Oasis Petroleum Inc. is evaluating not just the optimum number of wells for its Bakken drilling spacing units, but also the logistics of developing full DSUs and improving well economics, Thomas B. Nusz, Oasis chairman and CEO, said in a Feb. 4 conference call.
“Our work is not done but the team executed well on all fronts, setting us up for our first full DSU development projects in 2014,” Nusz said.
With the bulk of its acreage effectively held by production at the end of 2012, Oasis entered 2013 focused on the transition to pad development, incorporating tests of effective downspacing, and measuring resource potential in the lower benches of the Three Forks, Nusz said.
In 2013, the company saw significant growth on multiple metrics including volumes, reserves, acreage and inventory, Nusz said, while continuing to optimize well cost.
Oasis drove its well cost down from $8.5 million in the fourth quarter of 2012 to $7.5 million exiting 2013, Nusz said. In 2013, Oasis completed 136 gross operated wells, eight more than it had budgeted, while spending an estimated $40 million less in drilling and completion capital.
The company lifted its annual production by 51 percent in 2013 to 33,900 barrels of oil equivalent per day with fourth quarter production of 42,100 boepd, as its estimated net total proved reserves grew by 59 percent to 227.9 million barrels, Nusz said.
The company also grew through acquisition.
“We were able to increase our net acreage by 54 percent to 515,000 net acres” Nusz said. “This was largely as a result of the significant acquisitions where the team has done a tremendous job on integrating the assets into our operations, but also where our team was able to high-grade acreage, adding additional interest in our existing operative blocks, as well as new blocks.”
Oasis also expanded its inventory with tighter downspacing and additional lower bench Three Forks wells.
“We now have 3,590 gross operated drilling locations, up 78 percent year-over-year, which provides us approximately 17 years of drilling inventory with our current rig plan,” Nusz said. “The inventory will continue to evolve over time as we find ways to maximize the economics of our 403 operated DSUs.”
Full DSU focus
Oasis focused on the transition to full DSU infield development through evaluation of the Three Forks, infill spacing and optimization of surface operations, said Taylor L. Reid, Oasis president and COO.
“The first component we focused on was the lower bench of the Three Forks,” Reid said. “We cored seven wells through the Three Forks and conducted extensive core and log analysis, and based on those results, developed our Three Forks drilling program.”
Currently Oasis has five lower bench Three Forks wells on production, Reid said.
“In Indian Hills, two second bench wells, the Paul S and the Patsy, as well as a third bench well, the Omlid, are performing in line with Three Forks wells in the area,” Reid said. “On the east side, we have also been encouraged by the results of our first two lower bench completions.”
“In South Cottonwood, the Mangum, our first third bench well in the area, has been on for 25 days and averaged 944 barrels of oil per day in its first seven days and 580 barrels of oil per day since it went on production, in spite of flowing at restricted rates since that first week,” Reid said. “In North Cottonwood, the Bonita, our first second bench well in the area, has been on pump for 25 days; during that time, it averaged about 150 barrels of oil per day at a 73 percent water cut, and in the last five days averaged 180 barrels of oil per day at a 70 percent water cut.”
A profile of increasing oil and decreasing water production is typical of both Bakken and Three Forks wells in the North Cottonwood area, Reid said, and as a result, Oasis is optimistic about the second bench in the area.
North Cottonwood well costs are generally the company’s lowest at about $6.8 million per well, Reid said.
“Given these successful lower bench results on the east and the west sides, we plan to complete approximately 30 lower bench Three Forks wells in 2014,” he said.
Infill density testing
Infill density testing is the second key aspect to understanding the subsurface, Reid said.
“We have 16 of our 22 density tests currently producing,” Reid said. “Results from these tests have been positive, and when combined with our work on oil in place, reservoir modeling and pressure testing, lead us to believe that on average across our position, we will drill approximately 10 wells per DSU.”
Well spacing will vary, depending on the reservoir in the area, Reid said.
“Across our 403 spacing units, we have grouped the inventory into three buckets: the first are spacing units where we expect to drill 15 or more wells per unit; the second are DSUs where we expect to drill 10 wells; and the third, where we expect to drill seven wells,” he said, adding that the DSUs in the three buckets account for 26 percent; 40 percent; and 34 percent of the company’s total 403 DSUs, respectively.
“Keep in mind that these counts include second bench wells only in Indian Hills and South Cottonwood, and no third bench wells in any area,” Reid said.
2014
In 2014, Oasis will focus on four key themes: inventory acceleration, subsurface well density, surface pad operations and cost control, and well performance, Reid said.
Oasis has significantly grown its inventory, and the company has made the decision to accelerate its development, Reid said.
“We are currently running 14 rigs and plan to add two rigs in the middle of the year,” Reid said. “With the additional rigs, we are expecting to average between 46,000 and 50,000 barrels of oil equivalent per day.”
Winter impacts to production combined with a focus on pad drilling through the winter and breakup has set Oasis up for a production profile that is back loaded as in previous years, with about 60 percent of completions occurring in the second half of the year, Reid said.
Oasis has set a total capital expenditure budget of $1.425 billion in 2014.
“With about 90 percent of it going to the drill bit, we expect to complete 205 gross operated wells and 155 total net wells, including non-operated wells, for a 35 percent increase over 2013,” Reid said.
Subsurface well density drives the third theme in the company’s focus list: surface pad operations and cost control.
“The second and third themes go hand-in-hand as the subsurface well configuration dictates the number of wells captured on our pads,” Reid said. “With respect to the subsurface, you will see us drill more and more full DSUs as the year goes on and especially as we move into 2015; this translates into higher density pad drilling.”
More multiwell pads
In its 2014 program, Oasis will spud about 90 percent of its wells from multiwell pads compared to 60 to 70 percent of its wells in 2013.
“With larger pad sizes, we can generate further efficiencies and cost reductions that should drive our well cost to $7.3 million, including the impact of OWS by the end of 2014,” Reid said.
Oasis Well Services, OWS, is a Bakken-based subsidiary of Oasis, offering service lines including fracture stimulation, water treatment, drill pipe rental, tubing rental, water transfer, gas coolers, and other equipment. OWS has been a factor in its parent company’s cost reduction program.
Finally, Oasis will be focused on improving well economics through both cost reductions and completion techniques.
In the search for better wells, the least expensive option is not always the best option, and Oasis is finding that to be true in the case of slickwater fracks.
On the west side of the company’s acreage, early production results from slickwater fracks have performed in the top quartile of wells in certain areas, but there is an offset - slickwater completions cost $1.5 million to $2 million more than typical wells, Reid said, adding that Oasis will perform 15 to 20 slickwater fracks in 2014.
“There is still a lot of work to understand the EUR impacts associated with the fracks, but we are cautiously optimistic that it will result in an increase to well economics,” Reid said. “In addition to slickwater, we continue to test a number of other variants with respect to our stimulation techniques.
“In summary, we have come a long way this year in setting us up for full field development.”
