The Bakken ”Red Queen” is restrained with more credit
This post is an update on Light Tight Oil (LTO) extraction in Bakken based upon published data from the North Dakota Industrial Commission (NDIC) as per March 2015.
Extraction developments of LTO from Bakken may be followed by county, formation, vintage of wells, and one important source to understand the developments are coming from studying the developments by companies. Holding this up with companies’ financial statements (10-K and 10-Q) is an invaluable source about the companies, their financial capabilities and their strategies. This information is paramount to understand the developments in LTO extraction from Bakken and provides valuable insights into what to expect of future developments.
To get some understanding of what will drive future developments, it is helpful to look at individual companies.
Amongst all the companies operating in Bakken I selected for this post to present a closer look at 3 of the biggest companies in Bakken; Continental Resources, EOG Resources and Whiting Petroleum.
These 3 companies were found to be representative for several of the companies with regard to a range of variation in quality of wells, development strategies, use of debt, asset sales and not least what their responses to oil price changes may reveal.
- For Q1 – 15 the companies involved in LTO extraction in Bakken used an estimated $4 Billion(CAPEX) for well manufacturing and an estimated $2.3 Billion was from external sources, primarily from equity and asset sales and assuming more debt.
The “average” well with around 90 kb [90,000 barrels] of flow in its first year is estimated to have an undiscounted point forward break even (that is a nominal break even with 0% return for the well)at around $60/Bbl (WTI). - The break even price increases with increases in the return requirement.
- This analysis shows that the companies have deployed different strategies as responses to the decline in the oil price, which will affect future developments in LTO extraction.
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