Williston Basin powerhouse Whiting Petroleum plans to test an untapped and highly prospective oil formation within the Bakken petroleum system known as the Lower Bakken Silt.
Sandwiched between the already producing Middle Bakken and Three Forks formations, Whiting says the “Silt” is situated in the central portion of the Williston Basin, and is “primarily present” at the company’s Hidden Bench prospect in North Dakota’s McKenzie County, James Volker, Whiting’s chairman and chief executive officer, said in a recent presentation to analysts.
Whiting said it identified the zone through extensive core sampling, which “demonstrated high oil in place and may significantly increase reserves in this area.”
The company is so confident about transforming the Silt into production that it plans to invest millions of dollars “bracketing” the formation with as many as eight wells above and seven wells below the Silt. The wells, to be drilled on 160-acre spacing, might even improve current production from the Middle Bakken zone, the company said.
Previous ‘Silt” drilling failedWhiting said it previously attempted to drill into the Lower Bakken Silt but ran into difficulties when the drill bit got stuck in the formation.
“So our approach here is essentially to drill both above it in the Middle Bakken and below it in the Three Forks and essentially frack simultaneously to develop this zone,” Mark Williams, Whiting’s senior vice president of exploration and development, told analysts March 4 at the Raymond James Institutional Investors Conference in Orlando, Florida.
“It represents a tremendous resource for us as we go forward in developing this,” he added.
He told analysts that Whiting’s field strategy is now focused on opportunities for two types of development: finding new zones to exploit, such as the Lower Bakken Silt, and increasing the density of wells on existing production.
Whiting’s Pronghorn Sand discoveryWhiting, a noted explorer and a major Williston Basin producer, is generally credited with discovery of the highly productive Pronghorn Sand zone in southern North Dakota, at the company’s Pronghorn prospect in Stark County. The zone lies above the Three Forks and below the Lower Bakken Silt.
This year the company also is targeting its Pronghorn and Hidden Bench fields, along with its flagship Sanish field in Mountrail County, with well-density programs, in an effort to strengthen production.
Sanish, one of the first Middle Bakken discoveries in the basin, alone represents nearly 40 percent of Whiting’s total production; and, by spacing wells closer together, the company believes it may be able to boost the oil recovery rate 15-17 percent from its current 10-11 percent.
Sanish well-density projectTo this end Whiting plans to initiate a pilot well-density program at Sanish during the first half of 2013. If successful, the company said, this could add an additional three Middle Bakken locations per 1,280-acre spacing unit. The company also plans to refracture several wells in the field this year.
At Pronghorn, Whiting plans to drill six Pronghorn Sand wells per 1,280-acre spacing unit, which is up from the company’s initial plan of three wells per spacing unit.
“At Hidden Bench … we have the opportunity not only to do higher (well) density, but to develop that Lower Bakken Silt zone,” Williams said.
Production up 22 percentMeanwhile, Whiting reported record total production of 82,540 barrels of oil equivalent per day in 2012, an increase of 22 percent over output of 67,890 boe per day in 2011. However, when adding back the 4,500 boe per day of production that was conveyed to the Whiting USA Trust II in March 2012, the company’s overall production in 2012 was up 28 percent over 2011.
Seventy-three percent of Whiting’s total production comes from the Rocky Mountain region, with more than 60 percent coming from the Bakken, Pronghorn Sand and Three Forks formations in the Williston Basin. According to a report published by Petroleum News Bakken, derived from per-pool output published by the North Dakota Industrial Commission, at 66,155.7 barrels per day Whiting-operated wells produced the most oil in December, although the company came in second to Continental Resources on the amount of oil it owned from December production in North Dakota.
“The development of the fields we discovered in 2011, such as Pronghorn, Hidden Bench, Tarpon and Redtail, generated excellent results in 2012,” said Volker.
Pronghorn’s ‘exceptional’ resultsThe Pronghorn and Lewis & Clark prospects, located in the southern Williston Basin and encompassing 262,974 net acres, had average fourth-quarter 2012 production of 13,430 boe per day, a 10 percent increase over the 12,190 boe per day in the third quarter. In the Pronghorn field alone, Whiting said it experienced “exceptional” drilling results in the fourth quarter, including eight wells with 24-hour initial production rates exceeding 2,000 boe per day.
Western Williston Basin, which in addition to Hidden Bench includes the Tarpon, Missouri Breaks and Cassandra prospects, represents a total of 183,508 gross (114,732 net) acres. Production from this region averaged 5,120 boe per day in the fourth quarter, a hefty 47 percent increase over the 3,485 boe per day average in the third quarter.
Whiting noted that Tarpon produced the third highest well flow rate (Federal 21-4-3H) in the history of the Williston Basin — 6,879 boe per day from the Middle Bakken interval. The company also began pad drilling at Tarpon with immediate plans to drill three wells off each pad.
At Missouri Breaks, located in McKenzie County and Richland County, Montana, Whiting said it drilled successful wells on the western, eastern and southern portions of its acreage totaling 95,928 gross acres (66,095 net). In late October, Whiting completed the Amber Elizabeth 9-4H in the Middle Bakken flowing 1,315 boe per day. This was the first well drilled in the eastern portion of Missouri Breaks, the company noted.
Sanish output jumps 40 percentNet production from the Sanish field averaged 31,081 boe per day in 2012, a whopping 40 percent increase over 2011 levels, the company reported, adding that output was 32,590 boe per day in the fourth quarter, an increase of 4 percent over the third quarter’s 31,400 boe per day. Whiting noted completion of the Fladeland 14-33H, which was completed in the Middle Bakken flowing 3,220 boe per day. This wing well’s 7,279-foot lateral was fracked in a total of 22 stages.
Whiting said it identified more than 50 vertical Red River prospects at its Big Island play, consisting of 172,464 gross (122,389 net) acres in Golden Valley County, North Dakota, and Wibaux County, Montana. Additional 3-D seismic is being shot on the northwest portion of Big Island to identify any more prospect locations, the company said, noting that estimated ultimate recoveries for wells range from 200,000 boe to 300,000 boe. And the wells have an estimated completion costs per well of just $3-$3.5 million, the company said.
3-D shoot at StarbuckThe company also is conducting a 283-square-mile 3-D shoot at its Starbuck prospect to identify “seismic anomalies” in the Upper Red River “D” zone. The company holds 104,508 gross (92,277) acres in the Starbuck prospect, located in Roosevelt County, Montana.
Whiting development areas outside the Williston Basin include the Niobrara Redtail prospect in the Denver Julesberg Basin in Weld County, Colorado, and the Big Tex prospect in Pecos County, Texas. The company also operates enhanced oil recovery, or EOR, projects at the Postle field in Oklahoma and the North Ward Estes field in Texas, and maintains some production on the Gulf Coast and in Michigan.
Whiting reported proved reserves totaling 378.8 million boe, a 10 percent increase over 345.2 million boe of proved reserves at year-end 2011. This equates to 246 percent reserve replacement, or 74,331 boe in net reserves added. Adding back barrels conveyed to Whiting USA Trust II, proved reserves were actually up 13 percent.
Of the total proved reserves, an estimated 81.5 million boe were added through exploration and development activities, representing a 68 percent increase over the 48.6 million boe added from these activities in 2011, the company noted.
Capex hits $2.1B in 2012Whiting’s capital expenditures totaled $2.1 billion in 2012, or about $212 million above its initial $1.9 billion budget. The increase was attributed to a higher level of both operated and non-operated drilling activity. In total, the company completed 192.9 net wells during the year versus a projected 160 net wells.
Whiting’s 2013 capital budget is $2.2 billion, which the company expects to fund largely though operating activities, barrowing under its credit facility and “certain” unidentified oil and gas property divestitures. Of the total budget, $1.9 billion is earmarked for exploration and development activities, $108 million for land, $178 million for facilities and $150 million for well work and miscellaneous.
More than half of the capital budget, or $1.142 billion, is for the “Northern Rockies”, which includes the western and southern Williston Basin, the Sanish field and Red River plays.
Based on this level of spending, Whiting forecasts company-wide production of 33.8 million boe for 2013, an increase of 12-to 16 percent over 2012 production of 30.2 million boe.
Whiting was operating a total of 24 drilling rigs on its properties as of Feb. 1. Twenty were located in the Williston Basin. Over the past three and a half year, the company said it has been able to reduce average drill times from 38 days to 18.5 days per well in the Sanish field and from 35 days to 17 days per well in other field throughout North Dakota.
“Drilling procedures are being modified to utilize pad drilling technologies to further reduce drilling time and costs per well,” the company said.
Robust drilling inventoryWhiting projects a total inventory of 9,661 gross (4,503.2 net) potential future drilling locations, consisting of 7,556 gross (3,623.3 net) primary locations and 2,105 gross (879.9 net) prospective locations supported by successful exploration drilling or extensive geoscience. Of the total gross, 50 percent are located in the Williston Basin’s Bakken and Three Forks plays and 25 percent in the company’s Niobrara Redtail play in Colorado.
“At our 2013 pace of 175 net wells annually, this equates to 18 years of drilling from only our Williston Basin and Central Rockies locations and 26 years of drilling, including our prospective locations,” Volker told analysts during presentation of Whiting’s fourth quarter and year-end 2012 financial and operations report.
On the financial front, Whiting reported $81.4 million in net income on $577 million in revenues for the fourth quarter of 2012, compared to net income of $62.6 million on $400.4 million in revenues for the fourth quarter of 2011. The company posted full-year 2012 net income of $413.1 million on $2.2 billion in revenues, compared to $490.6 million in net income on revenues of $1.9 billion for full-year 2011.