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Vol. 18, No. 11 Week of March 17, 2013
Providing coverage of Bakken oil and gas

Best Bakken well

A record well, highest liquids; COP earmarks $4B for Bakken through 2017

Mike Ellerd

For Petroleum News Bakken

In a liquids-rich play, oil is paramount, and nowhere was that more evident than for ConocoPhillips in the Williston Basin in 2012. Not only did the company’s 2012 Bakken production yield the highest liquids percentage in its product mix of all of its Lower 48 plays, but the company also came in with what is believed to be the highest initial oil producing well ever in the Bakken.

That well, the company’s Brazos 24-34H well, is in the Charlson field in northeast McKenzie County and had a vertical depth of 10,582 feet with a single horizontal extending 4,256 feet into the Middle Bakken formation. It was completed with a 10-stage frack in May 2012, and during the initial 24-hour test in June, the well produced 5,130 barrels of oil, 9.75 million cubic feet of gas and only 206 barrels of water under a flowing pressure of 1,325 pounds per square inch.

According to Alison Ritter, public information officer for the North Dakota Industrial Commission’s Department of Mineral Resources Oil and Gas Division, that 24-hour initial production, or IP, rate of 5,130 barrels of oil per day is, to the best of anyone’s knowledge in the division, the highest IP ever seen in North Dakota.

2012 Product mix

ConocoPhillips’ 2012 average daily Lower 48 production was 457,000 barrels of oil equivalent per day, of which only 5 percent or 25,000 boepd came from the Bakken. However, the Bakken production had the highest liquids content of the Lower 48 unconventional plays at 88 percent, compared to the overall Lower 48 average liquids content of 46 percent.

Of the company’s 25,000 boepd 2012 Bakken production 22,000 bopd were liquids and 3,000 boepd were natural gas (17 million cfpd). Second in Lower 48 liquids content was the company’s Eagle Ford production of 70,000 boepd that had 56,000 boepd of liquids and 14,000 boepd of natural gas (85 million cfpd) for a liquids content of 80 percent. That was followed in third place by the company’s Permian Basin production of 51,000 boepd consisting of 33,000 boepd liquids and 19,000 boepd natural gas (111 million cfpd) for a liquids content of 64 percent.

The Eagle Ford, Permian and Bakken make up ConocoPhillips’ three major plays in the Lower 48.

2012 Bakken production

In the fourth quarter of 2012, ConocoPhillips’ average daily Williston Basin production was 24,000 bopd, down approximately 17 percent from the third quarter production of 29,000 boepd and essentially unchanged from its first quarter production.

For the year, the company’s average daily Bakken production of 25,000 boepd was a 44 percent increase over its 2011 Bakken production.

At the end of 2012, ConocoPhillips had a working interest in 187 Bakken wells, 68 of which were net company wells. According to North Dakota Oil and Gas Division records, ConocoPhillips, listed in that data base as Burlington Resources, brought a total of 44 wells online in 2012, 32 of which are in McKenzie County and the remaining 12 in Dunn County.

The 32 McKenzie County wells that went online in 2012 had IPs ranging from the record high of 5,130 bopd for the Brazos 24-34H well to 962 bopd. The second highest IP ConocoPhillips well in McKenzie County behind the Brazos 24-34H well was 3,591 bopd.

Collectively, all 32 of the McKenzie County wells had an average 24-hour IP of 1,204 bopd. The remaining 12 wells that went into production in 2012 are in Dunn County. Those 12 wells had IPs ranging from 2,846 bopd to 130 bopd with an average of 1,476 bopd.

As of March 13, Oil and Gas Division files indicate that ConocoPhillips had a total of 96 wells on confidential status. Sixty-five of those confidential wells are in McKenzie County, 30 are in Dunn County and one is in Stark County.

Future plans for the Bakken

Since splitting away from its downstream Phillips 66 operations in May 2012, ConocoPhillips says it is emerging as a totally focused exploration and production company dedicated to organic growth. To that end, the company is planning to invest approximately $16 billion in capital expenditures over the next five years across its global operations, and $4 billion of that $16 billion, one quarter, are earmarked for the Bakken. That works out to an average of some $800 million a year that the company is planning to funnel into the Williston Basin through 2017.

In the company’s first investor analyst meeting since becoming what it calls a “new independent,” Chairman and Chief Executive Officer Ryan Lance spoke on March 1 about the company’s growth plan, saying “it is about organically growing this company, growing the production, growing the margins, growing the cash flows and growing the returns.”

ConocoPhillips holds 626,000 net acres in the Williston Basin, 200,000 of which are “right on top of the Nesson Anticline,” according the company’s exploration and production executive vice president, Matt Fox. In addition, Fox said, the company has 400,000 mineral acres that have unconventional development potential.

Fox went on to say that the company is planning to add 45,000 boepd to its Bakken production by 2017, which is an 18 percent compound annual growth rate for the company’s Bakken assets. The company reports incremental finding and development cost for its Bakken production of approximately $20 per boe. ConocoPhillips’ Williston Basin holdings are in Mountrail, Williams, McKenzie, Dunn, Golden Valley, Billings and Stark counties in North Dakota; and in Richland and Roosevelt counties in Montana.

Regarding resources, Fox said the company has more than 1,400 identified drilling locations and 600 million boe of resource in the Bakken, and to date he said ConocoPhillips has only “booked” about 90 million boe. “There’s a lot of growth remaining in our Bakken position.”

At the end of 2012, the company had nine rigs drilling in the Williston Basin, up from the six it had in the basin in 2011. For 2013, it plans to add at least one and possibly two drill rigs to its current rig fleet.

ConocoPhillips has not yet set a target for the number of wells it will drill in 2013.

The global ConocoPhillips

World-wide, ConocoPhillips identifies five “significant” areas where it is ramping up operations between 2012 and 2017. Those areas are the Canadian oil sands, Europe, Malaysia, the Australia-Pacific liquid natural gas play, commonly known as APLNG, and the Lower 48. Of those five areas, the Lower 48 is where the company’s “development programs” are and where it sees its highest production and margin growth. In 2012, ConocoPhillips saw global average daily production of 1.58 million boepd, but by 2017 it wants to see that production increase to 1.9 million boepd.

With this diversity, and in the face of an ever uncertain future, Lance says ConocoPhillips is well positioned going forward. “We are not reliant on one product, one geography, one geology to succeed as a company, and we think that’s an important competitive advantage in this business today.”

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