The Bakken Shale, the third largest regional oil producer in the United States, achieved the 1 MMBOPD milestone in June 2014. The announcement came just months after IHS announced the field had produced a total of 1 billion barrels in an April 2014 report.
The Bakken is showing no signs of slowing down. At an Energy Information Administration conference in July, Eric Slifka, Chief Executive Officer of Global Partners LP (ticker: GLP), said he expects Bakken oil production to exceed 2 MMBOPD at some point in its lifetime. Production is also expected to rise in the short term by 5% to 6% in the summer season, according to a director from the North Dakota Department of Mineral Resources.
Oil & Gas 360® looked at the top players in the Bakken and their plans to keep production on the upswing – the majority of which are engaging in downspacing programs and ramping up projects:
1. Whiting Petroleum (assuming closing of KOG acquisition)
Net acreage: 885,000
Production: 107+ MBOEPD
WLL currently has 21 active rigs in the region but expects to ramp up to 26 by Q4’15. Simultaneously, the company expects completion costs to drop by roughly 8% to $8.5 million per well. EnerCom’s Five Factor Model, which compares the metrics and financials of 86 E&P companies, proved KOG replaced its production at more than three times the rate of the industry median. Kodiak management said WLL’s balance sheet allows the expected jump in production – a feat KOG was not comfortable doing with its financial profile. Whiting’s debt to market cap ratio of 28% is four points lower than the industry median and provides the company the flexibility to add the additional rigs in a short period of time.
2. Continental Resources (ticker: CLR)
Net acreage: 1,200,000
Production: 97.5 MBOEPD
In 2013, CLR began a downspacing project involving well spacing of 660 feet. A total of three units will be drilled at 18 wells per section and are expected to be completed in 2H’14. The first unit, completed on spacing of 1,320 ft’ with tests of the 660 ft’ spacing, produced a total of 14,850 BOEPD on 14 wells. The company has also modified its completion techiques to include slickwater and has resulted in production roughly 30% above the company’s 603 MBOE type curve for its first 120 days in production. Well costs including the slickwater are estimated at $9.7 million at its midpoint. The company expects to run 21 rigs throughout 2014.
3. Hess Corporation (HES)
Net acreage: 640,000
Production: 80+ MBOEPD
Hess ramped up production to more than 80 MBOEPD after it averaged 63 MBOEPD due to shut-ins in Q1’14. Although Hess is international, the Bakken is its most exploited asset in North America and the company anticipates rates of 80 MBOEPD to 90 MBOEPD throughout 2014. The company is conducting a very tight downspacing test at 17 wells per drilling spacing unit and expects results by the end of the fiscal year. A long-term goal is to boost Bakken production to 150 MBOEPD by 2018, which has been supported by $1.5 billion in midstream investments since 2012. The midstream has not only improved infrastructure but has also reduced flaring by as much as 40%. Hess plans on eventually divesting its midstream assets to centralize its plan on oil and gas production.
4. EOG Resources (ticker: EOG)
Net acreage: 110,000 (core)
Gross production: 61,000 MBOEPD
EOG’s production in the region was described by the company as a “technical renaissance” in its 2014 Letter to Stockholders. EOG activity in the Bakken is scheduled to increase by more than 50% year-over-year in 2014. The company says only the Eagle Ford currently provides better returns than the Bakken, and both have produced a direct after tax rate of return of 100%. EOG doubled its drilling density to four wells per drilling spacing unit in the year and has lowered its well spacing to 700 feet from 1,300 feet – process previously conducted in the Eagle Ford. The company currently projects eight years worth of drilling inventory and is adding a seventh rig to the region in the summer. In an interview with Forbes, Bob Brackett, an analyst for Bernstein, said no operator in the Eagle Ford and Bakken averages bigger wells. Initial flow rates exceed 1,000 BOEPD.
5. Statoil ASA (ticker: STO)
Net acreage: 355,000
Production: 49.9 MBOEPD
Statoil’s Bakken production accounts for 21% of its total United States operations. Nealy half of its US operations are focused on the Marcellus Shale since Norway-based Statoil is exploring ways to provide gas to European markets. As far as the Bakken is concerned, the company jumped headfirst into the play in 2011 with the purchase of Brigham Resources for $4.4 billion. At the time, Statoil said it could ramp up production to as high as 100 MBOEPD by 2016 if necessary, back when the purchased area was producing 21 MBOEPD. Statoil rarely comments on the Bakken due to its global focus, but it’s worth noting regional production has more than doubled since 2011 while net acreage has declined by 20,000 acres.
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