Oasis has delivered substantial growth since our IPO (initial purchase offer), growing from around 5,000 boe’s (barrels of oil equivalent) per day in 2010 to over 50,000 boe’s per day in the fourth quarter of ’14.” That is how Tommy Nusz, chairman and CEO of Oasis Petroleum, began a fourth quarter and year-end earnings conference call with industry analysts in late February.
That order-of-magnitude growth from 5,000 to 50,000 boepd over four years, however, didn’t come about by chance. Bakken-focused Oasis has been an innovator in testing well densities and various completion methods as well as exploring the lower benches of the Three Forks formation across its approximately 505,000 net acres and 405 operated drill spacing units in the Williston Basin of North Dakota and Montana.
On the business side, Oasis has optimized its position as an operator by building two separate fracture stimulation strings through its subsidiary Oasis Well Service which has added significantly to the company’s bottom line. Also adding to that bottom line is the company’s midstream operations through another subsidiary, Oasis Midstream Services.
But like all exploration and production companies operating in a challenging market environment, Oasis plans to spend less capital in 2015 while focusing on its highest return acreage with a new spacing unit development strategy. The company plans to spend $705 million in 2015, just half of what it spent in the Williston Basin in 2014. Of that $705 million, 80 percent is earmarked for drilling and completion and will be concentrated in the company’s Indian Hills core area in north-central McKenzie County and the South Cottonwood core area in western Mountrail County “where we have the highest well productivity, the best predictability in results, the most established infrastructure and the best resolution on full spacing unit development,” Nusz said.
Oasis has set 2015 production guidance at 45,000 to 49,000 boepd over the year, which represents flat to 7 percent growth.
Understanding Three Forks
While other operators in certain areas of the Bakken have seen very positive results from testing the lower Three Forks benches, Oasis had a different experience. After completing approximately 30 wells in the second and third benches of the Three Forks formation across its acreage in 2014, along with “a significant number” of density and well interference tests, Oasis is turning its attention back to the middle Bakken and the first bench of the Three Forks and has revised upward its middle Bakken well inventory while revising the Three Forks inventory downward.
President and Chief Operating Officer Taylor Reid told analysts in late February that one of the company’s goals in 2014 was to “push our understanding of the limits of the lower benches of the Three Forks” across its position in the basin. “Some areas have shown encouraging results while others have been more challenged,” Reid said. “As a result, we have decided to adjust our inventory in the lower benches to reflect our current development plan, which now includes tighter spacing in the Bakken and first bench of the Three Forks.” Reid added that the company believes it can “more effectively drain reserves by drilling more wells focused on the Bakken and the first bench, which will still capture reserves from the lower benches.”
In addition, Reid said Oasis “invested heavily in testing and understanding the fracture patterns and drainage patterns” associated with down-spacing tests and lower Three Forks bench well tests, and based on results of those tests “we have increased our confidence in tighter Bakken spacing.”
Stimulation testing
After beginning multiple completion method testing in 2013, Oasis continued that testing in 2014 “in an effort to enhance returns,” Nusz said. Analysis of those test results, he said, “is pointing us towards focusing our efforts in 2015 on high-volume proppant and slickwater.” He said early results from “high-intensity” completions “look very encouraging.”
Oasis has 20 high-intensity wells completed with slickwater and/or higher proppant loads that are on production in its core area and another nearly 20 producing across its other Bakken acreage. Those wells are outperforming offset hybrid-completed wells by as much as 80 percent, depending on formation and location. Sixty percent of 2015 wells will be completed using slickwater and high-volume proppant.
A leader in gas capture
As reducing flaring of natural gas continues to be a focus of the North Dakota Industrial Commission, Oasis continues to be an industry leader on that front. In North Dakota, Oasis currently has 97 percent of its wells connected to gas gathering infrastructure.
In a panel discussion at the May 2014 Williston Basin Petroleum Conference in Bismarck, Nusz said it is “just good business management in making sure we have the infrastructure in place to handle all of the fluids,” and referred to NDIC’s flaring requirements implemented in June 2014 as “just prudent.”
