Thursday, December 20, 2007

Some Austin Well Info, Mountrail Co.

Regarding temporary spacing for their Austin 1-02H well, sec. 2, 154N, 90W, Mountrail Co., EOG indicated that the well last month was averaging 800-some bopd, and that they have been fracing their wells before producing them and are utilizing a liner and swell packers in their completions. They are projecting an EUR (estimated ultimate recovery) of about 750K bbls over the life of the well, and estimated the mid-Bakken’s porosity to be about 7% (pretty good for the Bakken) and attributed about one-half percent porosity to fracturing. They said the reservoir properties are similar to those at the main area of development in Parshall field to the south. The company stated that they expected gas sales from the Parshall field area to begin around February or March of next year.

Speaking of EURs, from recent articles in the media it seems that some people are still claiming that billions of bbls are possibly going to be recovered from the Bakken. Those figures are derived from what seems to be a “let’s pull a number out of the hat” recovery percentage of the 400-some billion bbl estimate of oil in place from Price’s non-peer reviewed Bakken study. Specifically, they are indicating a recovery factor of 1-3 percent of the oil in place, which would result in 4-12 billion bbls of Bakken production.

There is nothing wrong with being optimistic, but is such an estimate realistic? Keep in mind that there will be no EUR from every section of land that is not going to be drilled, which at this point appears to be no small amount in a lot of the relevant counties, and which the estimates quoted in the media appear to totally ignore. Then too it is important to recognize that recovery of a billion bbls would require 2,000 wells that each have a EUR of 500K bbls. Consequently, 8,000 such wells would be needed to meet the lowest estimated EUR of four billion barrels. I invite anybody who is throwing out these estimates to forgo giving unsupportable broad brush estimates that lack specifics and explain where these 8K wells will be drilled, and whether an average EUR of 500K per well is realistic considering that many companies outside of the Parshall area are using EURs of around 300K per 1280 acre unit.

9 comments:

Anonymous said...

so if this well is producing 800 barrels a day and recovery is only 750,000. this well would be dry in less then three years,correct ??. i thought i read some place that these wells would last 20 to fourty years..i believe i read that in one of your posting about the montana wells that had a article about the length of the bakken wells..

Anonymous said...

Ok well production is very high intially but it declines. A few years from now those wells may only be pumping 200 bopd. At the end of the wells life it will be producing very little. It's alot like holding up a wet sponge at first alot of water flows out but after a little bit the pace slows.

Anonymous said...

It will probably be 200 or less bopd by next summer, and 100 not long after that, and then 50, then 20, etc.

Anonymous said...

200 or less by next summer. have you heard of any in the parshall field decreasing 75 percent in only 6 months after drilling. if so i would like to know which ones. i sure havn't heard of any yet...

David said...

EOG seems pretty confident that they can recover 750,000 bbls of oil from each section drilled in the Parshall/Bakken field almost irrespective of the initial bopd figure. According to Mark Papa in one of his responses during an analyst presentation, the Bartelson 1 well, one of the first completed which initially produced 1800 bopd, produced an average of 600 bopd over an entire year, but was at a little over 400 bopd rate 1 year out.

The wells seem to pop off initially at quite variable rates, ranging from about 700 bopd to 2000+ bopd, but once the initial pressure is off, they all seem to move fairly quickly into a rate of 500-600 bopd, and then the rate of decline is much less rapid after that.

I've been trying to determine what assumption about well life EOG is using for the 750,000 barrels recovery from each 640 acre spacing--as near as I can tell that assumes a well life of about 5 years, possibly 6.
EOG is experimenting right now drilling a third well on a 1280 acre spacing from the opposite corner across the Bartelson and Patten sections 1 and 2 of 152-90. If you listened to their request in Bismarck, they aren't really expecting this strategy to increase recovery on the two sections relative to what they are getting from the two existing wells(they think that the oil from the new well simply cuts production from the two older wells on the 640 acre spacing) However, this is an experiment (EOG's words) and there is a possibility that this will become a normal method to increase recovery rates, and a third well running crosswise of the laterals on two of the current 640 acre spacings may turn out to be the norm in the Parshall and Austin fields (those two fields will eventually be one).
The EOG economics are pretty simple: a very average well producing 500 bopd for 6 months generates over a million $ of oil a month at current prices and pretty much covers all their direct drilling costs of 5+ million $. As a capital budgeting project, this number is nothing short of fantastic, and EOG has been saying this over and over again in their reports to shareholders. What is pulled out after the 6 months is over less royalties and the cost of running and maintaining the pump goes straight to EOG's bottom line.
With oil around $90 a bbl, the economic incentive for EOG and others to experiment with new technologies to up the recovery rate on each section is huge. EOG seems pretty confident that there is 9 million bbl of oil under each section in the Parshall/Austin field, and that this first round of wells using the laterals, fracturing etc, is going to bring about 8 % of that to market. But if there is any way to pull more of the total 9 million bbls of oil out, the economic incentive to find that technology given what has already happened is huge. No doubt, 5 years from now EOG and others drilling the field will have further honed their techniques. EOG isn't going to walk away from a field that has been treating them this way from a purely capital budgeting standpoint. The only part of the puzzle I havent quite figured out is why the majors have not already landed. EOG is a big company, in the S&P 500, but small by the standards of a major oil company.

David

David said...

Does anyone have a number to toss out with respect to how much gas a typical well in the Parshall/Austin field might produce once the pipeline is in and the gas gets old rather than flared off? I have been guessing that the value of the gas might be 10-15% of the value of the crude oil produced each month, but this is only an uneducated hunch on my part.

I think the Feb-March date EOG is talking about corresponds to the date that the wells will be connected to the crude pipeline as well. At the moment the number of trucks needed just to haul off the oil from the 22 wells producing 500 bopd has been substantial--things should get a lot simpler with the pipeline in place.

How many barrels do each of those storage tanks hold? There are typically 8 or 9 set up on each well in the field. EOG is confident enough that the wells will come in that they set the tanks just as the wells are being started.

Anonymous said...

thanks David for the comments. so if eog does what there saying there going to experiment with, by putting two laterals per section and one 1280. what do you think the average out put would be for 10 to 20 years out. something around 200 to 500 bopd per section..thanks..

David said...

That's the part no one knows the answer to until they see if the lateral on 1280 acres adds to output from the two sections versus just reduces the output from the two wells already on sections 2 and 3 (corrected, not 1 and 2) using a 640 acre spacing. We should know the answer to that question by next summer or fall.
This is the well to watch that is on the 1280 acre spacing on section 3 152-90
#16986 - EOG RESOURCES, INC., PARSHALL 20-03H, LOT 2 3-152N-90W, MOUNTRAIL CO., 360'
FNL and 2225' FEL, DEV., PARSHALL, 14755, 9-5/8 "-1694', 1947' Ground, API #33-061-00626
(Approved: 12/17/2007)
As I look on the GIS map tonite, this well hasn't been located on the map yet but I think this well is on the SW corner of section 3 with the lateral running to the NE corner of section 2 152 90

Anonymous said...

The well in section 3 is now in the corner of the section. It is on the north end like 170 rods from section 2 to the east. Are they running 2 legs to encompass all of section 2 or are they only running one across one quarter in section 3 and across all of section 2?