written by reader Decline of gas and oil wells in the Bakken

By Anonymous Questions, February 21, 2014

Reading comments from The Outsider Club e-mails regarding the substantial decline of gas and oil wells in the Bakken and other shale plays around the country. The comment was made that the wells are declining at a rate of 40% or more in the first year, making drilling costs prohibitive so that many of the companies are losing money on each well drilled, and the claimed energy independence statements are false. Anyone have any input?

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arch1
Member
February 22, 2014 3:53 am

Yes that is the nature of of ‘thin’ strata such as bakken. Think of a cake with a layer of frosting between cake layers. If you drill 1 vertical hole you extract liquid portion for a very short distance from hole. In Bakken you drill down, then horizontal in shale layer so more is adjacent to hole. More than one horizontal hole may be drilled from original well at less cost than 1st vertical well, like spokes in a wheel on its side so, as initial in rush of fluid lessens, out put is extended. Length of horizontal hole can also be extended with limits. There is a lot of oil still in Bakken profitably available. Remember that Bakken underlies part of Montana, North & South Dakota, & up into Canada. A huge field with varying thickness of oil shale. Not all corn in a field grows at the same rate.

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Denis Harper
Denis Harper
Guest
February 22, 2014 9:52 am

That’s fairly clear Frank but I’d like to know how far out from the fracking pipe does the effect extend. Yards? Hundreds of yards? Miles? Most articles on fracking seem to avoid this detail and if the oilcos. start fracking at the most accessible areas it must surely get harder and more expensive as time goes on. I think this is the basis for the considerable amount of scepticism in the general public about the life of these assets as opposed to a conventional reservoir.

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arch1
Member
February 22, 2014 8:47 pm

Denis; Yes ,yes,yes Actually unknown,it is variable. Unlike common concept of pools of oil tapped by conventional wells oil is trapped in porous strata,under varying degrees of pressure. Fracking applies pressure to ‘open’ the rock using fluid {water] & small particles [sand etc.] to keep open. Some is being done with carbonated water[CO2+H20] soda water to sequester supposed greenhouse gas & collect “green” subsidy. Much propaganda from all sides,choose belief of your choice.

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John Strader
Guest
February 24, 2014 9:38 am

I am a CEO of a small oil company in Kansas and have been investing in Bakken oil Stocks since 2006. While I don’t have all the answers I do understand a lot about the Bakken and Three Forks oil formations.
The first year decline in oil production is closer to 75% from the initial daily production which is normal for most shale and some non shale oil wells in the US. However, many non shale formations have closer to 50% declines.
Many of the companies are using micro censers to determine how far apart the well should be drilled most companies are trying to drill 8 wells over a mile wide or 660 feet apart. From my research most companies will probably drill 8 to 10 wells per mile of width if they wish to maximize their rate of return on drilling costs per unit and 10 to 12 wells per mile of width if they wish to maximize the amount of profit and oil out of each drilling unit. Each standard drilling unit is one mile wide and two miles long.
The companies started expecting to drill 3 wells per drilling unit most companies are expecting to now get between 16 and 24 wells per unit. However if you go through various company presentations and take the most optimistic possibilities it is possible to come up with as many as 96 wells per unit in the best locations 3 benches in the Bakken and 5 benches in the Three Forks. However I think most locations will be between 16 and 60 wells per drilling unit with most of the units having between 24 and 40 wells. It will probably take at least 3 to 5 years to know for sure how this will play out.
Bakken and other Shale formations are generally very profitable. However some drilling locations within the Bakken formation are not profitable. This is also true of most other oil formations both shale and non shale in the US.

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bludolphint
Irregular
February 25, 2014 1:35 pm

I agree with your view on the shale, (etc.) plays. I remember a former CEO about 5 years ago when this boom was starting to get legs, but his were gas plays mostly. But anyway the point was how quickly these wells depleted. Some wells were uneconomical after just 2 years. I know that is just one opinion, but I have seen many reports since then, both tight oil & gas that are similar to that. I just wonder if some want “oil independence” so much that they talk about trillions of units under the U.S., but not much said about how much of the trillions can be economically obtained. Have you heard how many millions each well costs today and it is only going up.

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