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Why Investors Should Beware Of The Bakken

Why Investors Should Beware Of The Bakken

Bakken oil rig

It’s the beginning of the end for the Bakken Shale play.

The decline in Bakken oil production that started in January 2015 is probably not reversible. New well performance has deteriorated, gas-oil ratios have increased and water cuts are rising. Much of the reservoir energy from gas expansion is depleted and decline rates should accelerate. More drilling may increase daily output for awhile but won’t resolve the underlying problem of poorer well performance and declining per-well reserves.

December 2016 production fell 92,000 barrels per day (b/d)–a whopping 9 percent single-month drop (Figure 1). Over the past two years, output has fallen 285,000 b/d (23 percent). This was despite an increase in the number of producing wells that reached an all-time high of 13,520 in November. That number fell by 183 wells in December.

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Figure 1. Bakken Production Declined 92,000 bopd (9 percent) in December. Source: North Dakota Department of Mineral Resources and Labyrinth Consulting Services, Inc.

Well Performance Is Declining

Well performance was evaluated for eight operators using standard rate vs. time decline-curve analysis methods. These operators account for 65 percent of the production and also 65 percent of producing wells in the Bakken play (Table 1).

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Table 1. Operators, Cumulative Oil Production, Total Producing Wells and 2012-2015 Wells Used for Decline-Curve Analysis (DCA) in this study. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Estimated ultimate recovery (EUR) decreased over time for most operators and 2015 EUR was lower for all operators than in any previous year (Figure 2). This suggests that well performance has deteriorated despite improvements in technology and efficiency.

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Figure 2. Bakken EUR (Estimated Ultimate Recovery) Has Generally Decreased Over Time. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Figure 3 shows Bakken EUR and the commercial core area in green. The map on the left shows all wells with 12-months of production history and the map on the right, all wells with first production in 2015 and 2016.

 

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