Thursday, March 6, 2008

Decline Rates II

A reader left an excellent comment that I couldn't have written better myself and which deserves better prominence:

I am not a reservoir engineer but can offer some comments based on observing Williston Basin production over the last 50 years.

Initial production is always a good indication of performance, but there are great variances. One well which IP'd for 162 barrels per day has produced 1,463,000 barrels so far; it's still producing. Another with an IP of 480 barrels per day has produced 2,356,000 barrels to date and continues to produce. I believe this is the granddaddy of all North Dakota oil wells...so far. (Both of these are vertical Madison wells producing from relatively thin pay zones, 164-85.) Another extreme is a Nesson Anticline well with an IP over 1,000 barrels per day that was plugged after only a few months (vertical Interlake).

More to the point, I believe you need 18 to 24 months of production to get a good feel for what a well is going to ultimately produce. Since only a few horizontal Middle Bakken and Three Forks wells have more than a year of productive history, it is difficult for me to draw any firm conclusions. It appears that if you average the first 2 to 3 months of "flush production", the typical well might be producing 50% of this average amount in 10 months to a year. After 15 to 18 months in appears production has leveled off at a rate of about 25-30% of the first 3 month average (with little regard to the IP rate). Hopefully the decline from this point forward will hold at about 10%-15% per year.

The obvious exception to the scenario is the Petro-Hunt USA 2D in the Charlson area. It's reported IP was 700 barrels per day. It's 16 month total production is 378,536 barrels and the most recent month production was 1000 barrels per day! This was its best month ever; it is "inclining" not declining(?).

Other cautions on every well: did they stay "in zone" while drilling; did the zone get damaged while drilling; did the direction of the lateral section optimize natural fracturing, did the frac job get into the intended zones, and on and on. We'll all be wiser in a few years as this data base grows and learning curve goes higher.

Anyway, regardless of Williston Basin history, the future looks extremely bright! The Bakken play has been nothing but fantastic. Also, we have to remember, this is a play brought on by technology: horizontal drilling and fracing. Both of these will only get better and we've just scratched the surface of the Middle-Bakken potential. Who knows where the Three Forks will take us.

**********
Continental is planning some upper Three Forks wells in the near term so by the end of the year we should have a little better idea of the potential of that zone.

13 comments:

David said...

My feelings, exactly, Teegue...every well has a different decline function and some seem to have an incline function LOL. I'm of course watching the numbers on Geving 09 with great interest :-), in part because I know the monthly production data a few more months out. Geving is also interesting because it had one of the lower IP numbers in the field.

I will say this, however. The EOG wells are pretty consistently outperforming the wells drilled by the other companies in adjacent areas, and the EOG data are remarkably consistent over all the wells in the field--there really isn't a bad well in the EOG holes in the field (amazing in itself) and the lowest-producing wells still look teriffic by any other standard one would use to judge wells in the ND Bakken or for that matter on-shore wells anywhere in the world.

I reluctantly have to conclude that EOG wasn't simply lucky in finding the Parshall/Austin field. Tho luck may have played a role, I conclude that EOG does have soome specialized knowledge in siteing, drilling, fracing and otherwise completing these wells that the other companies have not yet fully mastered. Exactly what they know that the others do not know is not obvious, but to me these data say that there is clearly something going on. I know the other drillers don't want to admit this, but it's getting more and more difficult to deny what is increasingly looking obvious from the data.

The doubters in the room need to study the data some more.

Larry said...

It appears that Hunt will be the driller on the Section 12 land in Austin Township leased by Sinclair in the November 2007 BLM lease sale.

#17128 - HUNT OIL COMPANY, BRUHN 1-12H, SWSE 12-154N-90W, MOUNTRAIL CO., 230' FSL and1760' FEL, DEV., PARSHALL, 'Tight Hole', 2210' Ground, API #33-061-00694, (Approved: 3/5/2008)

As you recall Sinclair paid a $33000 per net acre bonus for 50% interest in two quarters of land in Section 12 and 13 of Austin.

NDM 97545
T. 154 N, R. 90 W, sec. 12 SW; 13 NW; Mountrail 320.00 AC

50% U.S. MINERAL INTEREST 2/ Austin Township $5,280,620. $ per net acre = $33004

Sinclair must have plans to bring a drilling rig to Mountrail as they have permitted two sites in Burke Township.

#17132 - SINCLAIR OIL AND GAS COMPANY, NELSON 1-25H, SESE 25-155N-90W, MOUNTRAIL CO.,300' FSL and 660' FEL, EXTENSION, PARSHALL, 'Tight Hole', 2113' Ground, API #33-061-00696,(Approved: 3/6/2008)

#17126 - SINCLAIR OIL AND GAS COMPANY, NELSON 1-26H, SESE 26-155N-90W, MOUNTRAIL CO.,300' FSL and 660' FEL, EXTENSION, PARSHALL, 'Tight Hole', 2210' Ground, API #33-061-00692,(Approved: 3/4/2008)

We should soon have 3 more examples of head to head drilling results between EOG and its competitors.

david said...

Hunt's game plan seems to be to move in on and attempt to drill on leases owned by another company, given that they may have the leases on other quarters in the section spacing.

Keep a watch on NW 1/4 Section 5 153 89 and see whether EOG or Hunt gets the permit (NW NW). EOG already has a survey, but Hunt wants to survey in a slightly different spot (NE NW) and then race EOG to the dmr for a permit. I'm more than a little involved in this silliness :-)

Larry said...

David,
Do you know the rules as to who will be the operator of a drilling unit? I assume it is the company who controls 51% or more of the leases unless that company elects to farm out the unit to another.

david said...

I'm gradually learning that its a lot more complicated than that. Apparently if a driller owns any of the leases on the spacing, the driller can site a well anywhere on the spacing even on a quarter of land where no leases are owned, and who gets the permit depends on who gets the site surveyed and approved by the dmr first, not by the % of leases owned.
OK EOG owns the leases on our quarter and surveyed for the site in January but had not yet gotten the permit. A couple weeks ago I get a call from a Hunt oil rep asking me to sign papers so they could survey the site and put a well in a little different spot. Hunt owns no lease acreage on our quarter but apparently does on some other quarters in the section. Hunt's preferred location, SE SE, on one of their own leases, is in the yard of an active farmstead. We called the EOG rep and EOG apparently is still very interested in drilling the well on the site they surveyed in January. Stay tuned. If EOG doesnt get a permit in about 15 days, Hunt will have their chance.

Larry said...

I understand your concerns. Hopefully, EOG has leases on a majority of the land in Section 5 and the NDIC will approve their permit.

I leased my lands to EOG as did most of my neighbors so we should not encounter a similar issue. My lands are in Redmond Township so it will be a couple of years before EOG finishes up development drilling in the Parshall area and then moves north to explore our area.

Being an optimist EOG will have two more years of expertise by the time they drill our lands and wells will be even better!!

Anonymous said...

When you have two companies that want to drill on the same section and have the same hearing date at DNR. What happens? It looks like that is going to happen this month with Tracker and Continental.

Teegue said...

Anon at 9:33, the companies will probably reach an agreement over which one will include that section in their unit and the other company will request that the section be dismissed from the app., or if there is no agreement the NDIC will have to sort out which other section it will be paired with. It appears there is at least one other proposed drilling unit app. with an overlapping section south of Killdeer between Tracker and Ansbro.

david said...

Lots of new wells off confidential list on daily activity report tonite.
The two EOG wells are in the weaker group so far in the Parshall field with respect to initial production figures, but they still beat all the others coming off the confidential list today.

Read the entire list at
https://www.dmr.nd.gov/oilgas/daily/2008/dr031308.pdf
and see what conclusions you draw.
EOG Resources, Inc., Sampson 1-12H, SE SE 12-152N-90W, Mountrail Co.
581 bopd, 2403 bwpd
This is on the East side of field
EOG Resources, Inc., Risan 1-34H, SW SE 34-153N-90W, Mountrail Co.
817 bopd, 2355 bwpd West central side of field.

Mikey said...

Also off the confidential list is Marathon Oil Company, Beck 24-8H, SW SW 8-146N-94W, Dunn Co.
101 bopd, 220 bwpd - Bakken. Teegue what are your thoughts as I think this is the well that you have wrote about a couple of times.

Teegue said...

Mikey, I don't know, as they had good oil shows when drilling it and it's also in a area of good producers. The well produced for 14 days in Dec. and has been shut in since "for evaluation." We'll have to wait until info about its twin is released to see if that sheds any light on the situation.

Anonymous said...

Quick OT Question:
Could someone please show an example of how to read the daily report from the ND Oil & Gas Commission? I have the basics down as far as how to locate the sections for the permit list, I'm wondering about the info that comes after the county name....thanks for any help.

I may just have to make this site my new home page, thanks!

Teegue said...

Re daily reports: I imagine you are wondering about the "F*L" thing. That is the feet the well is from the section line. . . "fsl" is ft from the south section line etc. The other thing is the ft and "ground". That is the ground elevation above sea level for the well, which is only important to calculate certain geologic parameters.