Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

Increased density of drilling in Bakken

Million Dollar Way has a complex post describing the increasing density of wells on each portion of land being drilled in North Dakota. Think 14 or 28 wells on 4 square miles. I’ll try to pull a few key ideas out of An Example of “Ears Pinned Back” — As CLR Calls It – In The Bakken.

Density in 2007

In ancient days, say about 2007, the concept was one well on a section. That according to the article.

Density in 2011

One section is a square mile, or 620 acres.  Two sections are 2 square miles, or 1240 acres. Several sections can be combined for simplicity of drilling. A 2480 acre spacing unit is 4 square miles. Either 2 or 4 section spacing units allow drilling wells from one or just a few pads, which is much more economical. The laterals can run for something like 2 miles, around 10,000 feet across two sections, which is more economical than drilling 2 wells with 5,000 foot laterals.

When I started following Bakken news, the astounding idea was that everywhere you see one well there will eventually, some day, in the distant future, be 8 or 10 additional wells drilled. That would mean the full build out would be 8 or 10 or 12 wells per spacing unit. 

If I recall correctly, spacing units were usually one section, sometimes stretched to two.

Density in 2014

Today the spacing units are 2 or 4 sections, which means 1,240 or 2,480 acres.

Look at the staggering number of wells per spacing unit.

As I read through the MDW article yet again, here’s the numbers for permits or plans for wells per spacing unit:  21, 30, 14, 21, 28, 21 or 28, 12, 28, 21, 21, 34, 36, 14, 28.

An MDW correspondent describes much of the information and closes as follows:

Before too long these five spacing units could likely have around 100 wells — 21-28, 21-28 and 14 wells in Continental’s three spacing units, and 17 wells in each of Hess’ two 1280-acre spacing units.  Amazing!

If I follow the discussion correctly (a big assumption), the Continental spacing units are 4 sections each. The two mentioned Hess’ spacing units are 1280 acres, or two sections.  That makes 16 sections, or 16 square miles.

Mr. Oksol closes with:

Then think about this. Each well averaging about $10 million (in round numbers) x 100 wells = $1,000 million or more simply $1 billion, just for the drilling in five spacing units.

That’s around a billion dollars invested for around 100 wells on 16 square miles. A long way from 1 well per section just seven years ago.

Let me extend the math a bit. With my wild assumption of 500,000 barrels ultimate recovery and an assumed $80/barrel price, here’s the reason to drop a billion bucks for drilling: 

  • 500K EUR x 100 wells = 50M barrels recovered in productive life. 
  • 50M barrels x $80/barrel = $4 billion of revenue over life, with front-loaded ROI.

Staggering.

Update: Great article explaining the efficiency goals and background on ‘downspacing’ from E&E Publishing – Bakken Shale:  Faced with production declines, drillers cook up new recipes for growth.

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