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.

Random updates from Bakken

A new well is likely to produce about a million barrels of oil, compared to half a million from a well drilled several years ago. Photo by James Ulvog.

A new well is likely to produce about a million barrels of oil, compared to half a million from a well drilled several years ago. Photo by James Ulvog.

A few articles of late:

  • 2 hotels closed in Williston
  • Ground broken for new Williston airport
  • Each Bakken well now expected to produce a million or 1.5 million barrels of oil

9/27 – Williston Herald at Dickinson Press – Two Williston hotels closing their doors – An owner of two hotels with total of 105 rooms will be closing them this week. Both are on the market, for $3.0M and $3.2M. One of them reportedly had drugs sales and prostitution on site during the boom.

Don’t worry too much about capacity. There’s a huge number of hotels open in Williston, especially compared to three or four years ago. Also, those hotels won’t be going anywhere. When the drilling picks up, someone else can pick up those empty hotels for a real bargain. When the space is needed, they will be open.

10/10 – Amy Dalrymple at Oil Patch Dispatch – Williston Breaks Ground on New $240 Million Airport – Construction is underway for the new airport. It will have a 7,500 foot runway and four gates at the terminal. The new airport will be able to handle planes that can hold 165 passengers instead of the 50 passenger jets in use at the current airport.

Currently there are five daily flights into Williston, which is down from 11 at the busiest time of the boom.

12/4 – Million Dollar Way – The Bakken: How Things Stand Near the End of the Year 2016 –  The productivity increase in the last few years is staggering. Here are a few tidbits from the article, which is a survey of recent quarterly releases from the drilling companies.

Estimated Ultimate Recovery, EUR, is the amount of oil to be drawn from the well, I believe with only primary recovery. A few years ago (2011), the typical EURs were 550K barrels from middle Bakken and 450K from Three Forks bench.

Today, Whiting and Oasis consider 900K boe is the norm with that expected to hit 1.5M boe.

From

  • ~500K five years ago to
  • 900K now and
  • ~1,500k in the near term.

Drilling time is measured from the start of one spud to starting the next spud. At the start of the boom, the time was 45 or 60 days.

Today for Whiting in Bakken it is 14 days and in Niobrara it is 7 days.

That is an increase by a factor of around 4 or 5.

Drilling cost – Today some operators are declaring $3.8M to frack and 3.0M to drill for total cost of $6.8M.

I’ll guess that is actually lower for some operators.

Early on the costs were about $10M, as I recall.

Look at the math:

  • Early  –  now
  • $10M – $6.8M – drilling cost
  • 550K – 900K – EUR for Bakken
  • $18.18 – $7.50 – amortized cost of drilling spread over EUR, in other words the drilling cost per barrel

Hold the cost constant (which is not a valid assumption since costs will likely continue to drop) and spread that $6.8M over 1.5M barrels and the cost is $4.53.

Astounding.

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