Marathon Oil Corp., which last December unveiled a major plan to hike annual production by more than 30 percent in 2014 across the Bakken and two other unconventional resource plays in the United States, said it now has the drilling rigs to get the job done.
“We ramped up drilling and completion activity levels … achieving our committed 28-rig program in January,” Lee Tillman, Marathon’s president and chief executive officer, disclosed in remarks that were to be delivered March 24 to the 42nd Annual Howard Weil Energy Conference in New Orleans, La.
Tillman said that in addition to its 30 percent plus production target in 2014 over 2013, Marathon remains confident of attaining longer-term production goals because of “strong resource growth” through well downspacing and optimization. For the period 2012-17, Marathon projects a resource play production compound annual growth rate greater than 25 percent, and a total annual growth rate of 5 percent to 7 percent.
Co-development opportunitiesMarathon also is progressing with evaluating and appraising “co-development opportunities” with the Bakken’s deeper Three Forks benches in North Dakota, he noted, as well as with the Eagle Ford’s Austin Chalk play in Texas.
In Oklahoma’s resource basins, Marathon continues to develop its South Central Oklahoma Oil Province, SCOOP, acreage, while assessing the Southern Mississippi Trend and Granite Wash horizons, “all of which could further expand our current resource estimates,” Tillman said.
Marathon averaged about 144,000 barrels of oil equivalent per day across its three U.S. resource plays in the fourth quarter of 2013, with roughly 40,000 boepd coming from the Bakken petroleum system, up from 38,000 boepd in the prior quarter.
Marathon’s ambitious 28-rig program, up from last year’s 22 rigs covering the three resources plays, is underpinned by 2.4 billion boe of proven and probable reserves — doubled since 2011 — and more than 4,500 net well locations. Since December, rig activity has been increased 20 percent each in the Bakken and Eagle Ford and 100 percent in the Oklahoma Woodford, according to the company.
Bakken gets $1 billion in capexMoreover, greater than 60 percent or $3.5 billion of the company’s 2014 worldwide capital expenditure budget of $5.9 billion is allocated to U.S. unconventional plays. Nearly one-third of the $3.5 billion, or just over $1 billion, is going to the Bakken.
Roughly $1.4 billion is earmarked for conventional North America and international exploration and production assets, including the Gulf of Mexico, Norway, Equatorial Guinea, the UK, Libya and Iraq.
Now that Marathon’s drilling program is up to speed, six rigs are working the Bakken, where 75 to 85 net wells are to be drilled in 2014, along with 20-24 net well recompletions, Marathon cited in its Howard Weil presentation.
There are now “future growth opportunities” to capture 800 million boe in “total resource” on its 370,000 net acres in the Bakken, Marathon said, noting that it had 630 million boe in proved and probable reserves at year-end 2013 compared to 345 million boe at year-end 2011, a hefty 83 percent increase in so-called 2P resource.
The anticipated production gains from these reserves will come by way of additional infill drilling in the Middle Bakken and first bench of the Three Forks, TF1, formation, tapping lower benches of the Three Forks, continued improvement in well completion design, and the addition of “other horizons,” Marathon said.
“Three Forks first bench contribution (is) growing,” Marathon said, adding that its economics are now “consistent” with upper Middle Bakken play.
Bigger slice of the pieTF1 accounted for 23 percent of Marathon’s operated production in 2013, compared to just 3 percent in 2011. Consequently, more TF1 pilot tests are scheduled for this year to further define its potential. Currently, 64 of Marathon’s 400 producing wells are in TF1, with 45 more planned for 2014.
Marathon, as other operators are doing, is testing the “co-development” of Three Forks and Middle Bakken wells in higher density on a single drilling pad. Field work includes testing 320-acre spacing for co-development of four Middle Bakken wells and four Three Forks wells per 1,280-acre unit.
“Early testing at 320-acre spacing (is) yielding encouraging results,” Marathon noted in the presentation, adding that higher density spaced pilots are planned for the second half of 2014 in the Myrmidon and Hector areas of North Dakota.
“In our particular acreage areas which we believe to be very high quality, we’re seeing excellent performance and tight curves from the Three Forks first bench,” Tillman said in February conference call with industry analysts.
Testing lower bench potentialMarathon also is looking at the production potential of the lower benches of Three Forks, with initial focus on the second bench, TF2, in the Myrmidon area, where six company-operated wells are planned for 2014-15. Permitting is currently in progress, Marathon said.
Additionally, Marathon has a working interest in two TF2 and TF3 pilot projects headed up by other operators, OBO, at the Rollefstad and Hartman units and one joint interest pilot, JIP, at the Hawkinson unit.
The Continental Resources-operated Hawkinson pilot already has established TF2 and TF3 commerciality, though additional testing will be required to determine proper well spacing.
Marathon also has managed to dramatically lower drilling costs. During the fourth quarter of 2013, the company’s drilling and completion costs fell about 10 percent compared to a year earlier, even as the company has increased the volumes of stimulation fluid and proppant it is using.
No doubt that performance was helped by the fact the company’s average time to drill a Bakken well improved about 16 percent compared to a year earlier, averaging 15 days spud-to-total depth. This year the company is aiming to further lower completed well costs to $7-7.8 million per well.
Eagle Ford’s ‘future opportunities’In its flagship resource play, the Eagle Ford, there are now “future opportunities” to capture 1.7 billion boe of total identified resource, Marathon said. That will be possible by exploiting the Austin Chalk and other horizons, along with reducing infill drilling from 60-acre areas to 30 acres, increasing the recovery factor through completion efficiency, and the recompletion of existing wells, the company explained.
Wells drilled at 40-and 60-acre spacing in 2013 exhibited higher initial production, IP, rates than wells at 80-160-acre spacing in 2011, Marathon said, noting that early 2014 wells at 40-acre spacing demonstrated even further improvements.
Moreover, zipper stimulations from pads “materially impacted” complexity and improved recovery, the company said, while fluids, volumes, rates, cluster spacing and proppant loading all evolved with spacing. Meanwhile, geologic completions, proppant size, gel loading, sleeve technology and perforation clusters are being tested.
Marathon said initial Austin Chalk wells have proven to be competitive with the Eagle Ford, noting that co-development from five wells produced “encouraging early results.” Two more pilots were to be spud in March, with one or two additional pilots planned for the second quarter, the company said.
During the fourth quarter of 2013, Marathon produced an average 90,000 boepd from the Eagle Ford on its 200,000-acre position.
And though Marathon’s Oklahoma production accounted for just 14,000 boepd in the fourth quarter, the basins hold an estimated 1.2 billion boe of total resource, the company emphasized.