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Vol. 19, No. 32 Week of August 10, 2014
Providing coverage of Bakken oil and gas

Full-field development

Oasis Petroleum has plenty of momentum to move beyond holding drill blocks

Mike Ellerd

Petroleum News Bakken

With a year-to-date production growth rate of 10 percent, uplifts from slickwater completions, a nearly complete shift to pad drilling, and noteworthy successes in lower Three Forks tests, Oasis Petroleum remains a front-runner in the Williston Basis as the Bakken-focused independent proceeds with its transition to full-field development.

“The basin has continued to grow and evolve on a number of fronts and Oasis continues to be a leader in operational improvement as we transform our company from holding drill blocks to a manufacturing resource development business,” Tommy Nusz, Oasis chairman and chief executive officer said in an Aug. 6 conference call with industry analysts.

Oasis averaged 43,668 barrels of oil equivalent per day in the quarter, up 6 percent over the first quarter and up 45 percent over second quarter 2012. Oasis has also accelerated its Bakken development in the last year increasing its number of drill rigs from nine a year ago to the 16 that it’s currently operating. And in the second half of the year, Oasis is looking to increase output to between 47,000 and 49,000 boepd.

And looking farther ahead, Nusz said Oasis currently is focused on two key issues: “First, our transition to full field development, and second, improvements in resource recovery through optimized completion designs and understanding of the prospectivity of the full Three Forks column across our position. While movement to full-field development across our 500,000 acres does create some variability on a quarter to quarter basis, we’re extremely proud of the fact that our organization continues to do what we said we were going to do - delivering on our expectations.”

Pad transition

With the company’s transition to full-field development there has been a significant increase in the number of multi-well pads. Oasis President and Chief Operating Officer Taylor Reid said that 45 percent of the company’s wells were on pads in 2013, but now more than 90 percent are on pads. Concurrently, Oasis has increased the number of walking rigs, which now account for 14 of the 16 rigs Oasis is operating, up significantly from the five walking rigs in the summer of 2013.

Reid said the increase in walking rigs has allowed Oasis to minimize rig movements. “We were able to spud more than 40 wells without moving a rig to a different pad during the quarter,” he said, adding that the walking rigs can generally move to a new well location on a pad in approximately 12 hours as opposed to days that it takes to move a rig to a new pad.

Enhanced completion design

Oasis has also been customizing well completions based on rock quality, according to Reid. “We have tailored fluid types, proppant quantities, proppant type and delivery mechanisms to optimize our completions and deliver strong returns across our acreage position,” he said.

However, the largest shift of the company’s completion methods has been its move to slickwater. Given strong results, Oasis is planning to increase the use of slickwater in completing from 20 to 25 percent of its wells in the second half of 2014.

The first Three Forks well that Oasis completed using slickwater is in its Red Bank area in western Williams County where Reid said cumulative production over 45 days resulted in a production uplift of more than 35 percent relative to an offsetting Three Forks well that was completed using the company’s base design for that area using cross-linked gels and 3.5 million pounds of proppant. Reid noted that while it is still early in the testing process, with the encouraging results Oasis is planning to test seven slickwater wells in the third bench of the Three Forks in the company’s White Unit in its Indian Hills area in north-central McKenzie County.

Oasis has seen similar production uplifts in its wells across the basin from increased sand fracturing. Reid said the company expects to complete seven to 10 wells across its acreage with two to three times more sand than the 3.5 million pounds in its base design, i.e., more than 9 million pounds of sand, and with at least 36 stages.

Across the border in its Montana acreage, Oasis completed a well in the Elm Coulee Northeast field in Roosevelt County with slickwater that is producing 35 percent above the company’s Montana type curve. “We are especially encouraged about this well since it is on the far west side of our Montana position,” Reid said, adding that the company will proceed with additional slickwater wells in that area throughout the rest of the year.

Lower Three Forks

In addition to testing slickwater in some of its Three Forks wells, Oasis has had a general focus on the lower benches of the Three Forks formation in 2014. Reid said lower bench wells in the company’s Indian Hills area in north-central McKenzie County and in its South Cottonwood area in western Mountrail County continue to produce within or even above the company’s Three Forks type curve band.

And in the Red Bank area in western Williams County, Reid said a second bench well has produced an average of 1,050 boepd over the first seven days of production.

“While it’s still early time, it’s another strong well at the top end of our Three Forks type curve band, and should significantly expand our economic window for the lower Three Forks benches north and west from the previous limit,” Reid said, adding that Oasis is planning to complete 20 more lower bench Three Forks wells in the remainder of the year.

Driving down well costs

The efficiencies Oasis has implemented in its drilling operations combined with other operational improvements have lowered the company’s base well cost to $7.3 million in the first half of 2014, which includes completion costs using the company’s completion subsidiary Oasis Well Service, OWS, which now has two complete operating crews.

Those cost savings, according to Reid, will total more than $100 million for the year, which he said has enabled Oasis to absorb the higher costs associated with enhanced completion designs without having to increase the company’s capital budget, which for 2014 is expect to total $1.25 billion.

Infrastructure

An integral component of Oasis Petroleum’s transition to full-field development is infrastructure, according to Chief Financial Officer Michael Lou, who said Oasis has long seen that large consolidated operated blocks benefit the building out of gathering infrastructure “creating one continuous system for our project areas.” Lou said Oasis has invested heavily in partnering with third parties to build its gathering infrastructure which he said has enhanced returns “through lower costs, higher cash margins and a higher gas capture rate.”

Oasis now has 96 percent of its wells connected to gas infrastructure. “We have worked hard to connect wells and we are confident in our ability to meet the state (gas capture) regulations,” Lou said.

On the crude oil side, Oasis collects approximately 75 percent of its produced oil through its own gathering system, which Lou said has resulted in oil differentials of 8 percent for the quarter, some of the best in the basin he said. “The tight differentials are attributable to our ability to efficiently move crude between the pipe and rail markets in the basin.”



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