Friday, September 14, 2007

Marathon Prevails At August Hearings. . . Sort Of

The NDIC has issued its order regarding the August hearing when Marathon and Hunt sparred over the creation of 1280 drilling units near Bailey Field in Dunn Co where Hunt held an interest in some of the units. In its Order the IC brought those lands within Bailey Field and created 1280 acre spacing units in all the units where Hunt had an interest and had requested 640 acre units.

However, in the one unit where Hunt held 50% interest in the 1280, the IC will not allow a drilling permit to be issued for that unit until March 31, 2008, to allow Hunt to test its techniques in the vicinity and determine if they are viable.

I'll let the exhibits speak for themselves. One comment about the Marathon depletion model exhibits though, as the results from simulation models are only as good as the inputs used in them. I would want to know how many times this model was run to get this result and how many variations of inputs where used in the process. In other words, was data based on reality used as inputs, or was the model run numerous times with a variety of different input values (not necessarily based on reality) until some possible predetermined result was achieved?

In any event, the one lateral put on the west side of the unit does not appear to be draining enough from the east side to justify the inclusion of those lands, in my opinion. These should be separate 640 acre units consisting of the east and west halves of the two sections. The eastern half should not be part of that unit, and if the lessees want to tie up the leases for 25 years on that east 640, they should have to drill on it.

Marathon's exhibits regarding 25 year depletion depicting the lateral: (1) in the center of the 1280; (2) 1320 ft. from the western unit boundary; (3) two laterals in the 1280; and (4) three laterals in the 1280. Without getting ridiculously technical on the pressure depletion aspects, let's just say that red is the original formation pressure and the darker the blue, the lower the formation pressure (indicating depletion).

Marathon also presented a number of exhibits depicting the expected production from each configuration and actual production for a number of wells, including those from Parshall Field, along with the economics for each well configuration scenario.

Hunt presented a number of exhibits trying to project the success in the Parshall area to the Bailey area by suggesting that the thickness of the middle Bakken was almost the same in both areas, and therefore, suggested that completion techniques were the driving force in the success at Parshall. As was pointed out, however, the formation thickness really has no significant relevance regarding the success of a well. The only relevant analysis as to whether a completion technique is controlling rather than lateral length or formation quality is initial production rates and the percentage increase in production that occurs after the frac job. If the production in Hunt's wells increases 100% and Marathon's increases only 50%, then that is some pretty good evidence that Hunt has a better completion technique.

Of interest, Hunt is calculating recoverable reserves of 350K bbls. on a single lateral in a 640 acre unit, whereas Marathon projects 333K bbls from two laterals on a 1280 acre unit (under their middle k.h analysis scenario -- k.h is essentially how easily fluids migrate to the well bore). Who is correct here???

The first exhibit shows Hunt's stage frac technique.


Anonymous said...

Your website is rapidly becoming one of my favorites! Do you have any more information regarding the total number of EOG wells (completed and drilling) in the Parshall field and the production rates for the most recent wells, and do you have any information on the company's recent acquistion of acreage in the area over and above what has been publicly announced? Thanks.

Teegue said...

Favorite website? We have to find you some better entertainment. ha

I think they have drilled about 16 wells (+ or - one or two) and have four rigs currently going. So that's four new wells every six weeks or so. Production rates are pretty hushed up, and we shouldn't focus too much on the initial rates (which I am guilty of myself) as like the Barnett Shale gas wells in TX, the decline rates can be pretty steep. But it's better I guess to start the decline from 2k bbls/day than 300. These wells are better judged after a year of production. I know they are/were recently leasing but locations are sketchy. Haven't heard anything about them buying acreage from another company and doubt they will because the margins can get pretty tight on those kinds of deals, especially when you have enough acreage of your own to work with right now.