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.

Archive for the tag “Bakken forecast”

North Dakota oil production drops 2.5% in December. Graphs showing impact of lower prices.

In December 2015, crude oil production in North Dakota dropped from a slightly revised 1,181,786 bopd in November to 1,152,280 bopd in December, for a 2.50% decline.

Completed well count was 76, which is a substantial drop from the 119 to 123 range in July through September. From August 2011 through December 2014 there were anywhere from 180 up to 213 rigs running. During that time, the average rig count was 192, by my calculations.

Fracklog is 945 at the end of December, which is a drop from the count during August through November but is higher than any month before that. This is the estimated tally of wells that have been drilled to total depth but have not yet been fracked & completed. As a result these are wells essentially held in inventory pending a price increase of oil.

The February Director’s Cut report indicated oil prices continue to drop, hitting $16.50 a barrel, yes under 17 bucks in February. The director’s expectation is for low oil prices to continue through the third quarter of 2016 with further drop in number of rigs in operation.

As you would expect with the dramatic drop in prices, exploration & production companies are cutting back operations. Today’s news making that point:

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Oil prices – Trends don’t continue in a straight line forever

Thousands of wells can come on line when prices edge up. Photo of two wells about to start production by James Ulvog.

Thousands of wells can quickly be drilled and come on line when prices edge up. Three wells in 9/15 about to start production. Photo by James Ulvog.

Here are three very different articles on the future of crude oil prices.

One of the memorable things I learned in grad school was the idea that you can’t project the current trend of something into the future forever.

Keep in mind that West Texas Intermediate price was somewhere in the region of $100 a barrel in mid ’14. WTI is now about $26. Let me round off some calculations for simplicity. Let’s call that a current price of $30. Let’s call that a year and a half.

So we see a drop of about $70 in 1.5 years. A straight line projection would calculate out as another $45/bbl in another year. Thus, by 12/31/16 WTI price will be  $30 minus $45, or a negative $15. Yes, you read that right. A straight line projection means that oil producers will be paying refineries $15 for every barrel the refiners agree to take off the producer’s hands. Gas prices will consist only of the refining costs, a humongous list of taxes, with an offset for the negative cost of raw material.

You can’t do straight line projections forever.

Here are three superb articles that help me understand what is going on in the world of crude oil…

  • After the Carnage, Shale Will Rise Again
  • Helms predicts oil prices to rise again in foreseeable future
  • Rumors Swirl Around the Saudi Throne

1/18 – Mark P. Mills at The Wall Street Journal – After the Carnage, Shale Will Rise Again / Vast swaths of shale will be profitable with oil at about $40 a barrel, and the nimble industry is ready – If you actually pay attention to my blog, Mr. Mills’ article is a must-read.

Oil prices are quite cyclical. He points out there have been six extremes since the’73-’74 oil embargo. The extremes create turmoil. At the moment we are in the carnage stage of the cyclical extremes.

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How about $60 oil by 12/16 for a strongly contrarian opinion?

 

Photo in Sept '15 by James Ulvog.

Photo in Sept ’15 by James Ulvog.

Somewhere around $60 by December is Harold Hamm’s prediction. If such a comment wasn’t from Mr. Hamm, I would have ignored the article.

Main coverage is at Wall Street Journal:  Continental Resources CEO Sees Oil Prices Doubling by Year End. He thinks Saudi Arabia made a serious mistake by pumping so much oil. That pushed prices way down. It also moved the US to allow exporting crude oil.

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Near-term forecast for Bakken production

Out of focus photo by James Ulvog.

Out of focus photo by James Ulvog.

Amy Dalrymple reports comments by Mr. Lynn Helms on what might happen in the Bakken oil patch over the next six months. Her article is at Dickinson Press on 12/9: Low oil prices for some drillers to sell; but new operators the opportunity.

First point in the article, which drives the headline, is a number of operators have sold 710 wells to operators moving into the state. Obviously the prices are based on what crude is going for now, which means these are long-term bets that prices will be substantially higher in a few years. If those bets are correct, the new players will score big. In the meantime cash-pressed operators are selling off peripheral assets so they can stay alive to focus on core assets.

General directions for 2016

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Drillers get additional year to complete wells. Guess on future production. Recent well count.

In very big news, Million Dollar Way explains NDIC Gives Operators An Extra Year To Bring Their DUCs On-Line; Flexibility On Flaring Also Announced . DUC means drilled, uncompleted. That is well that hasn’t been fracked yet, part of the fracklog.

Currently a well must be completed, or start producing oil, within a year of the drilling being finished or else. The ‘or else’ is the state gives six months notice to complete and if not done in that cumulative 18-month timeframe, the well must be filled in.

The NDIC just gave drillers permission a total of two years to go from finishing the drilling to starting production.

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First guess on long term Bakken production

Photo by James Ulvog.

When I see a rig like that, I see another half million barrels of oil. Photo by James Ulvog.

Time to start accumulating predictions for long-term production of crude oil in North Dakota with the huge drop in oil prices during 2015.

Here’s the first data point:

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50,000 wells to go in North Dakota?

 

Drilling rig in North Dakota. Photo by Melisa Ulvog.

50,000 more wells over the next 25 years? Drilling rig in North Dakota. Photo by Melisa Ulvog.

Guesses on the total number of wells expected to be drilled in the Bakken and Three Forks keep increasing.

8/14 – Amy Dalrymple at Oil Patch Dispatch – 10,000 Bakken wells drilled, 50,000 to go, Helms says – Try this on for size – The wells drilled to this point in Bakken field are one-sixth of the total that will eventually be drilled.

For every well in place, there are five more that will be drilled.

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Crude oil production in North Dakota increases slightly in June ’15 to second highest amount ever

(Shaky videography and editing by James Ulvog)

Production of crude in the state increased to 1,211,180 bopd (prelim) in June from 1,202,615 bopd (final) in May. That is up 8,565 bopd. Only  month with higher average production was December 2014 at 1,227,529 bopd.

production 6-15

Keep in mind the goal of the Saudis when they kicked off the price war was to take Bakken production off the table. I don’t think the results above are quite what they had in mind.

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Peak Oil doctrine is still dead. #40

Previously discussed an amazing article by Mark Perry at Carpe Diem. Post provides yet another reminder that Peak Oil is a failed concept.

Check out the June 23 post from Carpe Diem at American Enterprise Institute:  Bakken updates: 1) Williston as ground zero for the American spirit and 2) Here comes Shale 2.0!

Recoverable oil

The post quotes a correspondent who works for a drilling company and has deep knowledge. This correspondent says the expectation at the beginning of the boom was 3.5% of the original oil in place would be recovered. Industry estimates today suggest the recovery rate is 15-18%. With additional technological developments, the correspondent’s guess is there could be another 5% of the oil recovered.

Get a fresh cup of coffee and journey with me as my little brain processes through what this means.

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Guess on how long Bakken oil will be pumped

A few thoughts on the upside of oil production in North Dakota.

6/14 – Million Dollar Way – A Long Rambling Note on a Bunch of Things Regarding the Bakken – If you are still wondering why I am so powerfully positive on the Bakken, check out Mr. Oksol’s post.

My overly compressed summary:

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More good stuff on the open frontier of energy – 2/25

New frontiers are rough and tumble places. The energy revolution is proving to be no exception.

A few recent articles about crude oil and natural gas which I found interesting:

2/19 – Nature – Study finds relatively low emissions of methane from major US gas fields / After a series of alarming reports, scientists estimate leak rate of about 1% for three major US gas formations – Study by team from University of Colorado Boulder estimates that methane emissions in three major gas fields, (Haynesville, Fayetteville, and Marcellus) averages about 1% of gas that is produced. Range is from 0.18%-0.41% in Marcellus to 2.1% in Haynesville and 2.8% in Fayetteville. Average of 1% is in line with industry and EPA estimates and dramatically less than the 1.5% many critics claim.

2/9 – Wall Street Journal – Oil-Price rebound PredictedRead more…

More good stuff on the Bakken – some drilling expectations and netback prices

Some guesses on drilling activity for 2015. Astounding photos of the state. What it costs to get Bakken crude to market.

1/8 – Dickinson Press – N.D. oil regulator says lower oil prices spell gloom, not doom

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More info from 12/14 Director’s Cut – Indicators for near term

For follow-up to my previous post on October oil production data in North Dakota, check out the Dickinson Press’ discussion of comments from Mr. Lynn Helms:  Prices could plateau production: Hems says 2015 could be tough for oil.

Here are a few tidbits that help me understand what is going on around us:

Mr. Helms, who is director of the ND Department of Mineral Resources, didn’t think oil prices would drop this far.

Article says that on Friday sweet crude prices were $41.75 a barrel in North Dakota and $57.81 on the New York Mercantile.

Graphic at the Bakken Magazine says on Friday the Brent price was $62.05 and Cushing was $57.99. I’m slowly catching on (but you already knew that), so that graphic tells me that the Cushing price is also called the West Texas Intermediate index.

Rig count

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Near term prediction for oil production in North Dakota

Million Dollar Way thinks we will see the monthly production drop in November. Might still see one more record in October before the drop for winter.

Mr. Oksol’s comments from his post, New All-Time North Dakota Oil Production Record… Read more…

Update on a short term production prediction

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(Photo by James Ulvog – 2 pump jacks in operation, 2 more being assembled, 1 workover rig, 1 drilling rig – That site will hold an investment of around $54M or $60M when finished and will produce somewhere between 3 million and 6 million barrels of oil during its useful life.)

Oil production in North Dakota set another record in August 2014. Total production in the state averaged 1,132,331 barrels per day. Production in Bakken only was 1,068,609 bopd. That is a 1.61% increase statewide and 1.70% in Bakken-only.

Very cool.

On 9/23, I described the prediction from Bentek: Another short term production prediction for Bakken. Time to see how that turned out.

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