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THE Bakken Thread pt 3 (merged)

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Re: THE Bakken Thread pt 3 (merged)

Unread postby Tanada » Wed 22 Feb 2017, 07:42:03

As usual it is all about the time scale you use.

If you compare Bakken production today with 2012 it is very good looking. If you compare it with 2008 production it is down right MIRACULOUS looking.

Now that prices have more or less stabilized for the last three months leaseholders are seriously evaluating if they can earn a good enough profit from drilling and completion in 2017. Considering where prices were a year ago when many of the players decided to 'pause everything' through the 2016 work year this years evaluation is bound to turn out differently. Two of the biggest players announced in February or March 2016 that they were suspending all new drilling as of April 1, 2016. I forget which companies it was but it made a big news splash at the time.

In any case the situation on February 22, 2017 is substantially different than it was February 22, 2016. Prices today are about 138 percent of prices a year ago, and if you don't think that influences drilling decisions you must not understand the profit motive at all.

One year ago prices for WTI contracts were just under 50 percent of the 2010-2014 average price. Today they are 68 percent of the 2010-2014 average price. Again if you don't think this will influence drilling rates then you really have no understanding of the profit motive of business.

I fully grant that 68 percent of the sale price will lead to less drilling than the mad cap pace of 2013-2015 when they were using every rig they could lay hands on and building more. But at the same time levels are liable to climb back up to what they were just a few years ago before the late 2015 crash in contract price.

At some point the legacy production decline and new drilling will balance and the Bakken will stop falling as it is today. If prices go high enough drilling will again exceed legacy decline and the Bakken production will resume its upward march.

The big difference today is twofold, the sweetest of sweet spots on state and private land have been drilled about as much as they can be. So for state and private lands the individual well productivity is likely to continue its inexorable decline requiring more wells per unit of production than were needed in 2013. The other factor is President Trump has ordered leases be offered in the federal lands that cover a swath of the Bakken formation. This means the interior department will be offering leases and optimistic drillers will be able to lease and drill searching for undeveloped sweet spots. Any they find will add to the well productivity stats and help boost Bakken oil to greater production than many anticipate.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby Cog » Wed 22 Feb 2017, 08:57:18

Your are going to get the ETP folks are riled up Tanada. In their world, you need $70/bbl oil to break even, much less make a profit.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby AdamB » Wed 22 Feb 2017, 16:13:11

Tanada wrote:The big difference today is twofold, the sweetest of sweet spots on state and private land have been drilled about as much as they can be.


Not yet. Any geospatial analysis of Bakken and Three Forks productions shows some very specific things in terms of the effects of well interference, and the degradation of performance, and the drainage areas it happens at. A technique utilized in the Appalachian Basin that has not quite yet percolated out to the provinces isn't being used there yet, or at least I can't find it based on the completion reports.

And it ties in directly with how many more pressure compartments, even interfering ones, there are yet to drill.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby AdamB » Wed 22 Feb 2017, 16:16:38

pstarr wrote:What new leases, what new public land? How much has not been drilled?


Depends on your choice of well densities. And the price of oil.

Your entire complaint was the same one that said the Bakken production could never exist in the first place. Continuing to use it after having been discredited to the tune of better than 1 million barrels a day before price stopped it from increasing farther is one of those "shame on you for not learning from your mistakes" type episodes.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby rockdoc123 » Wed 22 Feb 2017, 17:51:00

Do you see new opportunities?


It may look tight to the uninitiated but individual wells which have been fracked in shale that is not full of natural fractures already only have about a 150 m radius of investigation around the well bore. That means that wells which are parallel and more than 300 m away will not be interfering but the larger the space then the more hydrocarbon left unswept. This is because of the extremely low permeability. So if you have two wells 1 km apart it would make sense to drill one in between, some risk of interference but balanced by the additional reserves.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby AdamB » Thu 23 Feb 2017, 00:14:26

pstarr wrote:I posted a thoughtful response to Tanada's post. You ripped off, cut and past technical jargon. I will post it all again AdamB if you continue.


Do as you'd like. If you don't understand the difference between a drainage area based on natural fracturing, compared to the stimulated rock volume (SRV) in modern completion designs, I recommend you ask someone who knows something about it. And then post whatever alternative facts you'd like, no one has ever stopped you from doing it before.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby AdamB » Thu 23 Feb 2017, 00:18:54

pstarr wrote:
AdamB wrote:
pstarr wrote:What new leases, what new public land? How much has not been drilled?


Depends on your choice of well densities. And the price of oil.

Your entire complaint was the same one that said the Bakken production could never exist in the first place. Continuing to use it after having been discredited to the tune of better than 1 million barrels a day before price stopped it from increasing farther is one of those "shame on you for not learning from your mistakes" type episodes.

It's drilled out


Of course it isn't. Only some amateur who doesn't understand the stacked nature of the Bakken petroleum system, which includes the Pronghorn and Three Forks formations, would ever confuse a 2D picture of a volume of rock allowing stacked horizontals because we are dealing with a 3D world.

Words undoubtedly not being enough, how about the cartoon version that still might be a little overwhelming for you, but if you study hard for a week, you might get it.

Image
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Re: THE Bakken Thread pt 3 (merged)

Unread postby Tanada » Thu 23 Feb 2017, 07:53:08

pstarr wrote:The chart posted above is a dramatic assertion of what happens specifically to tight-shale plays. Each new well bore and associated fracture region drains and collapses after a year or two. Along with production. The chart clearly shows the aggregate tail-end of thousands of used up efforts. Production settles out and continue at bakken at 10% of peak. Just another tired old stripper fields. Mom and pop's retirement.

Tanada wrote:As usual it is all about the time scale you use.

If you compare Bakken production today with 2012 it is very good looking. If you compare it with 2008 production it is down right MIRACULOUS looking.


1By itself, time scale is meaningless without context. It must be plotted against crude price, rig availability/commitments (they already moved to other parts of the world), and the dearth of economic sweet spots.

Tanada wrote:Now that prices have more or less stabilized for the last three months leaseholders are seriously evaluating if they can earn a good enough profit from drilling and completion in 2017. Considering where prices were a year ago when many of the players decided to 'pause everything' through the 2016 work year this years evaluation is bound to turn out differently. Two of the biggest players announced in February or March 2016 that they were suspending all new drilling as of April 1, 2016. I forget which companies it was but it made a big news splash at the time.


2Prices have essentially settled out around $50-$55 since late 2014, not just after 3 months. <>$50/crude has been on a long plateau after a collapse from almost a decade >$100 (true there was one incidental dip in early 2016). There is nothing new or special about the last three months.

Tanada, you are making a lot out of statistical noise. These little oscillations may be interesting to a petroleum day trader. Are you? But petroleum E&P strategies, national economies work out on longer time frames. That is the concern here, the point of my previous post. The point of peak oil. it's a long plateau with gradual movements up and down on either side. This is statistical noise.

Tanada wrote:In any case the situation on February 22, 2017 is substantially different than it was February 22, 2016. Prices today are about 138 percent of prices a year ago, and if you don't think that influences drilling decisions you must not understand the profit motive at all.


3Yes, it must influence a few drilling decisions, among a small cadre of fly-by-fly operators and their clueless investor wanabees

Tanada wrote:One year ago prices for WTI contracts were just under 50 percent of the 2010-2014 average price. Today they are 68 percent of the 2010-2014 average price. Again if you don't think this will influence drilling rates then you really have no understanding of the profit motive of business.


4Again, sure but how much. The fact remains that since the crash in crude prices off $100 back in spring 2014, all tight shale is collapsed. Month-by-month analysis non withstanding.

Tanada wrote:I fully grant that 68 percent of the sale price will lead to less drilling than the mad cap pace of 2013-2015 when they were using every rig they could lay hands on and building more. But at the same time levels are liable to climb back up to what they were just a few years ago before the late 2015 crash in contract price.


5where is the data to support your rosy assumption? There was plenty of opportunity to drill from late 2014 on when prices were in the $50 range.

Tanada wrote:At some point the legacy production decline and new drilling will balance and the Bakken will stop falling as it is today. If prices go high enough drilling will again exceed legacy decline and the Bakken production will resume its upward march.


6But evidences suggests prices will not go high enough? Neither demand, nor OPEC promises (lies actually) seem able to drive prices higher. Traditionally (over spans of decades) >$50 oil has depressed economies, sudden run-up above $60 collapses economies. But it seems that in general tight shale requires $70

Tanada wrote:The big difference today is twofold, the sweetest of sweet spots on state and private land have been drilled about as much as they can be. So for state and private lands the individual well productivity is likely to continue its inexorable decline requiring more wells per unit of production than were needed in 2013. The other factor is President Trump has ordered leases be offered in the federal lands that cover a swath of the Bakken formation. This means the interior department will be offering leases and optimistic drillers will be able to lease and drill searching for undeveloped sweet spots. Any they find will add to the well productivity stats and help boost Bakken oil to greater production than many anticipate.


7What new leases, what new public land? How much has not been drilled?


I tried to separate out your seven complaints and numbered them so we could have a reasonable back and forth.
1
I said time scale is meaningful, that in no way means that all other factors are meaningless. The situation is not flip a coin, it is more like calculating an orbital insertion, lots of factors combine to make reality.

2
Go back and actually read what I wrote. I have pointed out in many posts over the last 12 months that oil went from an average of $80/bbl WTI contract price in 2012-2014 to $60/bbl for December 2014-May 2015, then gradually declined to $50/bbl over several months until about late August 2015 when Goldman Sacks and other big traders started constantly hyping the Iran deal was going to flood the world oil market. That constant drumbeat with silly articles contending prices could fall to $15/bbl or even lower in a few cases served the big corporate interests well, they artificially drove the contract price to rock bottom so that on one day in January 2016 IIRC it got all the way down to $27/bbl very very briefly before some rationality returned. Even with all the hype and BS they could not hold price down and by March 2016 prices were back up in the $40/bbl PLUS range. Prices spiked up into the $55/bbl range over the summer due to the big forest fires in Alberta then fell back into the $45/bbl range when that danger had abated for a couple months before OPEC/Russia started serious quota negotiations and returned the price to $50/bbl+. If you objectively look at the data the only reason prices fell so low in January/February was the constant drumbeat of the big corporations that engage in trading practices that prices were going to fall off the cliff. Demand/Supply balance easily supported the $45/55 trading range from late 2015 just after USA production topped out with all those wells coming online in summer 2015 right through 2016.

3
You are making a totally unwarranted assumption, implying that none of the oil majors or even midsize companies have accounting departments nor specialists who do regular updates of what the moving average oil price is, what their own break even costs are, and how to get the most profit based on those two relationships.

4
You REALLY need to look at the data once in a while and try to be objective. That $100/bbl you claim for Spring 2014 was a short term spike, the average price from 2011-2014 was right around $80. That spike was a nice shot of cash for many oil companies but it only lasted a few weeks and when medium and large companies plan their next moves they don't base it on a few weeks, they base it on as many months so they can to get a real moving average. Most companies are NOT run by day traders with their 3 day max time horizons and this is particularly true of Oil companies that need years to secure leases, drill, complete, produce and sell their petroleum.

5

Why don't you try looking at the data once in a while instead of pulling facts out of thin air? Drilling continued full bore from the 'crash from $100/bbl' you claim in spring 2014 right through early 2015 adjusted for seasonal effects. The decisions to drill and complete those wells over that six months was based on data from the previous three or more years, that moving average I keep pointing out to you. Even more so with prices stable in the $60/bbl range during that same period there were plenty of locations already planned for drilling that the medium and large companies had every expectation of being profitable at that same $60/bbl WTI contract price. The second stage of the contract price decline took place in the second half of 2015 and that decline is what really started cutting rig counts and influencing planning. A great many people assumed that OPEC would not stick to their market share strategy announced in November 2014 until they had six months of proof. Even then prices only sank reluctantly and gradually until all the Iran deal hype started making headlines in the oil industry and financial industry.

6

What evidence? The reality is the world economy (not just the USA/Western Europe) grew like mad from 2002-2008, bobbled for 12-18 months and resumed growing in late 2009-2017. World oil consumption TODAY is substantially higher than it was during your few weeks long spike in Spring 2014. That means it is higher than it was in 2013 or 2012, or 2010 as well. Ignoring that fact or set of facts will not make them go away.

The world oil supply HAS NOT YET PEAKED. After all the failed predictions of 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012 that we had peaked and the decline was about to set in, including my own predictions based on what the experts were saying, I have chosen to take a longer view like ROCKMAN constantly argues we should.

World oil supply did not just go up a tiny amount in the period from 2005-2017 either. We as a planet produce and consume almost 5 MILLION barrels more crude in 2017 per DAY than we did in 2007. You like to try and dismiss it as 'lighter fluid' and all the other cute names you try and use, but the reality is all of that petroleum has real monetary value in real markets that use it wisely or foolishly to do things they want to do with that energy. The fact that you would not power a three wheel taxi trike in India with Butane is irrelevant, they are and seem quite happy doing so.

7

President trump has been in office a total of FOUR WEEKS. Petroleum planning, leasing, drilling, completion and production takes YEARS. The President has ordered the Interior Department to cooperate in leasing tracts of land for exploration and development in the Federal portion of those formations like the Bakken where a great deal of activity was taking place and despite all the hype is still taking place today. Just because drilling and completion rates have fallen to half what they were at the breakneck pace of 2014 doesn't mean they have ground to a halt. Instead of drilling 1000 wells they drilled 500. That means ultimately the well locations they did not drill in 2015-2016 will be drilled in 2017-2020 instead. The crude oil is still there in the ground waiting to be pulled out. There were a lot of articles written in 2009-2014 when drilling was proceeding As Fast As Possible that President Obama and the Interioer Department under his Administration were not willing to lease federal lands to oil companies even when the income would have been good for the government. The oil companies know roughly where the Bakken productive layers extend from Private and State land under adjoining Federal land. They are interested in drilling those trends on the federal side of the property lines just like they were interested in 2009-2014. The current President thinks it would be a good idea for that to happen, the oil companies think it would be a good idea for that to happen and oil at $50/bbl supports quite a lot of drilling already so it is reasonable to expect drilling will extend into those Federal lands once the Interior Department figures out what they will and won't lease for development and offers those leases for bids.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby rockdoc123 » Thu 23 Feb 2017, 11:14:51

That easy huh? Just slip a new well bore in between two old well bore? Like screwing a woman with two dicks lol The industry didn't find a way at $100/barrel, so where is the incentive now? Where's the beef?


it is that easy and it is being done in parts of various plays at prices less than $100. It is not done wholesale simply because companies have a need to prove up as much leased land as possible so that it does not expire, in fill drilling is not a priority for many as of yet. And yes you can always use more data...and someone from Schlumberger would certainly like to sell you more, but it isn't entirely necessary if you accept the well cost risk (your production can't get worse).

As to your rude and sexist analogy it is somewhat offensive, you need to grow up.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby AdamB » Thu 23 Feb 2017, 13:56:08

pstarr wrote:That easy huh? Just slip a new well bore in between two old well bore?


How would you recommend draining remaining hydrocarbons in between existing well drainage compartments? Magic?
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Re: THE Bakken Thread pt 3 (merged)

Unread postby AdamB » Thu 23 Feb 2017, 13:58:10

pstarr wrote:Excuse me. RM uses off-color language all the time and I guess I just overdid it. But then he is a real toolpusher.

I'll go back and fix it.


You should also fix claiming that RM is a toolpusher. He isn't.
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Re: THE Bakken Thread pt 3 (merged)

Unread postby AdamB » Thu 23 Feb 2017, 18:06:50

pstarr wrote:
AdamB wrote:
pstarr wrote:That easy huh? Just slip a new well bore in between two old well bore?


How would you recommend draining remaining hydrocarbons in between existing well drainage compartments? Magic?

In your desperate attempt to impress your supervisor you neglected to notice THE JOKE :roll:


Pete, your lack of understanding on the most basic of topics comes across as a joke in nearly everything you write. So no, I didn't know this was a different joke, compared to the serious things you write that are also jokes.
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