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Bakken(ND) Light Tight Oil – Update with Sep – 15 NDIC Data

Bakken(ND) Light Tight Oil – Update with Sep – 15 NDIC Data

After years of following developments in extraction of light tight oil (LTO) in the Bakken, the oil price, studying actual well production data from the North Dakota Industrial Commission (NDIC) and the SEC 10-Q/Ks filings for several companies heavily exposed to the Bakken, a quote from Shakespeare’s Macbeth comes to the fore of my mind:

All causes shall give way: I am in blood

Stepp’d in so far that, should I wade no more,

Returning were as tedious as go o’er:

                                              (Macbeth: Act III, Scene IV)

For me the Macbeth quote very much sums up the predicament many Bakken LTO operators now find themselves in.

Figure 01: The above chart shows developments by vintage in LTO extraction from the Middle Bakken/ Three Forks/Sanish formations in Bakken (ND) as of January 2008 and of September 2015 [right hand scale]. The color grading shows extraction by month. Development in the oil price (WTI) black line is shown versus the left hand scale.

What this study/update present:

  • With the decline in the oil price the average well as from the 2012 vintage will struggle to reach payout and become profitable.
    (The oil price decline reduces the portion of the more recent wells that are on trajectories to reach payout and become profitable.)
  • The 2015 vintage follows the 2014 vintage closely, suggesting that around 20% of the wells of 2015 vintage are on a trajectory to reach payout and become profitable.
  • The underlying decline from the legacy wells is strong. The extraction from all the wells started between Jan 2008 and Dec 2014 declined by close to 440 kb (or about 41%) from Dec 2014 to Sep 2015.
  • Some of the early wells (2008 vintage) have been restimulated (refracked) and the effects are short lived and the economics of this looks questionable, at best.

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