Wednesday, April 30, 2008

Marathon Quickly Getting To The Bottom Of Things

Marathon has been flying under the radar somewhat lately either through choice or by neglect. However, they have a undeniably huge presence in this play, and their efforts shouldn't go unnoticed, plus it was good to see a true "major" come back to ND.

What I find interesting is their best drilling time of 21 days, which is about how long it
took companies to drill a vertical well to 10K ft. in that area not too many years ago. No doubt their use of the new H&P flex rigs is contributing to that feat.

Also interesting is their projection of peak production of 20K bbls/day in 2012, which is about three times their projected daily production rate for this year. That may difficult to acheive though
because at some point the new wells are merely making up for the older declining wells, and it gets pretty tough to post such gains, unless of course you are drilling a lot more wells per month then you had in the past.

7 comments:

david said...

Marathon vs EOG

or Dunn vs Mountrail county

Its interesting to make these comparisons.
Both are saying about 5.5 mill $ direct drilling cost
Marathon has near 2 mile long laterals on 1280 acre (2 section spacing)
EOG runs mile long laterals on 640 acres
Marathon estimates 300 bopd initial production (with production dropping to maybe 1/3 of that after 6 months???)
EOG has been averaging at least 1000 bopd with production dropping to maybe 300-400 bopd after 6 months.

Interestingly BOTH companies are claiming their direct drilling cost at around $20 a bbl dispite the differences in the production numbers
With oil at $115 this differential attracts drillers like honey attracts flies.I don't think it has fully setin with a lot of people how attractive a $20 a bbl direct drilling cost is to a driller, coupled with the low if not zero percent of dry holes.

Is ND Bakken the cheapest newly drilled oil source on the planet right now on a direct drilling and recovery cost per barrel basis??? If so, ND has a heck of a deal!

Are the differences between the numbers reported between Mountrail and Dunn due to differences in what the two companies are doing drilling wise, geology, or both?

Based on the Marathon numbers, Dunn county would have the hottest field in the ND Bakken right now, were it not for Mountrail!

D

Anonymous said...

david said "marathon has near 2 mile long laterals on 1280 acre spacing"
i think the slide says 1280 acre units with 2 (two) wells per unit.

and,
"low if not zero dry holes"

you must mean technical dry holes, if the '90's are any indication, there will be many economic dry holes

dkwilk said...

I also see in the slides they are using a recovery rate of 6 %.

david said...

The map suggests that Marathon is doing something similar to what Whiting has laid out in the Sanish field, two long-lateral wells in a 1280 acre spacing that cross over a section line. Marathon's laterals appear to run almost directly N-S. Since they are N-S, they are just under a mile long so they clear the section boundaries of the spacing on all sides. Whiting's 1280 acre spacing laterals differ in that they typically runn NNW-SSE, and thus are at an angle. Since a line running at an angle is longer than a straight line, Whiting's laterals are slightly longer than Marathon's, probably about 10,000 ft for Whiting vs 9,000 ft for Marathon.
I assume that both Whiting and Marathon have many highly paid geologists who figure out how to optimally run the laterals in the spacing. Whiting swears they are doing the right thing in Sanish relative to what EOG has been doing in Parshall with the shorter, one-mile laterals on a 640 acre spacing. I assume that Marathon is also confident as well that they have the right length and position to maximize production in Dunn county field.

These companies are really very competitive and know their stock price is driven by the success they achieve, and all are seeking to maximize the oil output from their respective fields.

If in fact the Parshall/Austin/Sanish field is just one giant interconnected pool rather than many small disconnected pools, then there should be few if any dry holes within the field. But Marathon would have not been laid out this drilling plan if they were not equally convinced that they were also dealing with a single giant pool underlying much of Dunn county as well.

Teegue has correctly pointed out to me that the Berthold/Plaza/Wabek fields developed in the late 80s and early 90s is oil from a very different, Madison, geological structure in which the oill is found in many small disconnected pools. Take a look at these fields on the dmr GIS map and see how different they are from the fields currently being drilled, typically these were vertical wells on 40 acre or even smaller spacings. That was the correct approach given how the oil exists in those fields. Further, going into these older fields and redrilling them with long laterals with the idea of replicating what is going on in the new fields would not likely achieve success.

The reason these new fields are working with the success rate they have been having include:

1. focus on the middle member of the bakken not the upper or lower member
(thanks Julie LaFever for suggesting this)

2. Geology is a large interconnected field not many small disconnected pools a la Berthold/Plaza/Wabek fields.

3. Long horizontal line with fracing optimizes output from the narrow middle shale member when you are dealing with a big interconnected pool that underlies these fields.

EOG deserves credit for being the first to figure all this out but Whiting, Marathon and others are now right on their tail.

Ask yourself, where would ND oil development now be had EOG not decided to run the experiment in 2006 to see if the whole middle-member/long lateral/fracing scheme could be made to work in ND oil much like it had for them in the Barnett gas field in Texas? Would someone else have come along?

I still keep wondering in amazement that all this oil was sitting right under my toes (well, 10,000 ft under my toes) right on the land I grew up on and when I was a youngster I hadn't a clue it was there.

Anonymous said...

i am hearing why eog gets these big numbers bopd is there fracturing technique. other companies are still using old type of fracturing that is out dated to save money and are coming up with poor results..if i had it over to do again, i would of not signed with the company i did and would of signed with eog. these little companies just do not have the capital to do it right so they cut corners..really sad....

Larry said...

I am not convinced that EOG has a better mousetrap. A year from now let's look at the production from Whiting's well in Section 16 of Austin Township and compare Whiting's production to the EOG wells that will surround Section 16.

Anonymous said...

I am happy to have Marathon Oil Co. taking over. We had problems with PDC. Our royalties were paid irregularly due to PDC's sloppy accounting.