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Aug 12 10 6:50 PM
With 143 rigs operating in the state, North Dakota's rig count is closing in on record levels, unseen since 1981. According to the North Dakota Oil and Gas Division, the prior peak occurred in October of '81 when the average monthly count was 146 rigs.
Exploration plays, known for higher concentrations of oil and natural gas liquids (NGLs), have received an ever greater focus over the last twelve months. The rationale for the majority of these projects is compelled by the fact that oil is trading at approximately 17 times natural gas prices, even though the differential in energy produced favoring oil is at a ration of 6:1. Additionally, the markets view the natural gas industry as oversupplied.
E&P firms, coming from oil/NGLs, are looking to rebalance their project portfolios towards a greater mix and are turning in larger numbers to the Bakken shale, primarily situated in ND and well-known for its oil reserves. Operators Continental Resources, Whiting, EOG Resources and Hess are currently using the most rigs in ND. Continental Resources leads the way with a rig count of 20, almost tripling since the beginning of the year.
Although drillers are benefitting from the increased rig count, the additions by the largest suppliers are not growing as fast as the overall count. To us, this would suggest that the smaller drilling firms are experiencing more gains from recent activity than the largest players in the region.
Aug 15 10 10:49 AM
JAN FALSTAD Of The Gazette Staff The Billings Gazette | Posted: Sunday, August 15, 2010 12:15 amResidents of Williston, North Dakota talk about the effect the second oil boom is having on the community and the landowners.
Workers at Fiberglass Structures Inc. in Laurel spray glass onto the end of one of the 17,000-gallon tanks the business builds and sells for use in the oil fields of Eastern Montana and western North Dakota. A second shift will likely be added so the plant can meet demand.WILLISTON, N.D. — Looking over to a badlands butte flanking the shore of Lake Sakakawea, Bev and Bruce Conway, of Williston, N.D., pointed out their truck window to a 30-foot natural-gas flare burning up from a coulee under a brilliant July sky.
“Look at that huge flare! That wasn’t there before,” she said. “That can’t be on our land, can it?”
Indeed the flare, lit that morning after a week of underground hydraulic fracturing to shatter shale 2 miles below ground, burned from a new well on the Conway ranch. The lone well sits 250 yards from the front of her brother’s house and just over the hill from the deck she and Bruce built to start their lake-view retirement home.
The family owns the surface rights to the 360-acre ranch but not the mineral rights.
“We’re so far rural, we remained naively hopeful that they wouldn’t drill,” said Bruce Conway, who retired from the U.S. Air Force.
North Dakota is the fourth-largest producer of oil behind Texas, Alaska and California, and it is expected to pump more than 100 million barrels this year, up 20 million barrels from 2009. And North Dakota just became the nation’s third-most-active drilling state for oil and natural gas.
“We think we’ll issue 2,000 drilling permits this year,” said Lynn Helms, director of the North Dakota Oil and Gas Commission, while Montana is on track to issue 300 oil drilling permits this year.
The activity on the Conway ranch is just one well among 143 drilling rigs, each punching a well a month across western North Dakota.
The unprecedented boom includes an estimated 50 Montana companies working the oil fields in western North Dakota. The atmosphere is one of a race for riches before the boom goes bust again, as it inevitably does. Signs of the boom are easy to see:
Hundreds of heavy trucks rumble down what used to be rarely used rural roads.
Billings-area ranchers are heading east for steady truck-driving paychecks.
ConocoPhillips last month opened a Billings office with 15 employees just for its Williston Basin operations.
A Billings oil service company has purchased 18 more trucks to keep up with demand.
Bainville’s school enrollment has nearly doubled in two years, and the boom is just beginning there.
Housing is so scarce and expensive that workers camp in tents, sleep in their trucks or rent bunkbeds in storage containers.
Development is so rapid that environmental concerns about the million-plus gallons of water needed to hydraulically fracture Bakken shale, which releases the trapped oil and gas, has drawn little attention.
Price drives production
Despite the sweet profits of oil, the bosses at Tractor and Equipment Inc., Fiberglass Structures Inc., and CMG Construction are all keeping experienced, wary eyes on the boom.
Rob Harris hasn’t forgotten buying Fiberglass Structures, which makes tanks to capture the salt brine water pumped up with the oil, on April 1 a quarter century ago.
“On April 2, the oil field went to hell. They dropped pipe and left. The bust hit, and our sales dropped off 50 percent the day after I bought,” Harris said.
Last year, oil prices plummeted again and Harris’ sales fell 20 percent. Now, times are good again and a record year is in sight.
“If things stay on track, and I believe they will, I expect sales up be up 35 percent over 2009,” Harris said.
By hiring another six employees, Harris will add a second shift at his two Laurel plants to manufacture 85 tanks per month instead of 60.
“I’ve got customers telling me the boom is here to stay, maybe for 10 years. But they don’t have the manpower right now to operate all those rigs,” he said.
Like many in what is called the hottest new oil play in the United States, the Conway family of Williston is conflicted about the boom: sad that their ranch, blessed with rare native prairie grasses, has an oil well, but hoping for one of their own.
During the Great Depression, Bev Conway’s grandfather bought mineral rights on 60 acres near Wildrose north of Williston, so the Conways have the power to allow oil drilling on somebody else’s land.
“If they can drill up there, that’s where we’ll get some money,” Bev Conway said.
A nutrition instructor at Williston State College, Conway is grateful for the $1 million fund that oil has brought to campus, offering virtually every student a generous scholarship.
Still, the money comes with plenty of trade-offs.
Oil wells are labor-intensive activities with a steady flow of heavy trucks and workers to service the rigs, featuring fumes and the constant roar of diesel generators.
And while the oil dumps tons of money into the local economy and into the pockets of scores of companies and thousands of employees, there are no riches for surface owners. The Conways rejected the first offer of $6,000, but settled for a one-time $10,000 check allowing use of a quarter-mile of road and six acres of land.
“You don’t really have a choice,” Bruce Conway said. “And this well will last past our lifetimes.”
The race is on
The unimaginable riches and sharp changes sweeping across Eastern Montana and western North Dakota are part of a rush to punch wells in every other section, tying up as much land as possible and beating the clock on the shorter two- to five-year leases being signed.
“The companies are drilling like mad and trying to control the most land by production so they don’t have to go out and buy the same lease over again in this time of competition,” said Williston attorney Greg Hennessy, his desk piled high with oil leases and lawsuits. He also acts as city attorney for Bainville and Culbertson, both of which are seeing more drilling activity.
As horizontal drilling techniques have improved, allowing oil companies to drill in six different directions from the same well site, finding oil in the Bakken field has become less risky and more profitable.
“Five years ago, the wildcatters hit (oil) about 20 percent of the time. But now all that proprietary information has come out, the majors have learned from the small guys’ mistakes and there are virtually no more dry holes,” Hennessy said.
Even with improved drilling techniques, the price of wells that cost $2 million a few years ago has quadrupled.
“That’s a ton of money. But, even at $8 million, a good well can pay for itself in a year or less,” said Williston Mayor Ward Koeser, who used to teach math in Terry. “Where else can you get your $8 million back in a year?”
The rush to drill also is driven by good old-fashioned competition.
“They are like wildcats marking their territory in the forest, trying to control whole sections of land,” said Tom Rolfstad, executive director of Williston Economic Development.
Like many who are unabashedly pro-oil, Rolfstad fills his office with Bakken-boosting literature, including bumper stickers like “Rockin’ the Bakken” and “Frackin’ the Forks,” referring to the Three Forks formation, another oil-rich layer of shale just under the Bakken.
“It’s just a crazy world. You just can’t compare it with anything else,” he said. “It’s all good, as long as the oil keeps flowing.”
For a town booster whose telephone didn’t ring much back when the area was losing so many residents that some outsiders seriously proposed handing the land back to the buffalo, times have changed.
Now Rolfstad fields nonstop calls and text messages from oil players and a who’s-who of worldwide media. Reporters from The New York Times and the Arabic international new organization Al Jazeera recently visited the area to report on a region some have called the Saudi Arabia of the U.S.
“There is so much resource and the success ratios are so strong, I have heard many people say there is at least eight to 10 years of play,” Rolfstad said. “But I kind of wonder if anyone can do it that fast.”
Guessing the price of oil is like guessing what the stock market will do, so nobody knows if or when the economics might either slow or spur on this boom.
“Truth be known, all of us in Montana, we’re blessed with what’s happening in western North Dakota and Eastern Montana,” said Greg Cross, owner of Cross Petroleum, a wholesaler in Billings. “It’s keeping us working. If it was just the economy west of here, we’d be growing a lot slower.”
Along U.S. Highway 2 at the Montana-Dakota state line, a half-dozen scrapers performed a well site ballet.
One dozer, its blade filled with topsoil, yielded to the next dozer. On some farms and ranches, oil storage tanks outnumber the shiny rows of grain bins.
The drill count today doesn’t compare with the last boom because drillers don’t have to put a well atop each oil pool. Horizontal drilling techniques allow them to drill six directions from a single well site. Drillers drill down 2 miles and then go horizontal, running laterals another 2 miles to access oil from shale under two sections of land. Wells can be drilled in a month now, far faster than before, and move on.
Some modern rigs can be loaded onto trucks and hauled to the next site, saving dismantling time.
This is North Dakota’s third oil boom in 70 years, and it’s a beehive swarming back into Eastern Montana. The money from oil, 95 percent of it from the Bakken, generated $2 billion in taxes, leases and royalties for North Dakota’s treasury last biennium.
Tom Richmond, director of the Montana Board of Oil and Gas in the Department of Natural Resources and Conservation, is frequently asked why North Dakota has a hotter boom now than Eastern Montana.
“The shoe’s on the other foot now, but that’s coming around again,” Richmond said.
Sidney’s Elm Coulee Formation, which has 659 of Montana’s 4,451 producing oil wells, was easier to drill earlier this decade, so drilling took off first in Eastern Montana. When that drilling peaked in 2006, the horizontal drilling methods had improved enough to tackle the harder-to-drill North Dakota Bakken shale and the activity moved across the border. Now, that same advanced technology is coming west again to reach oil in Montana shale outside Elm Coulee, Richmond said.
“We’ve already got 45 permits issued in the last three months in Roosevelt County,” he said.
Last year, Montana issued 80 oil drilling permits. But this year, the state has issued 132 permits in six months and should top 300 by the end of 2010, Richmond said.
Water and power
Fracking is thirsty work, with each drilling rig using 1 million gallons or more of fresh water. The Williston Basin is pulling water from Lake Sakakawea, the fifth-largest man-made lake in the U.S.. Water is also being pulled from Lake Trenton near the confluence of the Missouri and Yellowstone rivers, where explorers Lewis and Clark camped two centuries ago. Williston is considering piping water north to Tioga and south to Watford City to aid the drillers.
“This is a man’s river. There’s a lot of water in the Missouri, no matter how big a straw you put into it,” Rolfstad said.
The Missouri River reservoir is at flood stage now, thanks to plentiful rains. But for the last decade, boaters couldn’t easily access the reservoir because of long-term drought that eventually shrunk the Missouri to a river narrower than before the Garrison Dam northwest of Bismarck, N.D., was built 60 years ago. Forests of willows grew on the dry lakebed and a herd of moose moved in to dine. Then the heavy rains raised the lake by about 40 feet.
Because of a lack of pipeline capacity, oil must be trucked from the wells and hauled to railroad loading facilities. EOG Resources (Enron Oil and Gas) constructed a massive oil transfer facility and an office complex for 70 employees in Stanley, 45 minutes east of Williston. Hess Corp. is building a rail-loading complex at Tioga, where the first North Dakota oil was discovered in 1951. And a grain-loading facility by Fairview’s railroad tracks now loads oil.
The oil industry also has tremendous appetite for electricity. The Mountrail-Williams Electric Cooperative has built a second transmission line and towers for a third are lying prone in fields along U.S. Highway 2.
“Three years ago, they needed 30 megs (megawatts) of electricity. They’re at 83 megs now and expect to be at 350 megs by 2025,” Rolfstad said.
Oil is once again bringing opportunities and wealth to the region, the Williston mayor said. Halliburton’s chief executive officer flew to town in July and promised to invest more than $30 million in the area this year, Koeser said.
“But we need help with our infrastructure,” he said.
And the mayor said he needs to find solutions to dodge the bitter endings of the last two oil booms, where the companies dropped pipe and left town in a rush, sticking local taxpayers with millions of dollars’ worth of improvements to roads, bridges, housing and other services planned or built to accommodate the oil industry.
But perhaps this time is different.
“We could be drilling for oil for 40 to 50 years. It may take that long,” Koeser said.
How hot is this well?
By fall, a pipeline should be connected to the well on Conway’s ranch to capture the natural gas and eliminate the flare.
While picking juneberries near the well, the Conways talked about the weeds the development has been bringing to the native prairie grasses. And they wonder whether the well is hot enough to lure more drillers to their rural paradise.
Williston attorney Chuck Neff said any well that shoots flares as high as the one on the Eide/Conway ranch probably is a major well, producing up to 3,000 or more barrels a day.
When the well came in July 28, drilling consultant Arlin Fischer told the Conways that North Plains Energy of Denver wouldn’t know for a couple of weeks how much oil the well could produce. But then he said the company was flying in some investors from California that afternoon to take a look.
Kevin O’Connell, manager of operations for North Plains Energy, said this is the third well his company has drilled in North Dakota. After drilling the Conway land, the rig was moved to Wildrose for the next try, he said, but he wouldn’t comment on investors’ travel plans or the well.
“Most everybody in North Dakota is requesting confidentiality for six months,” he said.http://billingsgazette.com/news/local/article_ec036d1c-a80c-11df-9ec2-001cc4c002e0.html
Aug 15 10 11:47 AM
JAN FALSTAD Of The Gazette Staff The Billings Gazette | Posted: Sunday, August 15, 2010 12:10 amTractor and Equipment Inc. of Billings has hired five more workers this year and is looking for another six to service the rapid growth in the oil fields straddling the Montana-North Dakota border. Nick Schneider, who handles parts and service from Billings, said T&E has 37 workers servicing oil rigs and wells around Williston, N.D.
WILLISTON, N.D. — Tugging at his King Ropes cap, Greg MacCarty laughed about his unexpected career shift to truck driver in the oil fields of western North Dakota after 35 years ranching with his wife, Vickie, near the Pryor Mountains south of Billings.
Despite long days hauling scoria rock to new drilling sites and the challenges of getting a nighttime pizza in Stanley, N.D., MacCarty has no complaints.
“I make more money than I’ve ever made in my life. I never made any money ranching, which is a great way to live, but it’s got very marginal money,” he said.
On a tornado-sighting evening in late July, MacCarty was one of three Billings men refueling their trucks in Stanley, east of Williston along U.S. Highway 2. They had finished another 500-mile day servicing the oil fields for a Billings company, CMG Construction Inc.
Along with an estimated 200 oil companies from around the world, CMG and Tractor and Equipment Inc. of Billings and Fiberglass Structures Inc. of Laurel are just three of dozens of Montana and Wyoming companies pumping up their profits from oil and natural gas in the Williston Basin.
Some of the major refiners also are involved. ConocoPhillips, which has been active in the basin for decades, recently brought 15 employees to Billings and opened another Williston Basin operations office. ExxonMobil just purchased XTO Energy, a player in Montana and North Dakota.
The boom has helped one startup Billings business grow faster than the founders ever expected, especially while much of the rest of the country suffers thorough a sharp recession.
In 2004, three construction pros from the former JTL Group started CMG. In six years, the company has grown to 200 employees, including 46 in North Dakota, and so far this year it has purchased or leased another 18 belly dumpers, tankers and tractor-trailers.
Company President Scott Chester laughed, saying he and his partners have been too busy to even erect a company sign at their headquarters behind T&E on the Frontage Road to Laurel.
CMG joined the oil scene in North Dakota only this year, but oil already accounts for a quarter of its sales and is expected to climb to one-third next year. But, like most businesses trying to hire qualified people in the oil fields, CMG is advertising across the country.
“The unemployment rate is zero for the folks who want to work,” Chester said.
Housing is so scarce that CMB bought 20 acres near Stanley and moved in housing from Pierce RVs in Billings for its workers.
Oil field work is an intense, highly capitalized game. So much money is at stake — up to $8 million per well sits on the table as a diamond-tipped bit punches through shale 2 miles underground — that companies and workers are basically on-call.
“We’ve always been in a performance industry where they want it now no matter what. The only difference is, the oil field runs 24 hours a day, seven days a week,” Chester said. “They may call at 2 in the morning for a water haul.”
CMG’s Mack Long said the company has built loyal customers through reliable performance.
“It s just a bigger scale and a bigger symphony. You still have a conductor, but the symphony is grander,” Long said.
The booms and busts
The intense demand for right-now service by qualified workers also is boosting business at T&E, a major Caterpillar dealer on the West End of Billings with seven stores in Montana, Wyoming and North Dakota.
Nick Schneider started as a diesel mechanic fixing Caterpillar equipment and now manages parts and service out of Billings.
In early 2009, even as the U.S. economy continued to tank, Schneider noticed the oil field activity ramping up, especially around Williston.
“More people in the store, not having enough people to fix things. That increased demand led to opportunity,” he said.
Schneider opened T&E’s Williston store during the second oil boom in the winter of 1982, and the paint had hardly dried on the walls when the boom went bust. By spring, Schneider had to lay off workers, the first layoffs he knows of since T&E started in Sidney in 1929.
So far this year, T&E has hired five more workers for the Williston Basin and is hiring at least that many more. But as busy as things are, this third oil boom hasn’t yet matched the second bonanza, Schneider said.
“At the height of the last boom, we peaked out with 65 employees over there and 35 technicians. Today we have 18 techs and 37 employees,” he said.
Fiberglass Structures Inc. runs two plants in Laurel and is about to hire another six employees, for a total of 19 new workers this year, to add a second shift so the company can build 85 fiberglass tanks a month for the oil fields.
But the boom depends on oil prices.
In 2008, oil hit unheard of highs around $140 a barrel and was predicted by some to reach $200. Instead, oil tanked to below $40 a barrel last year.
“The oil field is notorious for making poor people rich and rich people poor,” CMG’s Long said.
Plenty of play left
North Dakota may soon surpass its record 148-active rig count set in 1981. At least 45 new drilling permits have recently been issued for Eastern Montana and the demand for millions of gallons of water, sand, scoria, pipe, electricity, technicians and tankers to haul the crude to market seems insatiable. The Bakken Formation and a potentially even richer oil shale formation below, the Three Forks, could keep the oil patch booming for five years to even 50 years, experts say.
But nobody really knows.
“If the price of oil stays up, they drill faster. If the price goes down, they quit drilling,” Chester said.
The Montana-Dakota oil industry has a foreign flavor this time, especially with China and India affecting the markets, T&E’s Schneider said.
With the oil boom moving into Richland and Roosevelt counties in Montana’s northeastern corner, riches will come again to some people lucky enough to own mineral rights and those servicing the boom. For them, life will get easier from a hard-scrabble life of cows and wheat where an “industrial site” meant a dozen shiny grain bins lined up on the prairie.
Despite the top wages, some workers get tired of the “work-eat-sleep” monotony of oil jobs. In June, Culbertson-area natives Al Stanford and Bob Royan quit their truck-driving jobs and switched to remodeling houses so they could live closer to home.
When he has some down time, Pryor rancher MacCarty drives 6 1/2 hours home to his Montana ranch. But Bob Royan ranched near Culbertson until the land was sold and he had to move on.
Over lunch at the Wild West Diner in Culbertson, with big trucks rolling by from wells to the north, Royan and Stanford said they’ll probably go back to oil wages come winter, a return spiced with some reluctance.
“You know what the oil field does to towns?” Royan said. “It makes everybody greedy.”http://billingsgazette.com/business/article_d220ad14-a808-11df-8041-001cc4c002e0.html
Aug 15 10 12:15 PM
Posted: Sunday, August 15, 2010 12:00 am
Western North Dakota and, to a lesser extent, parts of Eastern Montana, are racing through the third oil boom since the first well struck black gold in 1951 near Tioga.
Imagine today’s beehive of activity:
• More than 200 oil and oil service companies working in the Bakken oil fields.
• Hundreds of 8,000-pound, five-axle tractor-trailers hauling crude, scoria, water and other supplies and equipment, each driving hundreds of miles a day. Each truck creates wear and tear on roads and bridges equal to more than 9,000 cars.
• Jobs for another 2,000 workers around Williston, N.D., a city of more than 13,000.
• Signing bonuses of $300 to $400 to attract workers to lower-paying, fast-food jobs.
• Companies racing to drill a well every two sections or 1,280 acres, which ties up the adjoining land.
• Halliburton Co. expanding its Williston office and shop complex and hauling Olympic Village dormitory housing from Vancouver, British Columbia, to Williston for some of its estimated 600 workers.
• Workers sleeping in their trucks, tents or even storage containers passing as homes.
• Three new hotels are planned for Williston, a city with eight hotels and motels.
• For the first half of this year, Williston issued nearly 56 residential building permits totaling $9 million. In comparison, Billings with nine times more people issued 129 single-family permits for nearly $24 million.
• Williston is North Dakota’s ninth-largest city and it generated nearly $216 million in sales taxes for the first three months of 2010, the third-highest total in the state.http://billingsgazette.com/news/state-and-regional/montana/article_425925de-a809-11df-ad6c-001cc4c002e0.html
Aug 15 10 12:23 PM
Gazette Staff The Billings Gazette | Posted: Saturday, August 14, 2010 11:45 pm
While enjoying a summer night at the cabin on the shores of Lake Sakakawea 20 miles east of Williston, N.D., attorney Chuck Neff spotted massive lights illuminating a once-dark bluff. The full moon hanging low in the prairie sky paled in comparison.
“I got in my truck and drove up over the hill to see what was going on. It was lit up like ‘Close Encounters of the Third Kind,’ ” Neff said, referring to a 1977 movie about extraterrestrials visiting Devils Tower in Wyoming.
The industrial lights were part of a weeklong hydraulic fracturing or “fracking” operation on a pad with some 50 water tanks hooked together.
Water is mixed with sand and some chemicals and then pumped at high pressure into the well bore to shatter the Bakken shale formation, which can be as hard as a driveway. The “fracking” creates fissures that free up trapped oil and natural gas to flow up to the well bore.
The Bakken, and the oil-rich Three Forks Formation underneath, lies in the heart of the Williston Basin sweeping south to Dickinson, N.D., up into Canada and over into Eastern Montana.
A horizontal drilling method punches a hole as deep as 2 miles into the Bakken, a thin 100-foot horizontal layer. North Dakota laws allow at least one rig every 1,280 acres of land, so drillers can tie up two sections of land by drilling down 2 miles and over 2 miles. Six horizontal legs can be drilled from one well site, effectively draining the oil out of two sections of land.
The directional driller, often in a faraway city like Denver, uses GPS and computers to “geo-steer” the diamond-studded drill bit. When it’s deep enough, the bit turns 90 degrees and roots its way horizontally another 2 miles to hit the “sweet spot” some 30 to 40 feet into the Bakken layer.
The “fracking” process can take four to five days per well and use more than a million gallons of water.
Pipelines are in short supply, and four or five wells need to be producing in an area before a pipeline is laid to capture the natural gas that flows to the surface with the oil. Until there are pipelines, oil companies are allowed to flare or burn off the gas.
There are dozens of flares burning across western North Dakota. Montana has pipelines to almost all of its wells, according to Tom Richmond, division administrator of the Montana Board of Oil and Gas in the Department of Natural Resources and Conservation,
MDU Resources Group’s Williston Basin Interstate Pipeline Co. announced in May that it is expanding its natural-gas pipeline capacity by 33 percent in northwestern North Dakota to handle the Bakken demand.
Increasingly refined hydraulic fracturing and horizontal drilling techniques have doubled Montana’s oil-and-gas production, Richmond said.
In the United States, approximately 35,000 wells are “fracked” each year and 1 million wells have been developed without documented harm to groundwater, he said. There are three protective cement barriers around the drilling pipe and problems have occurred only when the casing isn’t done correctly, he said. Oil in the Bakken lies well below groundwater supplies.
But increasing concerns are being raised about “fracking.”
A June HBO documentary called “Gasland” shows some of the impacts of “fracking” in Pennsylvania’s Marcellus natural gas drilling operations, including one homeowner striking a match and lighting gas seeping through a water faucet.
In June, the Wyoming Oil and Gas Conservation Commission unanimously required drilling companies to tell the state what chemicals are used during “fracking.” Also in June, the U.S. Environmental Protection Agency started a study of the potential effects of this technique on public health and water supplies.http://billingsgazette.com/news/state-and-regional/montana/article_ec487374-a809-11df-bdda-001cc4c002e0.html
Aug 20 10 8:11 AM
In 1951 a significant oil discovery was made on the Bakken Formation, which is a very old geological deposit occupying about 520,000 square km of the subsurface of the Williston Basin, covering parts of Montana, North Dakota, and Saskatchewan. Efforts to produce the oil have historically met with difficulties.The greatest Bakken oil production comes from the Montana Elm Coulee Oil Field, where production is expected to ultimately total 270 million barrels. Three years ago, production from Elm Coulee averaged 53,000 barrels per day which was more than the entire state of Montana had produced earlier in the decade.An April 2008 USGS report estimated the amount of technically recoverable oil within the Bakken Formation at 3.0 to 4.3 billion barrels and the state of North Dakota has also released a report which estimated that there are 2.1 billion barrels of technically recoverable oil in the Bakken.A rekindled oil boom developed in 2007 when EOG Resources (NYSE:EOG) reported that a single well it had drilled into an oil-rich layer of shale below Parshall, North Dakota was expected to produce 700,000 barrels of oil. This combined with oil drilling tax breaks enacted by the state of North Dakota in 2007, shifted exploration activities in the Bakken from Montana to the North Dakota side.
Last month, North Dakota overtook Oklahoma’s position as the third most active oil drilling jurisdiction in the United States and last year North Dakota similarly eclipsed Oklahoma to become the fourth largest oil producer in the U.S. Additional positive news for the oil interests within the region came yesterday, as a recent ruling by the state Public Service Commission will mean Montana oil companies have a better shot at putting their oil in a proposed pipeline from Canada to the Gulf of Mexico. TransCanada Corp. (TSE:TRP), was seeking multistate approval for a 1,980-mile Keystone XL pipeline, facing political pressure to let Montana and North Dakota crude oil into the pipeline. The Governor for Montana, Brian Schweitzer issued very optimistic comments, “Montana oil producers who don’t have access to a pipeline have to pay as much as $15 to $30 a barrel to ship it by rail. A pipeline is a much cheaper way to move crude and would make Montana oil more competitive”.
There are a number of publicly traded oil and gas companies that have drilling rigs in the Bakken region.
Marathon Oil Corporation (NYSE:MRO) holds 336,000 net acres in the Bakken Shale in North Dakota. Peak net production of approximately 22,000 barrels of oil equivalent per day (boepd) anticipated by 2013. Analysts have pointed out that Marathon Oil has generated an average of 85 percent of its revenue from refining and profit from the upstream division was weighted by taxes and royalties. As a result, the company has traditionally been valued much more like a refiner than a true integrated oil company. Its price to sales ratio of 0.4 is much closer to the independent refiner multiple than the 0.7 average afforded to the integrated companies that Marathon counts as its peers.
Rosetta Resources (NASDAQ:ROSE) has 239,000 net acres under lease in the Alberta Basin in the Cut Bank field. The company has drilled three test wells here to date and has been encouraged by the results. Rosetta Resources has demonstrated good results at several different formations besides the Bakken, including the Lodgepole, Three Forks and the Nisku. The company will decide how much capital to allocate here sometime during the current quarter.
Primary Petroleum (CVE: PIE) holds approximately 110,000 net acres in the Alberta Basin Bakken Fairway in western Montana and 20,000 net acres in the Saturn prospect in eastern Montana. Last month the company announced that it has had significant interest in its Montana prospects and has commenced presentations to potential industry partners.
Brigham Exploration (NASDAQ:BEXP) has nearly 84,000 acres in Montana that the company feels is prospective for the Bakken Shale and Three Forks formation. The company has budgeted for one well in 2010 on its Montana acreage. Brigham Exploration Company said it would test out both the Bakken and Three Forks formation in this well, and that the formations here have properties similar to that of its Rough Rider acreage. The executive management team will be presenting at Enercom’s 2010 Oil & Gas Conference in Denver on Monday, August 23.
Continental Resources Inc. (NYSE:CLR) is developing acreage in Montana near the Elm Coulee field. The company has 163,500 acres here and has allocated $43.5 million in capital in 2010 to develop this acreage. Continental Resources recently drilled the Rognas 2-22H, which produced at a seven day average rate of 841 barrels of oil per day. Earlier this month the company announced solid second quarter results, highlighted by strong, organic production growth and a net income increase. The company’s objective is to monetize non-strategic assets and maintain operating and capital discipline in accelerating production growth.
With help from Assistant Editor Vivien Dinizhttp://oilandgasinvestingnews.com/957-montana-and-north-dakota-oil-exploration-and-production.html
Aug 26 10 1:11 PM
"The Bakken and Three Forks formations in the Williston Basin are expected to be significant long-term sources of crude oil production growth," said Stephen J. Wuori, Executive Vice President, Liquids Pipelines, Enbridge. "The Enbridge system provides a low cost solution for shippers to access prime U.S. markets including the Great Lakes region of the Upper Midwest and the Midcontinent refinery markets connected to Cushing, Oklahoma. Our ability to provide segregated service also ensures that producers maximize the netback from their high quality, light sweet Bakken crude oil production. Finally, the integration of the Bakken Expansion Program with the Enbridge mainline will provide long-term guaranteed access to prime markets in the United States."
Enbridge's proposed Bakken Expansion Program includes several separate yet complementary projects. When completed, this program will provide another 145,000 barrels per day (bpd) of incremental pipeline capacity from new receipt locations in the Bakken and Three Forks formations in North Dakota to interconnections with other existing Enbridge systems serving a broad number of refineries in North America.
Enbridge has sufficient binding commitments to proceed with the Beaver Lodge Loop Project and the Enbridge Bakken Pipeline Projects (U.S. and Canada). Through the open season, shippers will have the opportunity to secure firm capacity on these two projects as well as commit to capacity on the SORTI and Dunn Projects.
The binding Open Season begins August 26, 2010, and closes at 5 p.m. MT on October 29, 2010.
Aug 27 10 11:19 AM
It contains hundreds of billions of barrels of light crude oil and thousands of wells and should be scaring the pants off any oil exporter needing high crude prices to balance its budget.It is the Bakken Shale oilfield, which sprawls across two Canadian prairie provinces and two western US states including North Dakota, under 500,000 square kilometres of land.Its US portion is described as the country’s largest oil deposit outside Alaska. With its biggest and most accessible part in Canada, the Bakken could prove to be one of the largest oilfields in the world.
The American Association of Petroleum Geologists says it is the biggest continuous oil accumulation it has ever assessed.“There’s no question there’s a tremendous amount of oil in place in general in the Bakken Shale,” said Bud Brigham, the chairman, president and chief executive of Brigham Exploration, a Houston oil junior that started buying Bakken properties five years ago.“It is very large, onshore and in the US,” said Harold Hamm, the chief executive and chairman of Continental Resources, which is the biggest Bakken lease holder. “We’re going to be drilling there for the next 10 years.”
The company, based in Oklahoma, reported a 93 per cent increase in its second-quarter oil production from its fields in North Dakota, driving a 37 per cent increase in total output.The geologist JW Nordquist discovered the Bakken in 1953. He described it as an “Oreo cookie” arrangement of hard dolomite rock sandwiched between two darker shale layers. For decades, petroleum geologists thought the Bakken shale was the source of the oil pools in the wider Williston Basin. But in 1999, Leigh Price, a geochemist working for the US Geological Survey (USGS), wrote a paper proposing that most oil from Bakken shale was still trapped in the Bakken Formation. He suggested the “cream” in the cookie contained up to 500 billion barrels of crude, making it a prime exploration target. It is the dolomite “filling” that contains the oil causing all the excitement today, although that oil may have originated in the surrounding shale.
Mr Price died in 2002, before his paper was published. The USGS was sceptical and for years refused to release the report and their review of it. In the meantime, an independent petroleum geologist, Richard Findley, had reviewed drilling logs from abandoned Bakken wells and surmised that their operators had missed the pay zone by drilling right through the hard rock between the two shale layers. He interested Lyco Energy, based in Texas, in his theory. Lyco brought in the services company Halliburton to try out what were then new technologies: horizontal drilling; and hydraulic fracturing.
In eastern Montana in 1997Findley, Lyco and Halliburton discovered the Elm Coulee oilfield. It now pumps about 50,000 barrels per day of light, sweet crude and is considered a small part of the Bakken field.Further research by geochemists and geologists not associated with the USGS has largely vindicated Mr Price, although estimates of Bakken oil in place have ranged from 10 billion to 500 billion barrels. The most recent, stemming from sophisticated computer modelling, suggests 300 billion to 400 billion barrels could be realistic.
But oil in place is not the same as recoverable oil or reserves. Dolomite is a hard, dense rock with tiny pores, which makes the oil difficult to extract.In 2008, the USGS estimated that about 4 billion barrels of oil could theoretically be produced from the US Bakken with current technology It represents enough oil to satisfy US consumers for about six months – hardly a game-changer.But the Bakken is still in the early stages of development. Technology is advancing, so actual oil recovery could vastly exceed initial estimates. Already, Canada’s Crescent Point Energy has tested a fracturing and water-flood regime that boosts recovery from wells in Saskatchewan to 30 per cent of oil in place.
“These mainly untapped resource pools provide Crescent Point with over 5,000 drilling locations and the potential to add over 500 million barrels of reserves,” Scott Saxberg, the company’s president and chief executive, told the Calgary Herald newspaper.“It’s unique that it’s light oil, and in our back yard, and it’s low cost,” he told Canada’s National Post.Costs for producing oil from the relatively shallow wells required to tap Bakken oil pools have fallen to about $5 per barrel, compared with tens of dollars per barrel for extracting tar-like bitumen from Canada’s oil sands and chemically converting it into synthetic light crude.Big pipeline developers such as the Canadian company Enbridge are expanding their networks to accommodate more oil from the Williston Basin.The horizontal drilling and fracturing techniques that Halliburton pioneered to unlock the mid-continent oil treasure are the same technologies that in 2007 spurred a US gas-drilling boom. The effects of that have rippled around the world, weighing not only on North American gas prices but also on international markets for the liquefied natural gas now shipped across oceans from states such as Qatar.OPEC producers would do well to remember that; the next threat to oil price stability may come not from market speculation or renewable energy but from a new North American oil rush."All Is Well"
Sep 13 10 5:47 PM
BILLINGS, Mont. (AP) -- TransCanada Corp. said Monday that it would ship 100,000 barrels of oil daily from Montana and North Dakota under a proposal to allow U.S. crude onto a planned Canadian pipeline.
The Keystone XL pipeline was proposed primarily to transport crude from Alberta's oil sands to refineries in Oklahoma and Texas.
But Calgary-based TransCanada on Monday launched a two-month "open season" to solicit bids from companies that want to tap into its Keystone XL pipeline as it passes through Baker, Mont.
The announcement followed complaints from producers in the Bakken oil field of Montana and North Dakota that they were being bypassed by the new pipeline.
TransCanada Vice President Paul Miller the company plans to invest $140 million in a new project, Bakken Marketlink, that would allow domestic oil onto Keystone XL.
That "onramp" for Montana and North Dakota oil could be in service by early 2013, he said.
The Bakken has been described as the fastest-growing oil play in the country. Production is expected to more than double in coming year.
Yet oil companies in North Dakota and Montana currently sell crude from the region at sharply discounted prices because of a shortage of pipeline capacity
"The Bakken Marketlink is TransCanada's response to this growing demand," Miller said. He added that the size of the project could grow depending on how much crude companies want to transport.
During a news conference with Miller at Montana State University-Billings, Gov. Brian Schweitzer credited TransCanada with giving U.S. companies a new option to move their oil.
"TransCanada has demonstrated, has shifted positions if you will, to embrace these oil producers," Schweitzer said. "The ball is now in the producers' court."
Sep 22 10 5:35 PM
"We have made tremendous progress on our strategy this year," said Gordon J. Kerr, President & Chief Executive Officer of Enerplus. "We have invested over $1.3 billion in two of the best resource plays in North America – the Bakken light crude oil play and the Marcellus shale gas play – expanding our portfolio and significantly improving the future growth prospects of Enerplus. In addition, the sale of the Kirby Oil Sands lease and other non-core conventional assets has allowed us to keep our balance sheet strong and will enable our people to focus on activities that will improve our operations and the bottom line."
Building on our existing Bakken land base in North Dakota, Enerplus has entered into an agreement to acquire an additional 46,500 net acres (72 sections) of land in the Fort Berthold area of Dunn and McKenzie counties in North Dakota. These lands are directly adjacent to our existing land holdings in this area and are prospective for light crude oil in the Bakken and Three Forks formations. The acquisition materially expands our current position to over 70,000 net acres (109 sections) in the Fort Berthold area, the majority of which will be operated by Enerplus with a greater than 90% working interest. Enerplus has proven expertise in this area and recent drilling results have been above expectations. With this acquisition, we now have over 210,000 net acres of undeveloped land with early stage Bakken and Three Forks potential in North Dakota and Saskatchewan in addition to our core Bakken field at Sleeping Giant in Montana.
The acquisition includes approximately 800 bbls/day of light crude oil production and proved plus probable reserves of 10 million BOE primarily attributable to the Bakken formation based upon our internal evaluation. This compliments our existing estimate of eight million BOE of unbooked proved plus probable reserves in this area. The purchase price before closing adjustments is US$456 million and will be funded through Enerplus' existing credit facility. The acquisition is expected to close in October 2010.
Enerplus has been active in the Fort Berthold area since late 2009 and over the past year we have participated in the drilling of nine operated horizontal wells, six of which have been completed to date. The lateral length of these wells has ranged from 4,300 feet with 12 frac stages for the short lateral wells to 9,000 feet with 24 frac stages for the long lateral wells.
Production from the long lateral wells has been limited due to fluid handling capacity.
Our internal assessment of the Bakken potential in this area is approximately five to six million barrels of original oil in place per section. Based upon a drilling density of two wells per section (two long lateral wells per 1,280 acres or two short lateral wells per 640 acres) with an approximate 15% recovery factor, we estimate an additional 50 million barrels of best estimate contingent resources on our combined working interest lands in the Fort Berthold area in addition to the 18 million BOE of proved plus probable reserves. We also believe the lands are prospective for the Three Forks formation for which we have estimated four to five million barrels of original oil in place per section. However, given the limited production data available, we are in the process of evaluating the potential recoveries and development opportunity that may exist in the Three Forks.
The breakeven supply cost to provide a minimum 12% rate of return in this area varies from US $40 WTI to US $60 WTI depending upon the lateral length of wells and recovery. Using current commodity prices and costs, we estimate the internal rates of return on this project range from 40% to over 100%. Based upon these economics, Enerplus will focus on maximizing the number of long lateral length wells. Our type curve assumes that the first 30 day average initial production rate will decline by approximately 80% in the first year.
Current production from our North Dakota properties, including the recent acquisition, is approximately 3,300 bbls/day of light sweet crude excluding the associated natural gas volumes which are not being captured at this time. We expect production volumes to increase to over 5,000 bbls/day by year-end. As the operator, Enerplus has the flexibility to manage the pace of development in this region due to the long tenure of the leases (average remaining life of 7.5 years). We expect to increase our spending in this area by approximately $25 million on drilling and completion activities through the remainder of 2010. We plan to have two rigs actively working in the area. We now estimate that our total capital expenditures in North Dakota in 2010 will be approximately $85 million. As we execute our drilling plans over the next five years, we would expect to see production grow to over 20,000 BOE/day from the Fort Berthold area.
On August 23, 2010, Enerplus closed the acquisition of 58,500 net acres of undeveloped land in the Marcellus shale natural gas play in northwest West Virginia and Maryland. The acreage is predominantly located in Preston County in West Virginia and Garrett County in Maryland creating a new, concentrated land position that Enerplus will operate with an average 90% working interest. Enerplus has now invested over $150 million in the Marcellus shale gas play in 2010 acquiring two key operated areas comprised of approximately 70,000 net acres in addition to the 127,000 net acres of non-operated land that has been acquired since 2009.
These new lands in West Virginia and Maryland are in emerging areas with limited existing development however we believe that the geologic characteristics are similar to Fayette and Somerset counties of Pennsylvania. Early results from offset operators including those of our joint venture interests have been encouraging. While no proved or probable reserves have been acquired, we estimate original gas in place on this acreage of approximately 50 to 60 Bcf per 640 acres.
The concentrated nature of this operated position, together with the long tenure of the leases provides Enerplus the opportunity to control the pace of development and spending. A majority of the leases have two to three years remaining on the original five-year term with an additional five-year extension option at nominal cost. Our initial plans are to shoot seismic and begin the permitting process this fall and we expect to begin drilling in 2011.
Enerplus has captured a meaningful position in one of the best shale gas plays in North America that we believe will provide us with significant production growth over the next four years. To date, we are encouraged by the results of our development plans and current production is approximately 15 MMcf/day. We intend to continue to manage the commodity and asset mix of our portfolio to ensure we have flexibility in our capital spending. We are evaluating the possibility of reducing our non-operated acreage position given the addition of our new operated acreage and in order to maintain a desired level of exposure.
Enerplus has entered into an agreement to sell 100% of its Kirby steam-assisted gravity drainage oil sands lease for gross proceeds of $405 million. We acquired a 100% working interest in the Kirby lease in 2007 for $203 million and since that time have invested an additional $58 million in Kirby to further delineate and identify the bitumen resource on the lease. The 'best estimate' of contingent resources associated with the lease at December 31, 2009 was 497 million barrels of bitumen. The sale is subject to the satisfaction of customary closing conditions and obtaining the necessary regulatory approvals and is expected to close in early October 2010. Proceeds from the sale will be used to retire outstanding bank debt. TD Securities Inc. acted as exclusive advisor to Enerplus on this transaction. Upon the conclusion of this sale, Enerplus' remaining oil sands portfolio will consist primarily of our equity ownership of 4.3 million shares in Laricina Energy, a private in-situ oil sands company that recently completed an equity financing at $30 per share.
Enerplus has also made further progress on our strategy to sell non-core conventional assets in order to improve our focus and operational efficiency. As previously stated, we identified approximately 14,000 BOE/day of production for sale with approximately 3,400 BOE/day sold to date. We recently entered into agreements to sell an additional 2,500 BOE/day of production and 9.3 million BOE of proved plus probable reserves for approximately $158.5 million. This represents sale metrics of approximately $63,400 per flowing BOE of production and $17.00/BOE of proved plus probable reserves including future development costs. This production was comprised of 54% crude oil and natural gas liquids and 46% natural gas located primarily in British Columbia and Alberta from approximately 70 properties. The average operating cost of these properties was over $23.00/BOE with a netback in the range of $19.40/BOE. These sales are expected to close on or about September 30, 2010. FirstEnergy Capital Corp. and RBC Rundle have acted as exclusive advisors to Enerplus on these divestment packages.
We are also in the process of marketing a third package of non-core assets. This package primarily consists of a number of smaller non-operated properties that are gas weighted with lower working interests. Although negotiations are on-going, we believe we will sell a portion of these assets this year through a series of transactions representing approximately 4,500 BOE/day of current production and realize proceeds in the order of $140 million. Scotia Waterous Inc. is acting as exclusive advisor to Enerplus on this divestment package.
We will continue to evaluate opportunities to improve our portfolio however we would expect these last sales will complete the majority of our divestment activities this year. Upon completion of these divestments, Enerplus will have sold over 10,000 BOE/day of non-core production in 2010 for estimated total proceeds of over $900 million including the sale of Kirby.
As a result of these recent acquisition and divestment activities (including the prospective third divestment package) we are adjusting our 2010 production and capital spending guidance. We now expect to exit 2010 with production in the range of 80,000 BOE/day to 82,000 BOE/day with annual average production of 83,000 BOE/day to 84,000 BOE/day depending upon the timing and execution of our development capital plans and divestment activities.
Capital spending is expected to increase by $30 million, totaling $515 million for 2010 with expected outstanding debt at year-end of $850 million. Our financial position remains strong providing us with the flexibility to manage our future capital spending and acquisition plans. Further details on our 2011 spending plans and production outlook will be provided in our 2011 guidance release expected in mid-December.
As a result of our acquisition and divestment activities over the past 18 months, Enerplus has significantly changed not only the composition of our asset base, but also the future growth potential of the company. We continue to evaluate strategic opportunities to enhance our portfolio and intend to maintain a disciplined approach to both our capital spending and our balance sheet.
Sep 28 10 9:01 PM
Although the exploration and production industry is focused mostly on developing the Bakken Shale in North Dakota, the industry is starting to expand development activity into Montana. This scale of activity is nowhere close to the amount of development in North Dakota, but is a logical expansion given the competition for acreage in North Dakota.
Most of the company's activity here has been on a non-operated basis, but Oasis Petroleum is expanding its Montana development and will be more active in 2011 on its own.
Rosetta Resources (Nasdaq:ROSE) is also active in developing the Bakken and only has properties in Montana. The company has 291,000 net acres in the Southern Alberta Basin and has drilled three wells to date to delineate the play. Rosetta Resources plans to drill eight vertical wells through the first six months of 2011 to set up for a more extensive horizontal drilling program later on.
Brigham Exploration Company (Nasdaq:BEXP) has 112,300 net acres that are prospective for the Bakken in Montana. The company is currently focusing its development efforts at the Ghost Rider project in Roosevelt County.
In August 2010, Brigham Exploration Company announced the completion results of the Rogney well in Montana, which produced at a 24 hour peak flow back rate of 909 barrels of oil equivalent (BOE). The company plans another well here in the fourth quarter of 2010.
EOG Resources (NYSE:EOG) also has acreage prospective for the Bakken in Montana. The company completed the Carat 2-33H well in April 2010, and reported to the Montana Oil and Gas Commission that the well had an initial production rate of 264 barrels per day of oil and 150,000 cubic feet per day of natural gas.
Continental Resources (NYSE:CLR) added approximately 63,000 net acres to its holdings in Montana that are prospective for the Bakken Shale. The company estimates that it will spend $55 million in capital in 2010, and recently added a second rig to work here. Continental Resources reported average production of 5,196 BOE per day from the Montana Bakken, and has 11% of its proved reserves here at the end of 2009.
Bottom LineMontana is seeing more activity in the Bakken Shale as the development of this promising play is starting to break out of its core area in North Dakota. This may be the result of intense competition for leases in the core areas of North Dakota. (To learn more, see our Oil And Gas Industry Primer.)
Oct 6 10 12:03 AM
BISMARCK, N.D. (AP) -- The number of rigs piercing North Dakota's oil patch has matched the previous record set nearly three decades ago, with 148 rigs now drilling in the state, officials said Tuesday.
North Dakota surpassed Louisiana last year as the fourth-largest oil-producing U.S. state. Rig counts dropped to about 30 early last year but have rebounded with the price of crude.
The number of rigs currently drilling in North Dakota equals a record set in October 1981, said Lynn Helms, director of the state Department of Mineral Resources.
"I've been watching it and watching it every day but I really didn't think we'd get there until the end of the year," Helms said. "I'm pleasantly surprised."
Modern drill rigs that use advanced horizontal drilling techniques are four to eight times more efficient than rigs that drilled vertical wells in the 1980s. Each active oil rig represents about 40 direct jobs and 80 indirect jobs in North Dakota, state and industry officials say.
Oct 13 10 5:16 PM
Oneok Partners (NYSE:OKS) is making major investments in the Williston Basin to accommodate the large increase in production expected from development of the Bakken and other formations over the next decade. The company detailed these projects and outlined the company's strategy at an analyst meeting held in early October 2010.
Expansion PlansOver the next three years, Oneok Partners will spend up to $355 million to build pipelines and natural gas processing facilities in North Dakota. Most of the funds will be used to build the Stateline I natural gas processing facility, which will have capacity to process 100 million cubic feet per day of natural gas. The company has also allocated funds to expand existing gathering and compression infrastructure in the area.
This was the third expansion notice by Oneok Partners in 2010. In April and July 2010, the company announced its intention to spend $1.1 billion for various projects in the Bakken.
Natural GasOneok Partners owns substantial assets in the natural gas gathering and processing area and is active in six basins in the mid-continent. The company owns 15,000 miles of gathering pipelines and facilities that can process 770 million cubic feet per day of natural gas. Oneok Partners is making investments into high growth shale areas and estimates that by 2013, 36% of its volume will come from the Williston Basin.
The company also owns 7100 miles of pipelines used to transport natural gas across the United States, with capacity of 6.5 billion cubic feet per day, along with 52 Bcf of storage for natural gas. Oneok Partners has a 50% equity interest in the Northern Border Pipeline Company, which operates a natural gas pipelines running from Canada to the Midwestern United States.
TC PipeLines, LP (Nasdaq:TCLP) owns the other 50% of the Northern Border Pipeline Company. A wholly owned subsidiary of TransCanada Corporation (NYSE:TRP) is the general partner of TC PipeLines, LP.
Natural Gas LiquidsOneok Partners also has infrastructure to process and transport natural gas liquids. The company has 549,000 barrels per day of fractionation capacity, as well as storage and distribution assets. Oneok Partners typically will transport unprocessed natural gas liquids from various areas in the mid-continent and then fractionate the liquids into its components in preparation for distribution.
FinancialsThese expansion projects and its other assets are expected to lead to EBITDA growth of 14% to 18% annually over the next three years. The company hopes to use this to increase its distribution by 5- 10% in 2011 and 2012 as well. The stock has a current yield of just under 6%.
Oneok Partners is an infrastructure play on the hyper growth in development of the Bakken and other plays in North America. Some investors may prefer this company to the more volatile exploration and production companies. (For related reading, take a look at our Oil And Gas Industry Primer.)
Nov 1 10 6:21 PM
BISMARCK, N.D. (AP) -- Know-how gained from North Dakota's once-perplexing Bakken shale formation is being used to exploit other onerous oil plays across the globe.
Pushed by high crude prices, companies in just four years have nearly perfected technology to tap oil trapped in a thin layer of dense rock nearly two miles beneath the surface in western North Dakota.
Unlocking the Bakken using advanced horizontal drilling and hydraulic fracturing techniques has propelled the state from the nation's ninth-largest oil producer in 2006 to its fourth-largest today. A record number of rigs are piercing the state's oil patch.
Oil companies and countries a world away have taken notice of North Dakota's success, said Lynn Helms, director of the state Department of Mineral Resources.
Companies say they are aiming to apply technology learned from the Bakken to geologically similar shales in China, France, Poland, Canada and in some U.S. states, including Wyoming, Utah and Colorado. Companies already have used Bakken technology to successfully tap the rich Three Forks-Sanish formation, directly below the Bakken.
"We've become the world research center for unconventional plays," said Helms, who recently hosted a contingent of Polish officials sent to study North Dakota's oil patch.
Initially developed to exploit gas shales, horizontal drilling and hydraulic fracturing were first used in North Dakota early in the decade. They flopped.
"The first attempts were failures, but by mid-2006 we had the first successes," Helms said.
The Bakken, which ranges from a few feet thick to 80 feet, is sandwiched between layers of loose shale. Its rock consists of sandstone and siltstone, with microscopic pores that contain the oil.
To capture the crude, companies drill down nearly two miles then angle the well sideways for about another two miles. A pressurized concoction of water, chemicals and sand is injected to the horizontal portion of the well to break open oil-bearing rock. Fissures, held open by injected sand or ceramic materials, provide a pathway for oil to flow to the well. So-called fracture stimulation can be done a dozen or more times at each well.
Jim Ehrets, a Denver-based geologist with Headington Oil Co., of Dallas, said it was known for more than 50 years that the Bakken held vast oil reserves but the price of oil didn't push demand enough to develop technology to tap it.
Normally secretive oil companies began sharing information amid skyrocketing crude prices, Ehrets said. It was the first time he'd seen that level of cooperation among companies in his three-decade career, and "There's no question it was accelerated by high oil prices," he said.
"The technology has come a long ways in a short time and is very well known now," Ehrets said. "But it continues to be tweaked and fine-tuned."
James Bowzer, a vice president for Marathon Oil Corp., said the Houston-based company has invested more than $1 billion in the Bakken and intends to invest another $2 billion.
Oil companies have pierced the Bakken for decades using traditional vertical wells, Bowzer said. Advanced drilling techniques and hydraulic fracturing have allowed Marathon and others to get oil from the Bakken's rich horizontal layer, like sucking the creamy filling out of a cookie by poking through it only once.
"The geology has always been there and the technology has finally caught up," Bowzer said. "It's no secret anymore. People are openly sharing what they know about drilling technology."
The Bakken also has helped spur advancements in rig and drill bits, which must penetrate "tombstone-type hard rock," Bowzer said. The time needed to drill a well in the Bakken has dropped from 55 days four years ago to about 20 days now.
Marathon intends to use techniques learned from the Bakken to develop similar formations around the world, including in Poland where the company holds an interest in more than 2 million acres atop a shale play that resembles the Bakken, Bowzer said.
Jon Pepper, a Hess Corp. vice president, said his company is experimenting with Bakken technology on its holdings in China and France.
"It appears (the China formation) may be somewhat analogous to the Bakken," Pepper said. "We're seeing if lessons learned from the Bakken may apply there."
Hess, formerly was known as Amerada Hess, is based in New York. Amerada was the first company to strike oil in North Dakota in 1951, using traditional vertical wells.
"We're certainly one of the pioneers in North Dakota, if not the very first," Pepper said.
The company has invested more than $1 billion developing its Bakken holdings and plans to invest another $1 billion annually over the next five years, he said.
"Our core unconventional holding is the Bakken," Pepper said. "That's where we've been operating the longest and where we have plans to dramatically increase production. We're learning lessons there we can leverage around the world."
Ehrets, the Headington Oil geologist, said shale formations worldwide are getting attention largely due to the success in the Bakken, which the U.S. Geological Survey has called the largest continuous oil accumulation it ever has assessed.
"It's logical that with the learned expertise from the Bakken that all of the bigger boys are searching worldwide trying to find the other Bakken," he said.
Nov 4 10 5:11 PM
BISMARCK, N.D. (AP) -- A Texas company is proposing a pipeline that could transport up to 75,000 barrels of crude a day from North Dakota's booming oil patch to U.S. supply hubs in Oklahoma and Illinois.
Plains All American Pipeline LP of Houston said the 103-mile Bakken North Pipeline would run from North Dakota's northwest corner through northeast Montana and to the U.S.-Canadian border. In Canada, it would link to an existing pipeline system capable of carrying crude to Oklahoma and Illinois.
Plains pegged the project at between $160 million and $200 million and wants to complete it in late 2012, company spokesman Roy Lamoreaux said Thursday.
The 12-inch pipeline would begin in Trenton, in northwest North Dakota, at the Bakken shale formation, an oil-rich deposit within the Williston Basin. The U.S. Geological Survey estimates that with current technology, up to 4.3 billion barrels of oil can be recovered from the Bakken formation in North Dakota and Montana.
"We think the geography of this line is favorable," Lamoreaux said. The pipeline would have an initial capacity of 50,000 barrels a day but could be expanded to move an additional 25,000 barrels, the company said.
Lamoreaux said the Bakken North Pipeline would connect with the company's existing Wascana pipeline at the U.S.-Canadian boarder. That pipeline, which had been used to carry Canadian crude to the U.S., is not presently being used.
Under Plains' proposal, the 107-mile-long idle pipeline would take U.S. oil north to storage facilities in Saskatchewan. For there, it would be shipped south on either Enbridge Inc.'s mainline or TransCanada Corp.'s Keystone pipeline to storage facilities in Patoka, Ill. and Cushing, Okla. The price of oil on the New York Mercantile Exchange is heavily affected by oil supplies at Cushing, which typically stores about 10 percent of the nation's oil.
North Dakota was pumping a record 327,000 barrels daily in August, the latest figures available. State and industry officials say the daily production rate could hit 400,000 barrels a day within a year.
The state reached its pipeline, rail and refining capacity of about 189,000 barrels a day in October 2008, slowing rig activity and forcing producers to take steep discounts. Millions of dollars has been invested in North Dakota since then for infrastructure work including new rail shipping facilities and pipeline expansions.
So-called takeaway capacity is keeping pace with North Dakota's oil production but just barely, said Justin Kringstad, director of the North Dakota Pipeline Authority.
The daily takeaway capacity for North Dakota and eastern Montana at present is about 460,000 barrels, including 338,000 that are piped, he said. About 100,000 barrels are shipped by rail daily and about 22,000 are hauled by trucks.
Kringstad said more than $1 billion in pipeline projects are either planned or under way in North Dakota that would add about 321,000 in shipping capacity. Plains' proposed pipeline is in addition to those projects, he said.
Pipeline companies "only build projects when there is demand," Kringstad said. "They are reacting to what's happening on the producing side."
Ron Ness, president of the North Dakota Petroleum Council, said additional export capacity is needed badly in the Williston Basin.
"Plain and simple, this gives producers more options," Ness said. "Adding capacity always helps prices (for producers)."
Nov 14 10 12:44 PM
Nov 15 10 6:45 PM
By 2013, approximately 25 percent of the company's E&P revenue streams are expected to be generated by oil production, up from 7 percent in 2010.
In the sale, Williams has agreed to purchase approximately 85,800 net acres from private owners for $925 million. The acreage is located entirely on the Fort Berthold Indian Reservation, located in the Williston Basin of North Dakota.
The company estimates that these properties represent approximately 185 million barrels of oil equivalent (MMboe) in total net reserves potential in the Middle Bakken and the Upper Three Forks formations.
The sale has an effective date of Oct. 1 and is expected to close by year end, subject to standard closing conditions. The assets in the proposed transaction also include 3,300 barrels per day of net oil production from 24 existing wells.
"This acquisition establishes a significant acreage position in an area which further diversifies, and when combined with our recently acquired Marcellus position, basically transforms our business — both geographically and in terms of our product mix," said Ralph Hill, president of Williams' exploration and production business. "It enables us to deploy available capital and existing technical expertise to a very attractive new opportunity."
Williams' entry into the Bakken Shale play follows its entry into Pennsylvania's Marcellus Shale, where the company has accumulated approximately 100,000 net acres over the past year and a half.
"This latest acquisition gives us a significant position in the best geologic portion of the strongest onshore oil play in the United States, based on our geologic and engineering analysis," Hill said. "The pay thickness, high porosity and amount of hydrocarbon saturation are highly attractive. We are now positioned in three of the country's most attractive growth areas — the Piceance, the Marcellus, and now the Bakken."
In addition to the purchase price, Williams expects to invest additional funds for drilling and development costs totaling approximately $60 million in 2010 and $200 million to $300 million in 2011. The company expects to fund the acquisition and 2010 capital expenditures with cash on hand, including proceeds from the Piceance asset drop down to WPZ. The funding for 2011 will be provided by expected increases in operating cash flows and expected cash on hand.
Currently, there are three rigs operating on these properties. Williams expects to double the current level of drilling activity to six rigs by 2012 and expects the new leases to be producing more than 20,000 barrels per day by the end of 2012.
Steve Malcolm, Williams' chairman, president and chief executive officer, said the company's experience in developing other horizontal shale plays is readily transferable to the Williston Basin.
"Development of the Bakken will be very similar to the low-risk, repeatable nature of the Barnett and Marcellus shales, as well as the tight sands in the Piceance Basin," Malcolm said. "Technological advancements in just the past few years have allowed the play to shift from exploration to resource development.
"We're excited about what this transaction means to the future of our drilling portfolio, as well as the opportunities before us to build new relationships in North Dakota and with the Three Affiliated Tribes — the Mandan, Hidatsa and Arikara — who call the area around these properties home," Malcolm added.
This proposed transaction was not included in the 2010-12 capital expenditure or other guidance provided on Oct. 28. The company will update its guidance when it reports year-end 2010 financial results.
Williams is an integrated natural gas company focused on exploration and production, midstream gathering and processing, and interstate natural gas transportation primarily in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania. Most of the company's interstate gas pipeline and midstream assets are held through its 77-percent ownership interest (including the general-partner interest) in Williams Partners L.P.
Nov 19 10 5:20 AM
Nov 18, 2010
[Dow Jones]--It's likely that there are many other areas that can produce as much oil as the Bakken shale in North Dakota, where companies have been increasing production using horizontal drilling, Adam Sieminski, chief energy economist for Deutsche Bank, says in an energy conference in Houston. Not recognizing that possibility in other shale areas in the US and worldwide could be a mistake for analysts calculating future oil prices as supply may be larger than expected, he says. North Dakota is on track to become one top four largest oil producing states in the US, he says. [email protected]
Nov 22 10 6:01 PM
Dec 6 10 4:47 PM
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