When will the Bakken boom subside? Are oil companies reducing their investments in the oil-rich Bakken petroleum system? Do they expect production to decline in 2013 or shortly thereafter?
We aren’t going to try to answer all those questions at this time.
But we are going to look to see what the major Bakken well operators are investing in the region in 2013. Is it up, down or the same as last year?
To answer that question we first looked to the three top oil producers — Continental Resources, Hess Corp. and Whiting Petroleum.
Wells they operate produced more than 25 percent of the oil in December from North Dakota’s Williston Basin, home of the Bakken petroleum system. (North Dakota produces more than 95 percent of all Bakken oil, including other formations in the play, such as the Three Forks.)
Together, Whiting, Continental and Hess produced 195,954 barrels of oil out of a total daily average of 768,853 barrels in December.
So what did the Bakken’s “Big Three” say their capital spending would be in 2013, as compared to 2012? And what are their expectations for Bakken production?
Whiting, which averaged 66,156 barrels of oil per day in December from wells it operates, expects its capital expenditures to be about the same in 2013 as they were last year.
It allocated $1.142 billion for the “Northern Rockies,” which includes the western and southern Williston Basin, the Sanish field and Red River units. The number excludes, however, company-wide exploration spending of $82 million, facilities investment of $178 million and $150 million for well work, some of which will make its way to the Bakken.
Whiting is looking at drilling 148 wells in 2013 and is currently running 17 drilling rigs in the region.
And what are the expectations of the company’s leadership?
Praising three Williston Basin prospects for generating “excellent results” in 2012, Whiting’s Chairman and CEO James J. Volker said Feb. 27, “For the foreseeable future, our objective is to generate double-digit production growth while spending close to our discretionary cash flow. Our 2013 capital budget of $2.2 billion (company-wide) is expected to yield year-over-year production growth in the 12 percent to 16 percent range.”
How can you spend the same and get more? The standard answer is that Bakken has moved into development mode, drilling and completion costs have come down and Bakken oil prices are expected to get stronger as differentials improve.
Continental spending moreContinental, which averaged 65,141 of oil daily from the wells it operates in North Dakota, is looking at increasing its capital expenditures for the Bakken.
Its 2013 capex is set at $2.622 billion, with $2.1 billion for North Dakota, $427 million for Montana, plus $63 million for its Red River units.
The company’s 2012 capex was about $2.25 billion.
Approximately 18 percent of the wells Continental operated and completed in 2012 were drilled from ECO-Pads. At Feb. 15, 67 percent of its 21 operated rigs in the Bakken were capable of ECO-Pad drilling and 14 rigs were actively drilling pad locations.
In 2013 it expects to drill 226.2 net wells. In 2012 it completed 173 net wells and drilled 204 net wells.
Hess spending a lot lessHess, which averaged 64,657 barrels of oil per day from wells it operated in North Dakota in December, has set its Bakken capex at $2.2 billion, which is a whopping 29 percent down from 2012 when it was $3.1 billion.
But Hess executives are quick to point out that they drove drilling and completion costs down by more than 30 percent in 2012.
In 2012, the company completed 206 net wells, but actually drilled 176 net wells.
In 2013, it plans to drill 185 net wells but complete 175 of them.
Currently, the company has 15 rigs in the basin.
In a Jan. 30 conference call with analysts, John B. Hess, chairman and chief executive officer, said North Dakota Bakken net production averaged 56,000 barrels of oil equivalent per day in 2012, and is likely to average between 64,000 and 70,000 boe per day in 2013.
“We have built a strong position in the Bakken, which is arguably one of the best shale oil plays in the world,” he said.
Statoil, EOG both spending moreThe next two ranking Bakken producers by operated wells are EOG Resources and Statoil, owner of Brigham Oil & Gas.
Their production — averaging 50,326 barrels of oil per day for Statoil and 46,091 barrels for EOG — combined with the Big Three, represents almost 40 percent of the oil from North Dakota’s Bakken system.
Both companies plan to spend more in the region in 2013; and they are expecting an increase in production.
Together with the top five, the next 20 companies produce nearly 75 percent of the oil from the Bakken. All but three responded, and their comments ranged from “We can’t tell you, we’re privately owned,” to “We don’t break out our Bakken numbers,” to “same” or “up” from 2012. Only two firm’s financials showed they planned to spend less in 2012.
Even those that were privately owned or don’t break out Bakken capex, were mostly upbeat about their plans.
So although it was not a perfect score for the optimists, our assessment is that they prevailed. Investment in the region is still strong.