Bakken Explorers 2015: ‘Simplify, standardize, work smarter’Statoil makes exploration a priority despite cutting capex and incrementally reducing activity in the Bakken Maxine Herr Petroleum News Bakken
The Bakken petroleum system is one of Statoil’s three U.S. onshore assets where it is realizing production of nearly 60,000 barrels of oil equivalent per day. The international energy company based in Norway has unlocked tremendous potential in western North Dakota, and despite a large cutback in spending in the U.S., Statoil has greater flexibility in the Bakken, Eagle Ford and Marcellus plays than other areas within its portfolio. The company has, however, slowed activity in the Bakken over the past few years in an attempt to find “the right balance,” according to Chief Financial Officer Torgrim Reitan.
“We see good value in waiting with some of the drilling currently,” he told the audience at Capital Markets Day in London on Feb. 6. “What we also see is that our cost related to drilling and completions are coming significantly down. And it’s extremely important to be able to take care of the hydrocarbons … particularly in environments like this, when it comes to infrastructure and so on.”
He added that a few years ago Statoil invested around $4 billion a year in the U.S. onshore but it is now significantly below half of that total.
Exploration is the core of business While it may have limited some investment to the area, Statoil is committed to exploring the Bakken. Eldar Saetre, who officially shifted to his new role as president and CEO on Feb. 5 following the departure of Helge Lund in 2014, said he won’t make any changes to Statoil’s overall strategy since “it has served us well and is wisely designed for the future.” So exploration will remain a key component of Statoil’s business.
“We’d like to continue with exploration at a high level. We want to be an exploration company also in the future, and we want to be as successful in the future as we’ve been in the past,” Saetre said. “So this is important for us for the longer-term value creation to keep up a decent exploration level. But it’s at the same time, a tightening compared to what we have seen in the last year.”
Saetre is no stranger to the volatility of oil markets and yet is adamant that exploration is at the core of the oil and gas industry. “I’d been through this experience before and we cut exploration massively some years ago in the downturn,” he recalled. “And we were hurt by that for years. So I think it is extremely important that we try to maintain a decent exploration level.”
Topping initial production lists Statoil maintains its stance at the top of the charts for initial production rates from its Bakken/Three Forks wells. In March, Petroleum News Bakken reported that two of Statoil’s Three Forks wells recorded 24-hour initial production rates of 3,454 and 3,302 barrels, respectively. They are located on the same pad in the Todd field of Williams County. A middle Bakken well on that pad also performed well with an IP of 2,638 barrels. Earlier in the year, Statoil also produced 2,490 barrels from a middle Bakken well in the Stony Creek field in south-central Williams County which fetched a top three spot on the state’s IP list.
The company said its exploration wells on a global scale in 2014 delivered at an average of 20 percent more than expected. Statoil is striving for greater cost reductions in 2015, just as it has achieved over the past couple of years. In 2014, costs per barrel of oil were reduced 16 percent from 2013. For unconventional U.S. plays in 2015, the company is aiming for a 30 percent reduction with even greater efficiency effects in 2016. The “main building block” to continue competitiveness is standardizing its processes and targeting technology development, said Margareth Ovrum, Statoil’s head of technology and drilling projects. Statoil has found well results are best with slickwater fracks, having nearly doubled the flow rate and produced three to four times the total volume while keeping proppant amounts about the same as its traditional method of using gelled fluid fracturing.
Growth projections Saetre said Statoil plans to continue growing production with an anticipated increase of 2 percent annually into 2016. It requires lower capital expenditures, capex, and strict prioritization, he said, which is reflected in the company’s 2015 capex where investments were reduced by US $2 billion from 2014. But with total capex at US$18 billion, $3.2 billion is still planned for exploration activity.
“This is not a program of simple cost cutting,” Saetre said. “We are targeting the underlying efficiency challenges of our industry. We simplify, we standardize and we work smarter together.”
A closer look at Statoil Statoil, which operates in 36 countries besides the U.S., entered the Williston Basin in 2011 with its acquisition of Texas-based Brigham Exploration Co. which provided an initial stake of approximately 375,000 net Bakken/Three Forks acres. Statoil owns an extensive gathering system to transport and market resources from the basin, including three oil facilities, seven saltwater disposal facilities, approximately 700 miles of pipelines and 10 unit trains.
One aspect of Statoil’s business that has not gone unnoticed by North Dakota regulators is its track record for safety. The company has not had a serious well incident in almost five years, and North Dakota Department of Mineral Resources staff is quick to note Statoil’s environmental responsibility.
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