Top executives at Enerplus Resources made no effort to hide their enthusiasm June 18 when they unveiled results of the latest operational performance from their stakes in the Williston Basin, with Senior Operations Vice President Ray Daniels declaring a “great day” for the company.
He told investors the assessment, which included a detailed analysis of well data within the Fort Berthold Bakken and Three Forks core area, yielded numbers “that are dramatic.”
Chief Executive Officer Ian Dundas said the resource numbers are “consistently getting better over time” with proved plus probable reserves at 105 million barrels of oil equivalent and total working interest original oil in place estimated at 1.5 billion barrels.
The best estimate of economic contingent resources, supported by an independent audit by McDaniel & Associates Consultants, surged to 136 million boe on June 1 from 39 million boe only five months earlier.
The company said the gain reflects a 50 percent increase in its estimated original oil in place, including contributions from the Bakken formation and the first bench of the Three Forks formation across its entire acreage position.
The estimates did not include the third and fourth benches of Three Forks or the upper and lower Bakken shales.
Future drilling locations up 127%
The revisions have allowed Enerplus to increase its future drilling locations by 127 percent to 330 sites - a 16-year inventory - with long horizontal wells accounting for 60 percent of the total and expected to yield from 530,000 to 800,000 barrels before accounting for gas.
That translates into an average well density of seven wells per 1,280-acre drilling spacing unit, with “further upside potential through additional down spacing, higher recovery rates and continued evolution of our well completions.”
Dundas said the economics hang on long well costs of $12 million, and $9 million per short well, although “we’re not doing very many (short wells).”
Daniels said the company’s continued work on resource modeling points to a recovery factor of 15 percent, which could go higher, but “we’re comfortable with that.”
Dundas conceded that although other nearby producers are using higher drilling density numbers “we’re comfortable with where we are ... we’ll see where it goes.”
He also said Enerplus is not interested in “randomly borrowing” to increase the pace of its activity, choosing instead to tie its decision-making to “affordability.”
“The changes in our completion design over the past 12 months have resulted in a 50 percent improvement in capital efficiencies” within the play, Dundas said.
Fort Berthold now accounts for 22 percent of 2014 corporate production of about 100,000 boe per day, 26 percent of proved plus probable reserves and 40 percent of capital spending, which has totaled $1.025 billion, starting with Enerplus’ original entry cost of $600 million in 2009-10.
Dundas said the potential production upside could reach 50,000 boe per day.
Takeaway capacity
For now, Eric Le Dain, senior vice president of corporate development, showed no concern about Enerplus’ ability to access takeaway capacity.
He said there are “no logistical issues to date” that would require the company to make shipping commitments of 10 to 15 years.
Enerplus is currently able to “identify which market we want to be priced off,” based on Alaska, West Texas Intermediate and Brent prices.
“Each month we’re deciding on how and where we flow,” he said, noting that the rail options provide flexibility in accessing markets across North America.
Le Dain said the cost of shipping to the Gulf Coast has come down over the last 18 to 24 months to $16 per barrel from $20.
He said the 550,000 barrels per day of regional pipe capacity available to Bakken producers will grow by 400,000-450,000 bpd after 2015, while rail loading capacity has grown over the past year by 50 percent to 1.2 million barrels at more than 16 unit train facilities.
Enerplus said it is striving to maintain a balanced approach to market commitments, with 13,500 bpd of pipeline commitments in place - 8,500 bpd to Clearbrook and Guernsey and 5,000 bpd of rail related sale commitments providing access to East, Gulf and West Coast netback prices, with the remainder available for sale into competitive available alternatives.
It said a firm commitment of 5,000 bpd has been made to the Sandpiper project for 2016 to Clearbrook.
Gaining on gas capture
The company said it has been “proactively focused on gas conservation,” with 80 percent of its wells connected to gas gathering - a number that will increase by year’s end - and all wells equipped with high efficiency flares as a backup in the event of disruptions.
It is confident about its ability to meet the North Dakota Industrial Commission’s target of 95 percent gas recovery in 2020 and what it describes as a “soft” target of 75 percent by the end of 2014.
