Denver-based Bakken operator QEP Resources has achieved sharp gains in well productivity by aggressively pushing proppant levels higher and adding more fracturing stages in its South Antelope well completions core area in the Grail field in far eastern McKenzie County.
In wells QEP completed with 10 million pounds of sand over approximately 50 stages, 90-day cumulative production increased by more than 60 percent, CEO Chuck Stanley said in a February conference call. “We believe this completion design results in a more complex pressure network that should, in turn, lead to a higher percentage recovery of the original oil in place in both the Three Forks and middle Bakken reservoirs.”
In mid 2014, QEP upped proppant loads from approximately 3.3 million pounds to approximately 10 million pounds, while increasing the number of fracturing stages from approximately 33 to approximately 50. Stanley said increased proppant loads in 33 stage wells increased 90-day cumulative production by more than 30 percent relative to offset wells completed with 3.3 million pounds of sand.
QEP will continue its downspacing pilots testing well spacings of 600 and 400 feet while also testing multiple benches of the Three Forks formation, Stanley said.
Falling rig count
QEP is sharply reducing its rig activity in the Bakken.
In February, QEP had five drill rigs in the South Antelope area and one on the Fort Berthold Indian Reservation, down from seven rigs drilling the Bakken in November 2013. The rig count will continue to fall. For the year Stanley said QEP plans to operate two to three rigs in the Williston Basin.
“Our 2015 capital budget reflects a more than 50 percent decrease in rig activity.”
QEP’s midpoint 2015 capex guidance was $975 million, approximately 57 percent of the $1.71 billion spent for exploration and production in 2014. Approximately half of the company’s 2015 capex is earmarked for the Williston Basin where production increased 94 percent between 2013 with 2014.
Fourth quarter 2014 output averaged 54,000 barrels of oil equivalent per day, up 18 percent over the third quarter and 95 percent over the fourth quarter 2013. The fourth quarter production was 95 percent liquids.
“In no uncertain terms we are slamming on the brakes hard, but let me also be clear that we are doing this from a position of strength,” Stanley said. Overall, QEP is “dramatically” cutting its drilling and completion activities, and plans to only drill wells that meet the company’s internal rate of return criteria.
QEP plans to cut its operated rig count from 21 in the third quarter to a count of 10 across its key plays in the Williston, Permian and Uinta basins and the Pinedale Anticline.
At the same time, QEP doesn’t believe it makes sense “to aggressively consume the highest return assets in our portfolio simply for the sake of driving production growth while commodity prices are low and while costs are still coming down,” Stanley said, adding that the company has already seen “significant price responses from service providers and material suppliers,” but “we think there is more room for improvement.”
Transformation
Historically, QEP was primarily a natural gas producer, but in 2012 it began transitioning to more liquids-weighted production. In 2011, QEP’s product mix was 86 percent natural gas, 8 percent crude oil and 6 percent natural gas liquids. In fourth quarter 2014, QEP’s product mix consisted of 52 percent gas, 36 percent oil and 12 percent natural gas liquids.
QEP picked up its core South Antelope acreage in 2012 for $1.4 billion. In 2014, it acquired crude oil development properties in the Permian Basin in Texas for $950 million, while divesting non-core, Midcontinent E&P assets, including the Granite Wash and Woodford Cana.
In 2013, QEP divested non-core E&P assets in the Powder River Basin, San Juan Basin and the Marmaton/Tonkawa plays in the Anadarko Basin.
In December 2014, the company became more of a pure play E&P company with the sale of its midstream business, including its ownership interest in QEP Midstream Partners LP to Tesoro Logistics LP in a $2.5 billion all-cash transaction.
“With the closing of this transaction, QEP has achieved a significant milestone in its transformation to become a more competitive and financially strong independent E&P company,” Stanley said in a news release. “Emerging from this transaction, we believe QEP is well positioned to compete throughout all commodity market cycles as a result of our strong balance sheet, our focused portfolio of both crude oil and natural gas assets and our relentless commitment to creating value for our shareholders.”
