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Bakken Decline Rates Worrying For Drillers

Bakken Decline Rates Worrying For Drillers

I have been supplied an Excel spreadsheet of all North Dakota wells back to 2006, thanks to Enno Peters and Dennis Coyne. I only used the data back to 2007 however. This is a wealth of information if we want to know how many wells came on line in a given month, we simply count them. We are given the monthly production data for each month. And since we have the monthly production data we can very easily figure the decline rate of each well, or any group of wells for any month or year.

A note on the data. The first month’s data was almost always for a partial month. Sometimes the well came on line near the first of the month and sometimes near the end of the month. To get around this problem I have started with the second month, which is the first full month, and used that month as the first month of all my data. All data and charts below include all North Dakota wells, not just the Bakken.

DeclineRateAllWells

Production per well has gradually increased each year. 2014 was the highest first month production but also the highest decline rate. Note that on the first month 2014 production is 29 barrels per day above 2013 1st month and 131 barrels per day above 2008 1st month. But the 2014 10th month was 7 bpd below the 2013 10th month. And by the 2013 only 7 barrels per day separated the 2008 data and the 2013 data.

Bottom line is, though the new wells produce more, they decline a lot faster.

FirstYearBarrelsPerDayPerWell

Barrels per day per well, for the entire year, discarding the first partial month and measuring the 2nd through 13th month, averaged 230 BPD for 2013 and 241 BPD for 2014. The first-year barrels per day per well has increased every year except for 2012.

AverageNumberOfWellsPerMonth

The average number of rigs per month peaked in 2012 at 218 yet wells per month continued to increase. This is wells completed, not wells drilled. Yet wells drilled have increased even more than wells completed. At the end of 2013 there were 635 wells awaiting fracking. At the end of 2014 there were 750 wells awaiting fracking. Below is the Year – Wells per Month data represented in the chart above. Related: Surprising Production Numbers From North Dakota

Year – Avg. # of Wells per Month
2007 – 24
2008 – 43
2009 – 41
2010 – 68
2011 – 108
2012 – 157
2013 – 172
2014 – 187

2014Rigs2014Wells

There is close to a 1 to 1 ratio between wells per month and active rigs per month. But remember there is a lag between when a well is drilled and when it is completed.

2014BPDChange

There is only a very rough correlation between production increase, (left axis) and wells completed, (right axis).

ProductionChangeChart

The above is the data used for the previous two charts. The production change is in barrels per day. Related: The Easy Oil Is Gone So Where Do We Look Now?

Now let’s deal with decline rates.

AverageFirstYearAnuualDeclineRate

The first year decline rate has continued to increase. One reason is the vast majority of new wells in 2014 are horizontal, fracked wells whereas many of the 2007 through 2009 were conventional wells. But I doubt that this is the only reason.

AverageFirstYearMonthlyDeclineRate

First year monthly decline rates jumped to a whopping 8.33% in 2014 versus 7.97% in 2013. However the 2014 decline rate is only for the first 10 months as December had only a partial month’s data so the decline for November could not be calculated.

Also, the monthly decline rate is erratic and not exact. Some months are shut down for part of the month causing the figures to jump around. The Annual decline rates are much better but still not exact.

The question that still remains is how many wells must be completed each month for production to remain flat. I have figured it every way possible and come up with 130 wells using the data above but using the EIA’s legacy decline rate I come up with 143. But it is the number of wells fracked each month that counts, not the number of wells drilled.

There were 730 wells awaiting fracking crews at the end of December. At the end of December 2013 there were 635. From the Directors Cut for February 2014:

We estimate that at the end of Dec there were about 635 wells waiting on completion services, an increase of 125.

And it jumped 50 the previous month, November 2013. Apparently this was because of the weather. When it gets very cold it slows fracking down rather dramatically, far more than it does the drilling crews. From what I can tell February 2015 will be a very slow fracking month. I am not so sure about January.

But the point is, they could drill only 120 wells per month but frack 150 and keep production increasing. And with 750 wells waiting to be fracked they could continue at this pace, fracking just 30 more wells than drilled, for about two years before production starts to drop. But the rig count may drop much lower. And are fracking crews suffering the same attrition as drilling rigs and crews?

On another subject, this was emailed to me a couple of days ago:

I wanted to pass on to you that a friend in management at a local NYSE listed company told me last week that wells may have to be shut in if some storage capacity doesn’t open up soon. Every tank battery, truck, tank farm, and pipeline is full.

Storage reported yesterday, for Friday February 20, was up another 8.427 million barrels to 434.071 million barrels.

Take away from that what you will.

By Ron Patterson of http://peakoilbarrel.com/ 

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  • Jerry Spetseris on February 27 2015 said:
    You and I are aligned in our thinking. Your analysis of N Dakota rig count, completion counts and production declines are accurate and so is your conclusion that increasing completions even in the face of declining numbers of rigs drilling new wells can offset natural production decline. EOG alone has over 700 wells awaiting completion. It'll depend largely on capex funding as too whether oil companies will reduce the completions backlog. We are hearing from small and mid cap public companies that their credit facilities are being reduced by up to half, forcing companies to capitulate on completing their backlog of drilled but uncompleted horizontal shale wells. Depending on how the US dollar does the day companies announce 4Q 2014 results, some that announced they are leaving the vast majority of their completions backlog as is are seeing their stock valuation getting hammered...Rosetta, Oasis, Carrizo, Sanchez, Continental Resources, Chesapeake...all due to what will be rapid production declines beginning in the 2Q if not sooner. No company takes a 10-15% stock valuation haircut willingly...the executives own a lot of shares. This is driven by a credit squeeze. It will be interesting to see what happens...
  • Seth on February 28 2015 said:
    Yesterday's peak oil alarmists point to decline rates, and the rig count, as if there is a direct correlation between these factors and overall shale oil production, which continues to increase due to continued exploration, iterative improvements in big data, technology, and innovations such as refracking.

    Let's not forget the massive Monterey Formation, currently unrecoverable with today's technology, and don't forget that 20 years ago shale oil in ND and TX was unrecoverable.
  • E.A. on September 10 2015 said:
    Seth, you aren't doing the sobering math of this boom-town resource. You and many others are running on feel-good hype, not geological facts.

    The 2013 USGS Bakken assessment showed only 7.4 billion recoverable barrels, which amounts to about a year of U.S. (sole source) consumption. Along with Texas we might have 3 years of U.S. supply (if no other sources were used) but it's hardly long-term oil in meaningful amounts. It's only impressive relative to its "dry well" history, and the fact that global crude oil still underlies it. Take away crude and shale would instantly fail to meet world demand of 90 mbpd. People who deny the geological fact of peak depletion curves have a temporary luxury of seeing shale as a savior. It's like saying a few bottles of Alhambra can maintain a swimming pool.

    The Monterey shale was downgraded by 96% in May 2014 (EIA) due to over-hyping and complexity of the formation, rendering it economically almost moot. I think you missed that news item.

    Then there's kerogen (the U.S. "Saudi Arabia") which may never see a break-even EROI point, and the water use plus land destruction would be huge if it was seriously attempted. People need to acknowledge physical scarcity sooner or later. The "abiotic oil" crowd will surely put up a fight, though.
  • Sharon Wenger on February 28 2016 said:
    If someone has the technology that will increase the crude oil production from 5% to 25 %. Is there any company willing to try.

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