Alta. Bakken uneconomicCosts foil MT Heath, Alberta Bakken; some conventional plays promising Mike Ellerd For Petroleum News Bakken
A recent study conducted by the Wall Street research firm Bernstein Research on emerging shale plays in Montana and Wyoming found that the Heath play in central Montana and the Alberta Bakken play in on the Rocky Mountain Front in northwest Montana have very low potential and are currently highly uneconomic. Those conclusions are consistent with the views of Montana Department of Natural Resources and Conservation’s Board of Oil and Gas Division Administrator Tom Richmond.
In a report released on April 12, Bernstein Research concluded that “with close to 30 wells in the play and a lack of sustained production to justify horizontal drilling costs,” the Heath play, which generally spans portions of Golden Valley, Musselshell and Rosebud counties in central Montana, “is not likely to be a significant value creator.” Bernstein describes the Heath formation as black shale with sandstone lenses that is sandwiched between the Tyler Sandstone on top and the Madison Limestone on the bottom.
According to Bernstein, the Heath is commonly silty and is interbedded with gypsum and coals, indicating a non-marine source rock. Bernstein says operators have reported thicknesses ranging from 100 to 500 feet, but Bernstein also notes that that erosion has occurred at the top of the formation, indicating the formation was unprotected by burial in the past.
The Bernstein report goes on to say that press reports indicate isopach thicknesses of 10 to 40 feet at depths of between 2,500 and 5,000 feet and says these variables imply challenges. “Too thin and too shallow limit the ability to flow successful wells.” Bernstein reports well costs in the Heath at between $4 million and $6 million.
In an interview with Petroleum News Bakken, Richmond says the Heath is an oil shale, and the oil accumulation is very similar to the Bakken, but unlike the Bakken, he says the Heath is not overpressured so it doesn’t have the pressure support. “So you can frack it and produce free liquid hydrocarbons and all that, but you don’t produce very much.” Richmond says there had been four or five operators active in the Heath, but he believes they have all left. “I think they’ve pretty much concluded that they’re not going to make an economic well, at least with current technology. So they’re kind of done.”
Bernstein looked at 11 months of production data from three Heath wells and found estimated ultimate recoveries of approximately 80,000 barrels. At an average well cost of $5 million, according to Bernstein, those EURs imply finding and development costs of $62 per barrel, which requires “oil prices north of $150 per barrel to create value.”
The Alberta Bakken The Alberta Bakken, sometimes referred to as the Southern Alberta Bakken as well as the Bakken fairway, extends from southern Alberta into northern Montana in Glacier, Toole, Pondera, Teton and as far south as Lewis and Clark counties. In Alberta the play transitions into the Exshaw formation and extends north along what is known as the Cratonic platform. The characteristics of the Alberta Bakken are similar to the prolific Bakken in the Williston Basin, but the term specifically refers the formation that lies within the Alberta Basin, not the Williston Basin.
Richmond says the Alberta Bakken is the same age as Bakken and is a similar deposition, but adds that “so far nobody’s found anything worth developing.” He says he doesn’t know if the formation in that area of Montana is mature enough or deep enough to generate oil, but if it has, Richmond notes that nobody has found it.
“Fairway to me means that there is evidence of some type of production, and when you get that far south I’m not sure there really is.” He said Anschutz, Newfield Exploration and Rosetta all were exploring the play on the Blackfeet Indian Reservation, but says all three “have basically pulled up their tent pegs.” In addition, Richmond says, Primary Petroleum was looking at some prospects on the Rocky Mountain Front, but he says he understands they are reevaluating those prospects.
The Bernstein report found results of wells drilled on the Montana side of the Alberta Bakken “have been disappointing.” The report looked at nine wells drilled into the formation which on average peaked at less than 100 barrels of oil equivalent per day and declined rapidly. “These results are extremely uneconomic at well costs quoted for the area of around $7 to $12 million,” Bernstein concluded. The best well drilled to date in the Montana Alberta Bakken according to Bernstein, had a peak 30-day production of 200 boepd and resulted in an EUR of 70,000 boe, which Bernstein says “implies a finding cost of $100 per boe — requiring oil prices north of $200 per barrel.”
On the Canadian side of the Alberta Bakken, Bernstein reports somewhat better results with the top well producing 1,200 boepd in the first 30 days of production. However, the average peak month production for horizontal wells on the Canadian side was only approximately 110 boepd.
Other Montana activity Most of the current oil and gas activity in Montana is in the Williston Basin Bakken and Three Forks formations in Roosevelt and Richland counties. Richmond says Montana obviously doesn’t have as big a resource as does North Dakota when it comes to the Bakken and Three Forks, but adds that there is good production in Montana and the Bakken and Three Forks formations will continue to be developed over for a number of years. In addition, he adds, there are a lot of infill wells that can be drilled in Elm Coulee.
There are numerous other plays in Montana which have seen activity in the past and may well see activity again at some point in the future.
In Dawson and Fallon counties, Richmond says there has been some recent activity in the Red River Formation. There has been talk of pursuing the False Bakken in this area, but Richmond says there is no any activity that he can actually attribute to the False Bakken.
Conventional plays Another play is the Ratcliffe formation, which is one of the basal beds of Madison group that lie above the Bakken formation. The Ratcliffe is prominent in Dawson, Richland, Sheridan counties. Richmond says it’s a conventional play and there has been production in the Ratcliffe since 1951, although presently, he says, there is little activity there. Richmond describes the Ratcliffe as “just another one of the Williston Basin pay zones,” but adds that those multiple pay zones are among the things that make the Williston Basin attractive. “It’s probably a stratigraphic accumulation where it produces oil,” he says, “and those are always a little tough to find without using a drill bit.” He says a lot of production from the Ratcliffe was discovered as part of Red River drilling because they had to go through the Ratcliffe to get to the Red River. Both the Ratcliffe and Red River plays extend down the Cedar Creek Anticline from Sheridan County in the north to Fallon County in the south.
The Nisku formation, also commonly known as the Birdbear, is a conventional play in northeast Montana that Richmond says can produce good wells, although the fields are small. In fact, he says one of the best wells ever drilled in Montana is a Nisku well, which was drilled in a small reservoir but with a real strong water drive.
In terms of economics, Richmond says the Nisku will not be attractive as a large prospect because the initial potentials are somewhere in the 100 barrels per day range for a good well, but he said the wells cost substantially less to drill, and Nisku wells can easily have life spans in the 20-year range with pretty flat curves.
Searching in Garfield, McCone In Garfield and McCone counties, some companies are looking for Bakken prospects, but Richmond says he’s “not one hundred percent sure there’s any Bakken there.” Those counties are north and northeast of the Heath formation and west of Roosevelt County, which is rich in Bakken prospects. Richmond says the farther west one goes in Roosevelt County the more water is produced in oil wells. “It’s kind of on the edge for Bakken, and it’s kind of on the edge for Heath. There might be some of each there but it’s not going to be very thick.”
Farther west, Richmond says there is always some conventional activity along Rocky Mountain Front. It’s relatively shallow, he says, and there are a lot of small operators, but it can be economic. However, the Nisku play is not just limited to northeast Montana, and according to Richmond, there have been successful Nisku wells along the Rocky Mountain Front.
In the Bell Creek field in southern Powder River County, Richmond explains that Denbury Resources is moving forward with a carbon dioxide enhanced oil recovery or EOR operation. He says the CO2 will be brought in through a pipeline from the Lost Cabin CO2 plant in central Wyoming. Richmond says there was good primary production in the Bell Creek field, but water flooding to enhance production has run its course, so the approach is to use CO2. Denbury is developing into a CO2 EOR focused company.
Natural gas activity Typically around half or even more than half of the drilling activity in Montana has been for natural gas, but the low natural gas prices in recent years have suppressed that activity and Richmond estimates that activity is now less than 10 percent of all drilling activity in the state. The gas drilling ongoing is for conventional gas in the Eagle Formation along the Cedar Creek Anticline.
There is a little coal bed methane or CBM production ongoing in the Powder River Basin, but there is limited new CBM development. And CBM is more expensive than conventional gas, according to Richmond, because there of the necessary water handling infrastructure. But if natural gas prices rebound, Richmond believes both natural gas and CBM development in the state could pick up again.
Montana’s O&G future? Richmond believes Montana has considerable prospects for conventional exploration, and he believes companies will eventually come back and look at some of the smaller plays, but adds that “they’re not going to be bottom line plays for major companies” He says the plays will be primarily conventional and structural, “so the fields are going to be relatively small, two or three or four wells, but it’s good, sweet oil.”
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