Whiting Petroleum isn’t waiting around for higher oil prices. Instead, the Bakken’s top oil producer is forging ahead, completing wells while driving down costs to realize the same kind of payouts that came from prices in the low $80s.
On a Feb. 26 earnings call, Chairman, President and CEO Jim Volker said that Whiting has its sights set on a $6.5 million well cost versus the typical $7-$8.5 million, reminding analysts that drilling a well hasn’t been that inexpensive since the company entered the Bakken.
“Now, we weren’t fracking them as big as we are today. But we do see … the ability to get down there in that same cost range again and yet realize the bump in production that we’ve realized as a result of the improved completion designs,” Volker said. “So I really believe we could have a lower budget and still see some more growth,” he said. “We’re designed and continue to design into 2016 our operations to make money at current oil prices. We’re not postponing completions; we’re not relying on the (oil price) curve to make our operations economic,” Volker continued. “We’re relying on ourselves to make money in the current environment.”
Rapid change, rapid growth
Whiting’s high rate of returns is a result of the rapid change in completion technology and understanding how to best apply it. Senior Vice President of Exploration and Development Mark Williams said crews are distributing stimulations around the wellbore with more entry points accommodated by cemented liners.
“Then if you add to that slickwater or hybrid fracks, which allow us to get fluids out into the formation - especially the areas of high oil saturation - that’s just allowing us to reach out and touch the reservoir a whole lot better than what we were doing previously,” Williams said.
Particularly when planning involves six wells each in the Bakken and Three Forks, he said it is critical to break up the rock around the wellbore to avoid reaching too far with a frack and interfering with adjacent wells.
“So we’re just trying to get a lot more specific in how we’re applying stimulation technology. And my belief is we’re still very much on the learning curve there,” Williams said. “We’ve got another two years or three years of real rapid improvements.”
New Three Forks fracks
Williams said Whiting has seen “great uplift” using cemented liners and slickwater fracks in certain areas targeting the Bakken formation, but the company is excited about its Three Forks program in 2015. Within the Sanish and Parshall areas on the eastern side of the basin, Whiting has “fine-tuned” its completions by doing a “Three Forks-style” frack versus a Bakken frack.
“It’s a little tighter in the Three Forks, and we’ve remapped the Three Forks there and we’re just seeing a whole new renewed interest in our acreage there in Sanish and Parshall,” Williams said. “I think some of the other operators’ off-settings have seen similar things.”
Whiting holds 812,000 net acres in the Williston Basin with more than 7,500 future gross drilling locations in the Bakken/Three Forks. During the fourth quarter, the company completed three productive wells on the Tarpon Federal pad ranging from 4,105 to 6,234 barrels of oil equivalent per day. Sixty and 90-day rates on Sanish field middle Bakken wells average 1,338 and 1,111 boepd. In 2014, the company’s initial production rates increased by approximately 30 percent year-over-year, as did its 30, 60, and 90-day average rates.
Capturing quick payout
Williams said some of the best performers from slickwater fracks in the basin are found in the Polar area in central Williams County, Sanish area of Mountrail County, and Stark and Billings counties’ Pronghorn area. In fact, Whiting plans to start a new program in the Pronghorn in 2015. The company is saving money in the Pronghorn by fracking with a mix of produced water and freshwater which Senior Vice President of Operations Rick Ross, said is bringing “pretty good luck.” The Pronghorn Federal 14-12PH and 11-13PH wells were completed in November averaging 1,524 boepd and 1,303 boepd, respectively.
Volker said about 300 cores have been taken across the Williston Basin and the company’s geoscientists have examined 234 of them, creating a customized database that defends the use of its high returns completions.
“As we go through the year, our costs will continue to come down. We’re very confident, I think, that we will be able to get those down consistently in the $6.5 million range and frankly that’s great economics,” Volker said. “If we’re doing wells that are 700,000 boe (barrels of oil equivalent) and netting $30 a barrel - that’s $21 million. So if we can get those costs down below $7 million, why we’re doing better than 3-to-1 on our money and we’re driving that time to payout pretty close to one year.”
Record-setting 2014
The company announced record total production in the fourth quarter reaching 12.1 million boe, or 131,260 boe per day, which is a 13 percent increase quarter-over-quarter and only included 24 days of Kodiak assets. The full impact of the Kodiak acquisition will be seen in the first quarter of 2015, Volker said, with guidance at 163,000 boepd. The Bakken/Three Forks represented 77 percent of Whiting’s total production in the fourth quarter with 100,870 boepd, but when expanded to include all production within the Williston Basin, the percentage goes to 88 percent. Total production in 2014 reached a record 41.8 million boe, or 114,530 boepd, representing a 22 percent increase over 2013.
“Our initial results on the properties acquired have been rewarding, with our first three-well pad in Dunn County testing an average rate of 3,473 BOE/d per well,” Volker said in a statement. “These wells were completed with a Whiting completion design at a cost savings of approximately $750,000 per well relative to the prior design.”
In the latest data available from the North Dakota Department of Mineral Resources, Whiting took the lead among the top 50 Bakken oil producers in North Dakota in December for operated, non-confidential wells with an average daily output of 128,692 barrels.
Whiting’s 2015 capital budget totals $2 billion with $1.8 billion of it invested in exploration and development activity, $59 million for land and $123 million for facilities. Based on projected spending, Whiting expects to produce nearly 60 million boe in 2015, marking a 42 percent increase over 2014.
“With Kodiak’s full-year production included, 2014 pro forma production was approximately 55.8 million boe,” Volker said. “Thus, while spending at approximately 50 percent of our combined company pro forma 2014 capex rate, we expect to grow production at 6 percent year-over-year.”
Whiting is currently running 16 rigs in the Bakken/Three Forks with plans to drop to 10 by mid-year within the highest rate-of-return acreage.
