Bakken Shale: Rise and Fall and Rise

Bakken Shale: Rise and Fall and Rise

The Williston Basin Petroleum Conference gathered at the Bismarck Event Center, in Bismarck, North Dakota, on May 19th.

This conference is an annual event, and the titular Williston Basin is a huge geographical area, encompassing parts of three Canadian provinces as well as three US states (Montana and both Dakotas).

The theme of this year’s event was simply stated on the conference’s web site: “Bakken Now.”

That two word phrase expressed the upbeat mood … Bakken now, yet again. Bakken shale is smack in the middle of the Williston, in western North Dakota, and the more than 2500 people who gathered in Bismarck understood.

Geology and Rig Counts

In terms of sedimentation, Bakken shale is buried beneath the Charles Formation, the Mission Canyon Formation, and what is improbably called the lodgepole. There is source rock both above and below the Bakken shale itself.

It is because of Bakken shale that North Dakota rig counts began rising dramatically around 2006. The count dropped off dramatically near the end of 2008, because the rest of the world had decided to throw a financial crisis. But the rig counts never got back down to pre-2006 levels, and rather early in 2009 they resumed their upward momentum, not peaking until 2012.

The average rig count in 2012 was 200. It didn’t so much “peak” (a term that might suggest a sharp fall off) -- as it paused, or plateaued there, for three years. But in 2015, THEN we got the sharp fall off. North Dakota began 2015 with a rig count of 188, and ended it with a count of just 64.  

By April 2016 the number of active drilling rigs was down to 29. That, it turns out, would be the nadir whence revival had to come.

Production figures tend to trail rig counts. Bakken productivity peaked late in 2014 bottomed out late in 2016.

A Rebound amid the DUCs

But on Monday, June 18, 2018 the US Energy Information Administration published its Drilling Productivity Report, which indicated the extent of the rebound since then. The rig count is back up above 50, and new-well oil production per rig is up to 1,470 barrels a day.

By way of comparison, the production numbers put Bakken back into near parity with Eagle Ford, the south Texas play that had been first successfully fracked by Petrohawk in 2008, and that had seemed to leave Bakken firmly in the rear view mirror by 2015.

The Bakken has recovered because producers have been working through an inventory of drilled but uncompleted wells (DUCs). The development of this inventory was a natural result of the market forces of recent years: when prices are low it may make sense to leave an already-drilled well unfracked, coming back to it when the prices rise again.

At the worst of the slump, the Bakken play had two years’ worth of an inventory of DUCs. There is less than seven months of that inventory remaining.

Three Opinions

Ron Ness, president of the North Dakota Petroleum Council, said that the Williston Basin conference “sent a valuable message that our industry has a bright future and that the Williston Basin’s oil and gas resources play a critical role in the world’s energy future.”

Bakken may now have some advantages over the more avidly hyped Permian play, because the region of the Permian is now going through some of the infrastructure-development pains that Bakken has already experienced and grown past. A story in North American Shale quotes Greg Hill, chief operating officer of Hess, saying “If you look at netbacks alone, WTI plus about $2 is what’s going on in the Bakken. If you look at Permian, it’s WTI minus $9 or $10 because of all those bottlenecks. … so, the Bakken is the place to be.”

John Stroud, now of the Stroud Exploration Company who was, from 2008 to 2010, a student at the Colorado School of Mines, gave a more scientific explanation of why it is the ‘place to be’ in his master’s thesis in the latter year: “The Bakken petroleum system contains an enormous amount of oil because of the ‘world class’ nature of its source rock and the low permeability of the surrounding strata, which have prevented expulsion of the oil generated.”  

 

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