Shale Oil Fiasco

[Anthony Okrongly + 114]

15 hours ago, 0R0 said:

 

I have been reading this thread avidly, as I am very interested in the economic and geopolitical impact of shale, as the Chamber of Commerce report indicates. It is singlhandedly lifting US economic activity and its prospects. However, there are some things that have not been discussed, and may be controversial to some.

First of all, the increasing demand for oil is in question. 

1. This is the first year in recorded demographic history of fewer births than the year before. The newest demographic projections undercut the UN population projections from 11 billion peak to 9 billion, That being largely due to increased longevity, meaning that the population increase is not going to include an increase in energy consumption in proportion as it will be at the over 60 age group. Urbanization has cut fertility rates globally to 1.6-1.7, and virtual urbanization via cell phones and social media is doing the rest. . 

2. Encroachment of nat gas as a fuel for marine transport starting with LNG vessels - why not everyone else? Then also nat gas for trucks as per Boone Picken's concept and company. The penetration isn't as high as I would have expected.  Considering only one EV truck model is on the drawing board and long recharge times are a no-no for efficient truck utilization. .Global NGVs are at 30 million, Nearly none of them in the US. 

3. EV penetration, China in particular is trying to undo its reliance on imports, particularly of oil. It is pushing EVs, even inviting Tesla to build locally with local capital and 100% ownership, First production coming now. Its 12 MBbl/day imports may well shrink fairly soon. Besides which, its working age population is already shrinking.

4. The expansion of telewoking and the perpetual shrinkage of in-office white collar work.Including telemigration. As geographical constraints make commutes and optimal empoyee/job matching more difficult in congested fully built out metro areas on the coasts..

The nat gas contribution to frac shale oil wells may increase as petrochemical production from nat gas vs. petroleum is far cheaper at nat gas below $3/MMBtu not to speak of for proximate prices of $1.50. This is also a substantial cost savings for primary steel and aluminum, and I believe is a major motivation for Trump's  tariffs on them, as Lightheizer and Navarro believe it is a major benefit to have the lowest cost steel and aluminum being made in the US, so once new production is established under the tariff protection (to protect it from currency devaluation - Lighthizer negotiated the Plaza Accord to lower the "superdollar") there would be a long term attraction of downstream production.

So considering these demand items, how would that change your projected pricing and peak production values?.  

Then there are a few issues that some of the Shale cheerleaders have pointed out,

1. That shale fracing is gaining efficiencies in operations and equipment as well as targeting drill paths and frac efficiency. The combined child well frac and completion costs are claimed to have dropped to about $5 million from what was $8 mil just a few years back.

2. The Oil 360 article detailing the findings of an 80k well study that is indicating that tier 2 and tier 3 wells do not produce that much less than the tier 1 wells. That one drew a "say what?" reaction from me. Since it is a statistical finding I am not in a position to dispute that. 

3. Recoveries of 20% rather than 10% are in the pilot and testing phase. Assuming that a transition to closer to 20% is coming starting next year, the economies of production are going to look much different. 

4. Re-fracing of spent wells is apparently a viable proposition, and with 80k and growing and a $30 cost claimed by Conoco, that makes for another wave of rework wells when prices don't support fresh drilling, and perhaps even if they do, as there is such a large and growing inventory of spent wells. 

How would these things modify your projections for supply side pricing and when and at what price level production would peak?

Let's see... 

#1 - World fertility is dropping- even in emerging markets such as Brazil and India.  There is a great book on the subject called "Empty Planet." Very well researched and documented. However people dying has more impact on oil and natural gas than people being born, particularly for the next 20 years.  And people are dying at a much slower rate as well. No impact for 15 years at least.

#2 - There's no reason for ships to use natural gas.  There will be no bunker fuel shortage.  So why make any changes?

#3 - 77 million cars were sold worldwide in 2019. Less than 3 million of them were electric. Electric cars are some small percentage of new car sales but that doesn't mean that a much larger percentage aren't conventional. Consumer Reports says the average lifespan of a car is 8 years... I find that low but I drive a 2006 Prius that I plan to drive for 3-4 more years (it currently has over 400,000 miles, but I have another engine on standby ready to be installed). But 8 years x 77 million cars = 600 million cars. Technically it's 615 million cars, but I rounded down.  The 15 million rounding error is essentially the high point on electric vehicles relative to conventional.  ... Additionally In the U.S. in particular Fully Electric cars like Tesla are typically a family's 3rd or 4th car.  They are not replacing gas cars in the U.S. they are being bought in addition to.  In China it's probably more "instead of" but I don't know for sure.  Still it's a rounding error and the limitations on rare Earth's is real. 

#3B - Nobody includes motorcycle and moped sales - particularly in urbanizing markets. I don't know what they are, but I know Honda sold more motorcycles and moped in 2019 than they ever have... so somebody is buying them.

#4 - I used to be a VP for a company.  Companies don't care about congestion.  Come to work, clock in.  It may be more possible with customer support type jobs to be done from home. You can't be a virtual waiter or a virtual barista.  It hasn't helped in average miles driven per person - which is the highest it has ever been at 13,500 per Person. That includes all persons, including newborn babies and homebound geriatrics. 

So, while the growth rate may slow eventually. There is no turning the trend from needing more and more oil over the next 20 years.  House sizes are also increasing and coal plants in the US dropped from 50% of all energy plants to 25%... mostly being replaced by natural gas, and by Electric.   However, ANY increase in natural gas plants means an increase in natural gas use.  Even if it's 50/50 natural gas plants and electric. The energy that is being phased out is coal, not natural gas. 

The 2nd half of your premise I know nothing about. But the idea that we will use LESS energy in the US or worldwide I simply don't see it. The rate of growth may slow but it will continue to grow. At some point Peak Extraction will occur - whether due to geology or economics. The old saying that The Stone Age didn't end due to lack of stones is cute.  But the Mastadon age ended due to lack of mastadons, the buffalo age ended due to lack of buffalo's and the oil age will end due to lack of extractable oil. We're gonna burn it all.

Edited December 30, 2019 by Anthony Okrongly
typo

[Anthony Okrongly + 114]

7 hours ago, Gerry Maddoux said:

You seem to be assuming that all those wells, and all that property, owned by companies that will go bankrupt will simply come off production. That's not the case. There are always plenty of people standing by, waiting to pick up elite wells and property on the cheap. Those wells will just go on producing, only the revenue stream will go to someone else, and the new owners will drill a gaggle of infill wells on the property that is HBP. There is no shortage of savvy buyers out there. Many have lined up capital. They are ready to go. 

This seems like the most reasonable outcome. Producing assets don't sit idle. The defaults will be on the debt not on the production. This will lower debt costs to producers and the companies the get bought or reorganize in bankruptcy could become low cost production leaders due to lower debt costs. Who knows?  That's the fun of capitalism.  The other fun will be the fact that the losses will discourage new investments. So, the lack of New Capital will equate into Lower Production... not the bankruptcies. 

We know how to make oil in shale... Pour tons of money down the hole, get some oil out... repeat.  If the amount of money available to pour down the hole shrinks then the amount of oil coming out will shrink more. 

[Coffeeguyzz + 454]

Mr. Maddoux 

Referencing your comments re refracs - particularly in the Bakken  - some info from today's blog from Bruce Oksol (themilliondollarway) regarding Continental's refrac of an old (2008) open hole well, the Mountain Gap 31-10H ...

Cum first 10 years 123k.

4 1/2 months' production after 57 stage, 14 million lb. proppant refrac ~182,000 bbl.

Random, 6 month production there after ... ~75,000 bbl with most recent (Oct. 2019) showing over 100 bbld.

Bruce Oksol - proud Williston native, retired military - provides THE best, ongoing Bakken info ... hands down.

People interested in this entire world of 'unconventional' production may want to monitor Bakken developments closely as those operators seem to be leading the curve in effectively handling this resource.

 

[D Coyne + 305]

10 hours ago, 0R0 said:

 

I have been reading this thread avidly, as I am very interested in the economic and geopolitical impact of shale, as the Chamber of Commerce report indicates. It is singlhandedly lifting US economic activity and its prospects. However, there are some things that have not been discussed, and may be controversial to some.

First of all, the increasing demand for oil is in question. 

1. This is the first year in recorded demographic history of fewer births than the year before. The newest demographic projections undercut the UN population projections from 11 billion peak to 9 billion, That being largely due to increased longevity, meaning that the population increase is not going to include an increase in energy consumption in proportion as it will be at the over 60 age group. Urbanization has cut fertility rates globally to 1.6-1.7, and virtual urbanization via cell phones and social media is doing the rest. . 

2. Encroachment of nat gas as a fuel for marine transport starting with LNG vessels - why not everyone else? Then also nat gas for trucks as per Boone Picken's concept and company. The penetration isn't as high as I would have expected.  Considering only one EV truck model is on the drawing board and long recharge times are a no-no for efficient truck utilization. .Global NGVs are at 30 million, Nearly none of them in the US. 

3. EV penetration, China in particular is trying to undo its reliance on imports, particularly of oil. It is pushing EVs, even inviting Tesla to build locally with local capital and 100% ownership, First production coming now. Its 12 MBbl/day imports may well shrink fairly soon. Besides which, its working age population is already shrinking.

4. The expansion of telewoking and the perpetual shrinkage of in-office white collar work.Including telemigration. As geographical constraints make commutes and optimal empoyee/job matching more difficult in congested fully built out metro areas on the coasts..

The nat gas contribution to frac shale oil wells may increase as petrochemical production from nat gas vs. petroleum is far cheaper at nat gas below $3/MMBtu not to speak of for proximate prices of $1.50. This is also a substantial cost savings for primary steel and aluminum, and I believe is a major motivation for Trump's  tariffs on them, as Lightheizer and Navarro believe it is a major benefit to have the lowest cost steel and aluminum being made in the US, so once new production is established under the tariff protection (to protect it from currency devaluation - Lighthizer negotiated the Plaza Accord to lower the "superdollar") there would be a long term attraction of downstream production.

So considering these demand items, how would that change your projected pricing and peak production values?.  

Then there are a few issues that some of the Shale cheerleaders have pointed out,

1. That shale fracing is gaining efficiencies in operations and equipment as well as targeting drill paths and frac efficiency. The combined child well frac and completion costs are claimed to have dropped to about $5 million from what was $8 mil just a few years back.

2. The Oil 360 article detailing the findings of an 80k well study that is indicating that tier 2 and tier 3 wells do not produce that much less than the tier 1 wells. That one drew a "say what?" reaction from me. Since it is a statistical finding I am not in a position to dispute that. 

3. Recoveries of 20% rather than 10% are in the pilot and testing phase. Assuming that a transition to closer to 20% is coming starting next year, the economies of production are going to look much different. 

4. Re-fracing of spent wells is apparently a viable proposition, and with 80k and growing and a $30 cost claimed by Conoco, that makes for another wave of rework wells when prices don't support fresh drilling, and perhaps even if they do, as there is such a large and growing inventory of spent wells. 

How would these things modify your projections for supply side pricing and when and at what price level production would peak?

Less demand would result in lower oil prices and lower oil prices would result in lower output of unconventional oil than I have projected, thus a lower and earlier peak for World C+C output.

Cheaper costs for producing tight oil (and extra heavy) would have the reverse effect, meaning higher output of inconventional due to higher profitability ceteris paribus, this might offset lower prices due to low demand to some degree.

On balance the two effects might offset each other, impossible to predict.  The scenarios I have presented takes all of this into account and is my best guess as to how it will play out.  About a 50/50 chance output will be higher or lower than what I have presented.  Odds the scenarios will be exactly correct is about zero.  If a 10% window (+/-10%) around the scenario is created odds of being within that window are perhaps 40%, with a 30% chance output would be above or below the window.

[James Gautreau + 86]

12 hours ago, Anthony Okrongly said:

Let's see... 

#1 - World fertility is dropping- even in emerging markets such as Brazil and India.  There is a great book on the subject called "Empty Planet." Very well researched and documented. However people dying has more impact on oil and natural gas than people being born, particularly for the next 20 years.  And people are dying at a much slower rate as well. No impact for 15 years at least.

#2 - There's no reason for ships to use natural gas.  There will be no bunker fuel shortage.  So why make any changes?

#3 - 77 million cars were sold worldwide in 2019. Less than 3 million of them were electric. Electric cars are some small percentage of new car sales but that doesn't mean that a much larger percentage aren't conventional. Consumer Reports says the average lifespan of a car is 8 years... I find that low but I drive a 2006 Prius that I plan to drive for 3-4 more years. But 8 years x 77 million cars = 600 million cars. In the U.S. in particular Fully Electric cars like Tesla are typically a family's 3rd or 4th car.  They are not replacing gas cars in the U.S. they are being bought in addition to.  In China it's probably more "instead of" but I don't know for sure.  Still it's a rounding error and the limitations on rare Earth's is real. 

#4 - I used to be a VP for a company.  Companies don't care about congestion.  Come to work, clock in.  It may be more possible with customer support type jobs to be done from home. You can't be a virtual waiter or a virtual barista.  It hasn't helped in average miles driven per person - which is the highest it has ever been at 13,500 per Person. That includes all persons, including newborn babies and homebound geriatrics. 

So, while the growth rate may slow eventually. There is no turning the trend from needing more and more oil over the next 20 years.  House sizes are also increasing and coal plants in the US dropped from 50% of all energy plants to 25%... mostly being replaced by natural gas, and by Electric.   However, ANY increase in natural gas plants means an increase in natural gas use.  Even if it's 50/50 natural gas plants and electric. The energy that is being phased out is coal, not natural gas. 

The 2nd half of your premise I know nothing about. But the idea that we will use LESS energy in the US or worldwide I simply don't see it. The rate of growth may slow but it will continue to grow. At some point Peak Extraction will occur - whether due to geology or economics. The old saying that The Stone Age didn't end due to lack of stones is cute.  But the Mastadon age ended due to lack of mastadons, the buffalo age ended due to lack of buffalo's and the oil age will end due to lack of extractable oil. We're gonna burn it all.

Ev's cost continue to drop but I tend to agree with you. I do not think Ev's will ever compete with ICEv's at today's prices. I think oil will go to $300 a barrel, then settle back to between $100-200 a barrel. At that point EV's will be competitive. How do you get there? LTO peaks and begins to decline. Saudi oil, unprotected, gets attacked and goes offline. Russia peaks again. These things are right over the horizon. 

[Old-Ruffneck + 1,177]

1 hour ago, James Gautreau said:

Ev's cost continue to drop but I tend to agree with you. I do not think Ev's will ever compete with ICEv's at today's prices. I think oil will go to $300 a barrel, then settle back to between $100-200 a barrel. At that point EV's will be competitive. How do you get there? LTO peaks and begins to decline. Saudi oil, unprotected, gets attacked and goes offline. Russia peaks again. These things are right over the horizon. 

Please explain your reasoning for $300bbl oil and when will this happen? If it is over the next 10 years that might be plausible but unlikely as while oil is a force out there, it will start to slip as the only energy factor. EV's in next 5 years in USA will start to make inroads as the infrastructure I am assuming will be mandated into law. Parking lots will be designed differently and trenching in a heavy gauge line and setting up quick connect stations. I see it happening more sooner than later. 

[Gerry Maddoux + 3,627]

9 hours ago, Coffeeguyzz said:

Referencing your comments re refracs - particularly in the Bakken  - some info from today's blog from Bruce Oksol (themilliondollarway) regarding Continental's refrac of an old (2008) open hole well, the Mountain Gap 31-10H ...

Cum first 10 years 123k.

4 1/2 months' production after 57 stage, 14 million lb. proppant refrac ~182,000 bbl.

Random, 6 month production there after ... ~75,000 bbl with most recent (Oct. 2019) showing over 100 bbld.

Bruce Oksol - proud Williston native, retired military - provides THE best, ongoing Bakken info ... hands down.

People interested in this entire world of 'unconventional' production may want to monitor Bakken developments closely as those operators seem to be leading the curve in effectively handling this resource.

Many thanks for the update. 

I agree about the Bakken.

[James Gautreau + 86]

45 minutes ago, Old-Ruffneck said:

Please explain your reasoning for $300bbl oil and when will this happen? If it is over the next 10 years that might be plausible but unlikely as while oil is a force out there, it will start to slip as the only energy factor. EV's in next 5 years in USA will start to make inroads as the infrastructure I am assuming will be mandated into law. Parking lots will be designed differently and trenching in a heavy gauge line and setting up quick connect stations. I see it happening more sooner than later. 

I think it will happen this year. I think once the Permian decline manifests itself, the entire Permian infinite resource thing will evaporate and we will once again be in an era of scarcity. IMO 2020 will put pressure on the system. Iran will launch attacks against Saudi infrastructure, making its crude indispensable to world markets, and Trump will be forced to lift sanctions or risk oil prices going much higher. There is a confluence of events that will play out. EV's are coming on, but they're still round off error. When oil settles back down to between $100-200, EV sales will pick up considerably. 

[Gerry Maddoux + 3,627]

10 hours ago, Coffeeguyzz said:

Referencing your comments re refracs - particularly in the Bakken  - some info from today's blog from Bruce Oksol (themilliondollarway) regarding Continental's refrac of an old (2008) open hole well, the Mountain Gap 31-10H ...

Cum first 10 years 123k.

4 1/2 months' production after 57 stage, 14 million lb. proppant refrac ~182,000 bbl.

Random, 6 month production there after ... ~75,000 bbl with most recent (Oct. 2019) showing over 100 bbld.

Bruce Oksol - proud Williston native, retired military - provides THE best, ongoing Bakken info ... hands down.

People interested in this entire world of 'unconventional' production may want to monitor Bakken developments closely as those operators seem to be leading the curve in effectively handling this resource.

Your (much-needed) post re' Bakken refrack caused me to go back and check the IP of the Bibler wells, drilled in early 2013. 

They are: 1521, 1630, 1896, 1991, 1657, 1984, 1769, 1554 . . . . boe/d. That's eight wells on a 1280-A spacing. Note the uniformity. 

These are representative of good wells of that era, and they're all considered "vintage" wells by this point. I'm not promoting the Bakken, but there were no discernible frac hits or other adverse interaction, and those wells paid out very quickly. Now they're idling, tailing off. I submit that the single most economic endeavor in shale--if you use the Mountain Gap well as a prototype--might be to go in and redo the Bibler wells . . . and many other groups with similar lithography, porosity, and initial production characteristics. 

I'm grateful you brought up the Mountain Gap well. I've long been a fan of the refrack concept but had no data to go along with it; just Lynn Helms' assurance that "70% of Bakken wells are refrack candidates." If the Mountain Gap well proves to be a model for the four big production counties, refracking could prove to be the next big thing in the Bakken. 

[Mike Shellman + 548]

On 12/29/2019 at 11:21 PM, Coffeeguyzz said:

...effectively handling this resource.

 

 

 

 

Edited January 1, 2020 by Mike Shellman

[Old-Ruffneck + 1,177]

8 minutes ago, James Gautreau said:

I think it will happen this year. I think once the Permian decline manifests itself, the entire Permian infinite resource thing will evaporate and we will once again be in an era of scarcity. IMO 2020 will put pressure on the system. Iran will launch attacks against Saudi infrastructure, making its crude indispensable to world markets, and Trump will be forced to lift sanctions or risk oil prices going much higher. There is a confluence of events that will play out. EV's are coming on, but they're still round off error. When oil settles back down to between $100-200, EV sales will pick up considerably. 

James,

Well lets hope this does come to fruition as 300 oil spiked in short order would cause massive inflation on a world wide scale, putting even more stress' on the "markets".  Iran is trying procure a viable nuke and I do believe we have 2 fleets in the Gulf. While the powers that be let the last one slide, I don't think it'll happen again. We have lots of new toys to practice with. As for the Permian is pumping away, doubtful a major drop in production will happen. I will be there in couple weeks and get a better idea.

[Gerry Maddoux + 3,627]

6 minutes ago, James Gautreau said:

I think it will happen this year. I think once the Permian decline manifests itself, the entire Permian infinite resource thing will evaporate and we will once again be in an era of scarcity. IMO 2020 will put pressure on the system. Iran will launch attacks against Saudi infrastructure, making its crude indispensable to world markets, and Trump will be forced to lift sanctions or risk oil prices going much higher. There is a confluence of events that will play out.

So, Nostradamus, the perfect storm is upon us, eh? 

1) The Permian isn't going to decline much for a while. 2) The Permian is only 40% of the total. 3) Nigeria, Iraq and Iran are chomping at the bit to fill the gap vis a vis any scarcity that develops . . . and KSA will let them in order to maintain the peace. 4) The Russian wells in the edge of the Kara Sea are huge. So are the 14 blocks off Guyana. They're coming soon. 5) The minute Iran launches attacks against KSA infrastructure, Mr. Trump will squash them like a bug, because (God help us), he still considers the Saudis to be our ally, and a much-needed oil resource (and he may be right, ultimately). 5) Lifting all sanctions against Iran would run into strong Republican opposition in the Senate (think Lindsay Graham). 6) It is in the US oilman's best interest, and that of the economy too, to have a Brent oil price cap no greater than about $80, WTI $75. That's what the Saudis and the Russians want too. That is a "livable" price for all concerned.

You could be proven to be right; however, the logistics don't support it. Your model assumes that just because the major banks have soured on LTO, there will be this massive slowdown. There is going to be one of the largest transfers of oil property, rigs and equipment, in the history of oil, but it's going to immediately be put to use by stronger hands buying in a more realistic pricing environment. There's a strong optimism still prevalent in the shale basins that bear little resemblance to your dystopian model.

If your model turns out to be correct, it means the world is in a whole lot more trouble than just paying for $300 oil.   

[Papillon + 485]

2 minutes ago, Gerry Maddoux said:

Mr. Trump will squash them like a bug

I knew I should have copyrighted this.

[James Gautreau + 86]

Trump is an existential threat to the mullahs in Iran, and the one thing they can use in the fight are oil prices. If oil prices are down around $50 Trump gets re-elected. If they are over $100 he doesn't. If they are $75, flip a coin. Iran has nothing to lose in attacking Saudi Arabia. Trump has shown his reluctance to attack Iran, especially a tit for tat on oil assets, since nothing would push the price of oil up faster than that. Trump cannot and will not attack Iran oil assets, even if Iran attacks Saudi Arabia's oil assets. He is trapped. 

[James Gautreau + 86]

Nostra-Dumb-Ass I am not. Just reading the tea leaves. The first attack on Saudi Arabia was a trial run. It was big enough to cause concern, but not big enough to cause permanent damage. The right move for Trump would have been a proportional attack that took a similar amount of Iranian assets offline. It was a huge mistake to not do anything, since he has green-lighted the next attack. These are the Persians. They been around since Jesus and before. They know all the angles. 

[footeab@yahoo.com + 2,136]

8 minutes ago, James Gautreau said:

Trump is an existential threat to the mullahs in Iran, and the one thing they can use in the fight are oil prices. If oil prices are down around $50 Trump gets re-elected. If they are over $100 he doesn't. If they are $75, flip a coin. Iran has nothing to lose in attacking Saudi Arabia. Trump has shown his reluctance to attack Iran, especially a tit for tat on oil assets, since nothing would push the price of oil up faster than that. Trump cannot and will not attack Iran oil assets, even if Iran attacks Saudi Arabia's oil assets. He is trapped. 

BS, doesn't matter if it is Trump or someone else.  Enact the oil export ban and WTI vrs Brent spread just widens.  Frankly, if I was in office, the oil export ban would be back in place.  Sell refined products only.  Or at minimum sell oil to only mutual defense treaty partners only.  Not defense partners we have said we will defend, but mutual defense partners only. 

[Gerry Maddoux + 3,627]

4 minutes ago, James Gautreau said:

Trump cannot and will not attack Iran oil assets, even if Iran attacks Saudi Arabia's oil assets. He is trapped. 

I was always taught to be aware of trapped animals, especially Homo sapiens. 

 

28 minutes ago, Mike Shellman said:

Another observation from planet earth: in its first outing this well did not pay out drilling and completion costs; NDS is typically $8-10 a barrel less than WTI and the Williston has its own ugly flaring problems. The re-frac described likely cost $4-4.5MM over and above the original D&C costs; its now below 90 BOPD and on the express elevator down. In its entirety this well is unlikely to pay out. Refracs, re-injecting gas, vibrating the well, sending sound waves down it and/or sacrificing dead chickens and performing ritualistic dances dancing around the well head... all cost more money. Productivity is NOT the same as profitability. 

Very good points: all reasons why we're in this pause with shale. That was a big refrack job on the Mountain Gap well, so your estimate of cost is likely correct. The spread between Bakken and Permian oil has narrowed a good bit, but still an informed comment. You're so vituperative, I find it difficult to even protest . . . some of your concerns are also mine and you state them better than I could. I suppose on the flip side, if there is one, is the fact that the index well is in Dunn County, on property that was very likely considered tier-2 or even tier-3. At $40 oil, it's going to be a breakeven well, but at $70 oil it would be fairly profitable. We'll have to wait and see what supply/demand does. As a royalty and override owner in the Bakken, that Mountain Gap refrack would be a pretty good payday, if a person had a good stake in the spacing.  

[James Gautreau + 86]

I'm not so sure it doesn't matter. I've yet to be impressed by Trump's gut instincts. I think he needs to re-evaluate their effectiveness. 

[Guest]

I'm gonna contact the Guinness Book of Records to see if any other chat has 55,000 views and is literally a huge circle where not one person has even vaguely changed their mind. You guys may be on to something. I'm sure they could create a ''most pointless conversation ever'' category. 

[Gerry Maddoux + 3,627]

Here's the entire web post by Bruce Oksol re' the Mountain Gap well. Please note that the post-refrack cumulative production over approximately 18 months was 348,000 blls. At $50 oil, that's $17,400,000--which I'm pretty sure would qualify as a profitable well in the eyes of the most hardened skeptic. Bruce says this is a "not atypical example of what is going on in the Bakken."

MONDAY, DECEMBER 30, 2019

Re-Fracking In The Bakken -- The Returns Are Going To Infinity -- December 30, 2019

 

With regard to the subject line: yes, I am inappropriately exuberant about the Bakken. My focus is on the mom-and-pop mineral owners in North Dakota.

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

Re-posting. This is mostly for newbies. Earlier today I posted:

Shale bust redux.

For those who subscribe to The WSJ, you probably saw the "as shale wells age, gap between forecasts and performance grows" by Rebecca Elliott and Christopher M. Matthews. If the story sounds familiar, it's because it is. This this has been previously posted. From the same writers, almost exactly one year ago, January 2, 2019, also in The WSJ, "fracking's secret problem -- oil wells aren't producing as much as forecast." And then again, September 29, 2019, by the same two writers, RE and CMM, "shale boom is slowing just when the world needs oil most."  Really? Two final nominees for the Geico Rock Award for 2019.

I don't know if the Permian is different than the Bakken when it comes to fracking, re-working, mini-fracks, halo effect, advantaged oil, major re-fracks, etc., but I think the jury is still out with regard to the thesis that Elliott and Matthews would suggest. Below is not an atypical example of what is going on in the Bakken.

In the data below, note:

• from the original completion date, 6/08, to 5/18, ten years, this well produced 123,000 bbls of crude oil; 
• then after the re-frack in early, 2018, the cumulative by 10/19, had jumped to 471,000 bbls of crude oil
• this well, after a re-frack -- and a well that could have easily been written off, abandoned, and plugged -- came roaring back to produce 348,000 bbls of crude oil between in about eighteen months, and with oil about $20/bbl higher -- and the only cost -- the cost of fracking -- at a time when service costs and sand are at record lows

Good, bad, or indifferent, the mom-and-pop mineral owners are probably wondering what just happened when they opened their most recent royalty checks. Good for them.
 

*******************************

A Re-Fracked Well In The Bakken

The well:

• 17100, 240, CLR, Mountain Gap 31-10H, Rattlesnake Point, t6/08; cum 123K 5/18; cum 471K 10/19;

We now have the re-frack data: 57 stages; 13.93 million lbs; test 3/18:

Production data before/after the re-frack:

BAKKEN	9-2018	30	25164	25212	26236	31413	27881	3140
BAKKEN	8-2018	31	35997	35753	45374	42924	42309	210
BAKKEN	7-2018	31	41189	41427	57492	45918	43344	2169
BAKKEN	6-2018	30	52661	52713	63442	57604	52886	4326
BAKKEN	5-2018	17	26682	26410	36450	28245	21100	7145
BAKKEN	4-2018	5	694	694	5436	1379	0	1379
BAKKEN	3-2018	0	0	0	0	0	0	0
BAKKEN	2-2018	0	0	0	0	0	0	0
BAKKEN	1-2018	0	0	0	0	0	0	0
BAKKEN	12-2017	0	0	0	0	0	0	0
BAKKEN	11-2017	0	0	0	0	0	0	0
BAKKEN	10-2017	0	0	0	0	0	0	0
BAKKEN	9-2017	0	0	0	0	0	0	0
BAKKEN	8-2017	0	0	0	0	0	0	0
BAKKEN	7-2017	0	0	0	0	0	0	0
BAKKEN	6-2017	22	171	240	33	88	88	0
BAKKEN	5-2017	31	296	239	37	122	116	6

Production following original frack:

BAKKEN	12-2008	31	2645	2442	285	1430	1430	0
BAKKEN	11-2008	28	3042	3128	407	3416	3416	0
BAKKEN	10-2008	30	4006	3566	1019	3645	3046	599
BAKKEN	9-2008	25	2005	2291	187	1726	1545	181
BAKKEN	8-2008	31	3844	3643	527	3484	3319	165
BAKKEN	7-2008	31	3969	4095	1043	3020	295	2725
BAKKEN	6-2008	30	5914	5648	2002	3903	0	3903
BAKKEN	5-2008	31	160	0	2305	0	0	0

 

Posted by Bruce Oksol at 7:54 AM  

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Labels: Bakken_2.5, Bakken101, CLR_Re-Frack, Re-Fracking

[Gerry Maddoux + 3,627]

4 minutes ago, DayTrader said:

I'm gonna contact the Guinness Book of Records to see if any other chat has 55,000 views and is literally a huge circle where not one person has even vaguely changed their mind. You guys may be on to something. I'm sure they could create a ''most pointless conversation ever'' category. 

HaHaHa, you're right: this is a circular firing squad. 

[J.R. Ewing + 19]

6 minutes ago, DayTrader said:

I'm gonna contact the Guinness Book of Records to see if any other chat has 55,000 views and is literally a huge circle where not one person has even vaguely changed their mind. You guys may be on to something. I'm sure they could create a ''most pointless conversation ever'' category. 

Why do you keep returning to a thread you consider to be useless?

[Guest]

To see if anyone else realises how ridiculous it is. I wouldn't say useless either, there is a slight comedic value to it. 

 

[James Gautreau + 86]

I used to blog at www.kunstler.com which is one of the first peak oil blogs. James Howard Kunstler wrote "The Long Emergency." It was one of a handful of books that introduced the world to the concept of peak oil. It's mostly political now, right left horseshit out the yin yang. In the 12 years I blogged there no one ever changed their mind about anything. Seasons change. 

[footeab@yahoo.com + 2,136]

6 minutes ago, James Gautreau said:

I used to blog at www.kunstler.com which is one of the first peak oil blogs. James Howard Kunstler wrote "The Long Emergency." It was one of a handful of books that introduced the world to the concept of peak oil. It's mostly political now, right left horseshit out the yin yang. In the 12 years I blogged there no one ever changed their mind about anything. Seasons change. 

The only time anyone changes their mind is if they have been drug through the mud screaming, get tired of eating mud down their pie hole and decide to close their yapper.  Open their eyes and notice they are laying in a mud puddle 1 inch deep.