Continental Resources is redefining the Bakken petroleum system, raising its estimated in-place liquids reserves for the play by a whopping 56 percent, or from 577-to 903 billion barrels of oil equivalent. The increase is based primarily on numerous oil-saturated core samples taken at various locations, deep within the Three Forks formation, the company said.
“We’ve added a lot more oil. The question is how much of it is technically recoverable,” Jack Stark, Continental Resources’ senior vice president of exploration, said on the sidelines of the 12th Williston Basin Petroleum Conference, May 22-24 in Bismarck, N.D.
“We are looking at the total Bakken petroleum system,” Stark added. “Before we were looking at pieces of it. The actual definition of the Bakken will be redefined.”
A major producer and the region’s largest leaseholder, with 938,940 net acres at March 31, Continental produced 48,024 boe per day from the Bakken during the 2012 first quarter, more than half of the company’s 85,526 boe per day in total output during the three-month period.
326 billion barrels added
Continental’s recovery rate for the Bakken system on 577 billion barrels of in-place oil, calculated in 2010, was 24 billion barrels, or 4 percent. However, establishing that recovery rate evidently was more certain than trying to figure a new rate for the 326 billion barrels of recently added in-place reserves.
“This was based on how wells were performing, how many we could drill based on 320-acre spacing in areas we felt had the productive capacity,” Stark said of the 24 billion barrel estimate. “That’s really key. It’s not a pie in the sky thing.”
When recoverable estimates were crunched on 577 billion barrels, virtually all company production came from the Middle Bakken and the first bench, or first zone of the underlying Three Forks formation.
Based on core samples from nine of its wells, plus information from two wells drilled by other operators, the company has since added estimated in-place reserves from three lower zones in Three Forks — benches two, three and four.
Production history lacking
The problem? There’s no long-term production history from the second bench, and no production data yet from the third and fourth benches, on which to help establish a reliable recovery rate.
“At this point we don’t know how these wells (will) perform, therefore we cannot put a performance factor to that,” Stark said. “So we’re going ahead and just saying you pick a recovery rate that you are comfortable with, and you can put any number you want to it.”
He added: “we don’t know what the oil recovery factor will be from this rock, but 4 or 5 percent seems reasonable. This is total speculation, but it is based on the fact that there is more oil in place.”
At 4 percent, the recovery on the 903 billion barrels of in-place oil estimate would be about 36 billion barrels; and at 5 percent, recovery would be roughly 45 billion barrels, or more than three times what Alaska’s Prudhoe Bay has produced thus far.
Whiting comments on increase
Jim Volker, chief executive officer of Whiting Petroleum Corp., another large Bakken producer, said he agrees with Continental’s revised estimates, if the additional Three Forks zones prove to be productive.
“I would say that it could be that high,” Volker told Petroleum News Bakken. “What remains to be seen, of course, is when we go horizontal will we continue to see the same kind of economics that we’re seeing in the Middle Bakken and the Pronghorn sand, or will it be less attractive?”
The Pronghorn layer is often attributed to the Three Forks formation, and referred to as the Three Forks-Sanish. But according to some geologists, the Pronghorn is actually part of the Bakken formation directly above Three Forks.
David Roberts, chief operating officer for Marathon Oil Corp., wouldn’t comment directly on Continental’s latest numbers, but noted that since Marathon entered the Bakken play, the company’s own resource estimate for the play has tripled.
“And that largely is the result of improving our completion technology and better understanding of things like the Three Forks,” Roberts told Petroleum News Bakken. “It does not surprise me that as other people are testing various zones ... they are continuing to see more and more growth. But the key thing is that we’re getting better at the actual recovery part of it.”
Core samples dispersed
Core samples that provided Continental with the necessary data to raise its in-place oil estimate are from wells widely dispersed within the Bakken system, in an area measuring about 120 miles by 60 miles, Stark said, emphasizing that “there is variability in the way these zones look.”
“It isn’t like, guess what, it’s identical everywhere,” he added. “It varies, but we’re seeing good continuity in the first and second benches. The third bench is equally widespread but a little more variable in its character as far as dolomite is concerned. And the forth bench is more localized than any of the benches in its development.”
Many operators currently produce oil from both the Middle Bakken and first bench of Three Forks. But Continental and ConocoPhillips are said to be the only companies so far to have drilled producers into the second bench. These wells, located 20 miles apart, have been deemed commercial.
“There are a couple of other operators that have indicated they are going to test the second bench,” Stark said.
Continental is now planning to place a well bore in the third bench of the Three Forks, with the objective of establishing commercial production, Stark said. He did not disclose any plans for the fourth bench.
“We have a unit that doesn’t exist out there today that is producing from four different members of the Bakken petroleum system,” Stark said. “And if they all are producing at commercial rates, that’s very significant.”
Reserve estimates vary
Reserve estimates for the Bakken formation have varied widely dating back to the 1950s. In April 2008, the U.S. Geological Survey estimated the amount of oil that could be recovered using current technology at 3-to 4.3 billion barrels, with a mean of 3.65 billion.
The state of North Dakota also released a report in April 2008 estimating there were 2.1 billion barrels of technically recoverable oil in the Bakken. Various other estimates, including Continental’s, pushed recoverable and non-recoverable with today’s technology even higher. A separate estimate placed the recoverable figure at 18 billion barrels.
Earlier studies, including the 2008 USGS report, did not include estimates from the Three Forks formation and its various zones. However, the USGS is expected to release an updated report next year that includes Three Forks, which many believe will at a minimum double the agency’s earlier recoverable estimates.
“That was one of the reasons, I believe, that they (USGS) wanted to go ahead and do a reassessment, because the Three Forks brought on a whole other reservoir that needed to be considered,” Stark said.
On a related subject, Stark said that because acreage for lease is becoming scarce in the Bakken, “there’s a stage of consolidation going on right now. And Continental surely will participate in that. We will continue to basically acquire properties that look attractive to us, if they come at a reasonable price.”
$1.6 billion in revenues
Based in Oklahoma City, Continental also has a leading presence in the Anadarko Woodford Play of Oklahoma and the Red River units play of North Dakota, South Dakota and Montana. The company reported total revenues of $1.6 billion for 2011 and is on track to triple production and proved reserves from 2009 to 2014. At Dec. 31, the company had 508 million boe in total proved reserves, 39 percent more than a year earlier. Continental currently has 24 operated drilling rigs in the Bakken.
Continental was the first company to complete a paired middle Bakken and Three Forks well (2010), a 24-hour continuous frac (2009), a horizontal well in the Three Forks zone (2008), and a 1,280 long multi-stage frac (2007).
Continental also completed the first commercially successful well in the North Dakota Bakken to be both horizontally drilled and fracture stimulated.
Crude oil and natural gas sales were $552.3 million for the first quarter of 2012, compared with $326.5 million for the same period of 2011.
