The successful and arguably legendary completion techniques of Liberty Resources are making a comeback in the Williston Basin.
The company previously held acreage in the Bakken, but at the end of a three-year business plan, it sold its assets to Kodiak Oil and Gas in July 2013 for $680 million. Liberty had demonstrated industry-leading recovery rates with its proven completion techniques, and now has plans to once again out-produce its competitors on 53,000 recently acquired acres in Williams, McKenzie, Divide and Burke counties. Liberty partnered with Riverstone Holdings to develop the Williston Basin in its prior venture, and the two companies have teamed up again, forming Liberty II.
The previous partnership had 43,000 net acres and 29 well completions in the Bakken and Three Forks, producing over 6,000 barrels of oil equivalent per day.
We went in with a three-year plan to develop acreage and prove-up the central basin, and then flip the assets to another company,” President Mark Pearson told Petroleum News Bakken.
Riverstone Partner John Lancaster said, “The (Liberty) team was simply able to extract more oil per wellbore on average than other producers in the region by deploying a proprietary and highly effective pressure stimulation approach. Our strategy in Liberty II is to deploy the same team and capabilities in areas where we think this approach can produce similar outperformance.”
Liberty was also the largest investor in Zavanna during that time, and ran all of its completions, so the two companies shared top spots for the highest-performing wells in the Bakken (see chart). While many top operators saw solid results, all fell short of Liberty. Pearson notes that Zavanna’s results were slightly lower than Liberty because they had wells on 640-acre rather than 1,280-acre spacing units and, hence, shorter laterals.
“When financial people look at what we do, they shake their heads at the rest of the industry wondering why they aren’t copying this,” Pearson said. “That’s just the reality of the industry. People get in their particular way, and they have a cost structure to stay in.”
It’s not all about geologyLiberty developed a model to determine what factors influence production in the Bakken, and found six essential parameters that can calculate projected cumulative oil recovery with amazing accuracy. Of the six, only one is related to geology with the other five dependent on completion techniques.
“If you want to maximize recovery you need to focus on completion parameters,” Pearson said. “Most companies are trying to cut costs on completions and that will have a detrimental effect on their production.”
Liberty’s completion techniques do come with a steep price tag. Pearson said the company is spending $3.4 million to $4 million to complete a well, while many other operators are trying to keep costs to around $1 million. But he said the costs are recovered within two months, and he would argue that this is the area where money should be spent.
“Fracks used to be 10 percent of the cost, but now frack and completion is more than the cost of drilling and some companies have a hard time wrapping their head around that,” Pearson said.
The data show Liberty wells only get better with time. Initial production over 30 days is 10 percent higher than the average in the central basin, then it jumps to 30 percent higher over 180 days and soars to a 56 percent performance increase over one year.
“By no means do we have the best geology, because we got in there late,” Pearson said. “We have a relatively high water cut, but it all comes down to completion.”
Liberty uses a plug and perf completion with a large number of stages, exclusively using slickwater fluid and ceramic proppant.
“When we started using these, we built ourselves a database of every central basin well, how it’s completed, and the production data,” Pearson said. “So we can match our understanding of geology with completion information, production data and benchmark performance of different completions.”
Out of necessity, the company gave birth in 2011 to Liberty Oilfield Services, a hydraulic fracturing company, since there was a shortage of service companies and most were not interested in working with a company not large enough to commit to a full-time contract.
Liberty II will apply its expertise in well completion design and execution within its inventory of approximately 100 Bakken and Three Forks drilling locations throughout the newly acquired acreage. The company acquired the Bakken assets from Sequel Energy, and though the completion strategies will be similar, the business plan is different. It will be a five-year plan, taking three to four years to complete the drilling work.
“Private equity models are always looking to monetize, that’s the nature,” Pearson said. “We’ll draw up all the assets and then look to monetize flowing production from those assets, though we may still operate it.”