16, driven in part by a 40% reduction in spud-to-release time. Well-cost reductions and EUR increases have brought single-well finding and development costs down to $4-$5/boe in its core Wild Basin area, a 38% improvement since the beginning of 2016. Despite these efficiencies, Oasis has cut capital spending by 75% from 2014 and reduced its rig count from 10 in the 4Q14 to a current two, causing production to dip in early 2016. The company said it would double its rig count to four in 2017 if WTI oil prices reach $50/bbl and add a fifth rig in 2018.

Whiting Petroleum, which produced 116,000 boe/d in the Bakken in the 3Q16 (83% of total output), increased its rigs in the play from two to four in 2H16. But the boost is not primarily based on improved economics. Whiting has decreased the number of days to drill a well in the Williston Basin 15 days, down from by 63% from 39 days in early 2012. At the same time, it says its 90-day IP rate for wells completed between August 2015 and July 2016 is 1,038 boe/d, the highest among its nine major peers. However, the company has added one rig each through two JV participation agreements it signed with two private companies, which will pay 65% of the costs to obtain a 50% working interest in a 44- and 30-well program, respectively. On its 100%-owned acreage, Whiting is building an inventory of 22 DUCs, which it will complete when oil reaches $50/bbl.

Hess Corp. holds an impressive 577,000 acres in the Bakken, which generates about a third of its total production, or 106,000 boe/d in 3Q16. It has also achieved a 64% reduction in drilling days and a 65% reduction in drilling and completion costs over the last five years. But has still sharply reduced activity, going from eight rigs in 2015 to four rigs in 1H16 to two rigs in 4Q16. It has eliminated drilling in Williams and Dunn counties, planning only 22 wells in a sharply reduced core area. The company expects production to decline because of the reduced activity. It said it will increase activity if oil prices recover.

Continental Resources, the first mover and largest producer in the play, states that its finding and development costs, another measure of improving economics, have declined 70% from $27.40/boe in 2012 to a targeted $8.13/boe in 2016. These F&D results incorporate a $9.1 million well cost in 2012 and a targeted $6 million well cost for 2016, a one-third reduction. At the same time, Continental’s EURs have more than doubled from 405,000 boe in 2012 to 900,000 boe targeted in 2016. But despite these improvements, the company has shifted the majority of its 2016 capital investment to the SCOOP and STACK plays, allocating just 35% to the Bakken despite it generating 62% of its production. It is running four rigs but has stopped completing wells, which will result in an inventory of 190 DUCs by YE16. The company said it would begin completing these wells in 2017 if oil prices reach $50/bbl but would not add rigs unless oil reached $55-$60/bbl.

 

Full Presentation

 

Full Presentation

 

Full Presentation

 

Full Presentation

docFinder